Firefighter Pension - Am i doing the right thing?

Beckyboo22

I think its best to stay in the scheme, as i cant see anything that would offer a better outcome at the moment. I think its going to be a matter of keeping my eye on the ball and hoping for the best outcome.
Thanks again for all of your help and advice! i really should have joined the forum years ago
Bex

ExMugPunter

hugheskevi wrote: »

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.



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.

On New Years eve i was talking to a friend of my Dad's who is just about to retire from the fire service and he was saying pretty much the same thing.

However, he also said that it is the lack of protection for fire fighters who are forced to leave the service due to health grounds that is the main concern. I have absolutely no idea if he is correct in this, but he said that many older fire fighters will not pass the fitness testing and they will then be forced to retire on a much smaller pension than they envisaged.

If this is correct, then my (unqualified and probably naive) advice to the OP is to stay in the scheme, but also (if at all financially possible) set up a personal pension to run independently of the main scheme. In the event of possible early / forced retirement this separate pot can then be used first to reduce the impact of taking the main pension early.

My wife and I are doing this to avoid the prospect of taking our pensions early ( NHS and Teachers pensions) but if what I was told is correct, then I would think that this approach would be vital for a firefighter.

ExMugPunter

PeacefulWaters wrote: »

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.

Beat me to it!:D

Beckyboo22

Exmugpunter, May i be rude and ask who you and your wife invest your private pension with?
Sorry if thats a personal question, but as i will only be investing a relatively small amount compared to my LFB pension i would be lost as to where to start with a good deal!
Thanks for the time and your post by the way
Bex

hugheskevi

However, he also said that it is the lack of protection for fire fighters who are forced to leave the service due to health grounds that is the main concern.

Yes, because in the case the firefighter leaves service (for whatever reason, I think there may be some sort of protection for those failing fitness tests due to no fault of their own, but I don't know much about that), say at age 50, the Normal Pension Age of the scheme changes from being 60 for an active member to being equal to state pension age for a deferred member.

The effect of that is huge - the pension amount they were expecting to receive at age 60 becomes about 30% less than they will now receive, as being a deferred member they will have an actuarial reduction applied if they still wish to take it at age 60.

PeacefulWaters

Beckyboo22 wrote: »

Exmugpunter, May i be rude and ask who you and your wife invest your private pension with?
Sorry if thats a personal question, but as i will only be investing a relatively small amount compared to my LFB pension i would be lost as to where to start with a good deal!
Thanks for the time and your post by the way
Bex

Cavendish online is a fairly straight forward option. You might wish to progress to a self-managed SIPP if investment choices become a hobby further down the line.

hugheskevi wrote: »

Yes, because in the case the firefighter leaves service (for whatever reason, I think there may be some sort of protection for those failing fitness tests due to no fault of their own, but I don't know much about that), say at age 50, the Normal Pension Age of the scheme changes from being 60 for an active member to being equal to state pension age for a deferred member.

The effect of that is huge - the pension amount they were expecting to receive at age 60 becomes about 30% less than they will now receive, as being a deferred member they will have an actuarial reduction applied if they still wish to take it at age 60.

I can see why they're peed off with that.

ExMugPunter

Beckyboo22 wrote: »

Exmugpunter, May i be rude and ask who you and your wife invest your private pension with?
Sorry if thats a personal question, but as i will only be investing a relatively small amount compared to my LFB pension i would be lost as to where to start with a good deal!
Thanks for the time and your post by the way
Bex

At the moment we use Hargreaves Landsdown as the platform and have Vanguard Lifestrategy products as the main fund.

However, many people will argue that are there are better and more suitable ways of doing it. I am not for one moment suggesting that you should do exactly as we are. But if you decide to do something similar, there are many people on here who can point you in the right direction.

A comfortable retirement is the least you deserve for serving in the fire service. After listening to the stories and seeing the impact of the job on my Dad's friends, you have my utmost respect.
Good luck.

jamesd

Beckyboo22 wrote: »

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

Beside the early leavers issue the problem is the way the new normal retirement age combines with the fitness test requirements and normal human ageing. That'll force many firefighters out of the job before they reach normal retirement age.

The problem of financing that is no different from anyone retiring before state pension age, it just takes accumulating enough money outside this pension to cover the time between retiring and getting the pension. A personal pension can be a big part of that because that money is currently available from age 55 but expected to be available from ten years before state pension age in the future, with state pension age increasing.

Before age 55 investments outside a pension can be used, notably inside a S&S ISA.

Beckyboo22 wrote: »

i am concerned by the fact a huge amount of fire fighters are pulling out of the scheme becasue of the new reforms.

You should be concerned for your fellow firefighters. They are almost certainly making a very poor choice.

dunstonh

Funding the gap is going to be the important thing. However, that doesnt mean leaving the pension. It means an additional thing, such as personal pension or ISA to fill those earlier years should early retirement be necessary.

Remember that at scheme retirement age, the firefighters pension is best. If you have to, or need to, go early, then you need something you can draw on before the firefighters scheme kicks in.

kidmugsy

Because Trade Unions are so routinely dishonest and hysterical, my default assumption is that whenever they make a fuss it'll be fake. So it is interesting to learn that there are details of the firemen's scheme that would naturally cause worry to the members. If there's a lack of public sympathy for their position, I suppose that that can be attributed to the assumption that union officials make a fuss because that's just what the lying liars are paid to do. It's the problem of crying wolf.