Firefighter Pension - Am i doing the right thing?

Beckyboo22

Hello! My first post so be gentle with me please
I am currently a serving fire fighter in London, and with the recent shake up of our pensions im not quite sure what to do.
I was wondering if i could ask some advice as to my new pension, and if i am doing the right thing by staying in it for the next 33 years.
I have been serving for 5, but i am concerned by the fact a huge amount of fire fighters are pulling out of the scheme becasue of the new reforms.
I would really like some informed feedback if possible.
Thanks so much for your time!
Bex

ger2000

I am also in a similar scheme to yourself and the majority of my colleagues have remained within the scheme, expensive at the time as it is. I am sure most experts will tell you it is as good as it gets. Some have left using the funds to assist with the property buying and using this as there pension vehicle.Sorry i cant give you any more advice to help you make up your mind.

Beckyboo22

Thanks so much for the reply! I was wondering if that may be the best way forward, to come out of the scheme and plow the money in to property.
Im paying around £400 a month into my pension every month, and its a big chunk of my salary.
I hope people dont think i am coming across as greedy or rude, just trying to get the best options for my future.
Bex

dunstonh

I have been serving for 5, but i am concerned by the fact a huge amount of fire fighters are pulling out of the scheme becasue of the new reforms.

Only the stupid are pulling out. Its one of the best pensions there is even after the changes. Nothing else will come close.

Problem is that firefighters are quite militant on the whole and the unions have a strong say and they are giving awful advice in encouraging people to pull out.

Nothing else you do in its place will come close to matching the benefits of the scheme.

I was wondering if that may be the best way forward, to come out of the scheme and plow the money in to property.

Still wouldnt beat the firefighter scheme.

Im paying around £400 a month into my pension every month, and its a big chunk of my salary.

And you think a property would be cheaper?
You are not actually paying in £400 as you get tax relief on that and pay less NI. Plus, you get the defined benefits backed up by the taxpayer.

I hope people dont think i am coming across as greedy or rude, just trying to get the best options for my future.

At least you are asking the questions and not following the foolish that have opted out of the scheme.

jem16

Whilst the pension is not as good as it was, you would both be very foolish to come out of it. In fact it would probably be the worst financial decision of your life.

Stay in the scheme - nothing else that you will do can come close as you will immediately be throwing away your employer's contribution.

It's still a Defined Benefit pension and guaranteed with no risk to yourself.

Beckyboo22

Thank you both so much for your comments. I like to be very well informed before i make decisions of this magnitude, but its incresingly difficult to get sensible and un-biased answers from my colleagues and the unions, Hence i asked you marvolous people
I feel guilty for even asking the question in the first place to be honest, i know there are a huge amount of people in worse pensions than my own. I hope i havent come across as a money grabber!
Thank you again for your time x

jem16

Beckyboo22 wrote: »

I hope i havent come across as a money grabber!

Not at all. You just come across as someone who wants to find out the truth rather than the rumours.

hugheskevi

I'd be far more hesitant than the previous responses.

There are significant early leaver penalties built into the design of the new Firefighters scheme. This means that the scheme is good value for those who remain in the scheme until at least age 55, but for those who leave early the value is much lower, and for some members they could be better off not being in the scheme and using the contributions for other investments.

In particular, younger members who only work a few years before leaving will do extremely badly from the scheme. They will accrue benefits at slightly better than 1/60th of pensionable pay, have a normal pension age equal to state pension age and receive prices (CPI) revaluation from date of leaving. In return, they will pay 10%+ member contribution rates, which exceed the total value of the benefits accrued (remembering this is only if they leave early, but after 2 years as before then the pension contributions are refunded).

Of course, it is far from easy to know if you will be an early leaver or not, so in practice it would be difficult to identify in advance whether or not the scheme is something that will be good value or not.

It's still a Defined Benefit pension and guaranteed with no risk to yourself.

I think that the allure of Defined Benefit schemes is based on what they were, not what they are now. A lot of the new designs have some very rough edges, or are simply not very generous, and just because something is DB is no longer a sure-fire indication it is good value as it once was.

Morrisons is probably the stand-out example of a DB scheme that is poor value for large parts of their workforce, but I think the big penalties for early leaving (the lower revaluation combined with the much higher NPA) in the post 2015 uniformed public service schemes are the best examples of design flaws which will leave some members facing big financial loses for changing employment, particularly once they get into their late forties/early fifties.

Beckyboo22

Thank you Hughheskevi, i am aiming to stay in this job for the long haul, but of course 33 years is an awfully long time for things to change. I am of course concerned that the government have the ability to change my pension seemingly at will, and that was the main worry for me. Do the same rules apply for private pensions?
Thank you again for your time
Bex

hugheskevi

I am of course concerned that the government have the ability to change my pension seemingly at will, and that was the main worry for me. Do the same rules apply for private pensions?

The Government can change future accrual rules - including contribution rates - pretty much at will, and the same applies to private pensions (some consultation needed, but not too much).

Historic accruals have always been protected, depending on how you view the change from RPI to CPI price-linking. Indeed, as links to final salary are being retained the protection in that regard is better in public sector than when private sector makes similar changes (normally final salary when scheme closes is used). The RPI/CPI change affected both public and private sector pension, but had a greater impact on public sector as everything changed, whereas in the private sector many schemes had RPI written into their rules so did not change.

In your position I wouldn't be too concerned about political risk - it is present, but historic experience suggests that it is not a big risk.

PeacefulWaters

I'd be staying in and building up a separate pension fund privately on the assumption I wouldn't be working until 60. This fund could plug the gap between ceasing work and collecting the defined benefit pension.