Firefighter Pension - Am i doing the right thing?

atush

Thrugelmir wrote: »

Doesn't make people unemployable in any capacity though.

Basically they outsourced a lot of those type posts. Which is in hindsight an unfair thing to do if requiring them to stay in service to age 60?

atush

Beckyboo22 wrote: »

Thanks again for the replies. Looking into taking out another pension to plug the gap should I be sacked at 55 for not passing the tests. Does anyone know of any good company's to start looking at?
Many thanks again!
Becky

It depends on if you will choose your own investments (in which case start looking at cavendish online) or have someone paid to help you (in which case find an IFA via unbiased.co.uk)

Marktheshark

Public sector pensions are a pyramid scheme.
Those paying in now are paying the pensions of those already retired.
At some point the scheme will collapse like all pyramid schemes.

Those that are buying property instead will at least have the property.
When will it collapse who knows, but it will do that is mathematical statistic.

Dunnit

Most Public Sector pensions are unfunded so few actually have anything to pay into. It would take the collapse of government as we know it for the pensions to stop.
If, as appears likely, Ed Miliband gets into power he may want to take more out of the housing market and what better way than to further tax second home owners as well as their capital profits.

76zedfour

bec, are you a female firefighter? Statistically it is very unlikely you will be fit enough in your late fifties to pass the fitness test unless you are currently a competitive triathlete and can maintain that level of fitness regime. Government sponsored papers have led to this conclusion and drawn no plan to combat this inevitable gender problem. I would plan accordingly.

frugal90

If you are a teacher then you will need to work until 67 to get your pension or accept 5 percent per year reduction to go early ie 35 percent to go at 60-most will do what you may have to do fund the gap or start a job with less stress attached-before anyone attacks me and says teaching isn't physically and mentally demanding then go and try it for a couple of years-also those years spent at uni and teacher training don't even qualify as no years for the state pension

hugheskevi

If you are a teacher then you will need to work until 67 to get your pension

It is State Pension age, rather than age 67, which is the Normal Pension Age (NRA) in the new schemes (with a minimum of age 65 for the non-uniformed schemes. Under current legislation State Pension age extends to age 68, but it is expected the age for younger members will be 69 or 70 (possibly higher).

or accept 5 percent per year reduction to go early ie 35 percent to go at 60

5% is only a broad estimate, the reduction is lower when the pension is commenced many years early. For example, in the current Teachers' pension, a member with a NRA of 60 who takes their pension at age 55 would have a deduction of 20.6% applied (calculator here).

most will do what you may have to do fund the gap or start a job with less stress attached

The Teachers' Pension does have a higher accrual rate and lower member contributions than the Firefighters' Scheme however, making it less likely that members could do better using alternative investments (although young teachers not staying in the scheme for long periods will not do very well from the scheme).

There is also no point at which the value of the benefits change both significantly and unpredictably, potentially quite soon before planned retirement - although the difference between revaluation for active members and deferred members does mean that leaving service reduces the expected value of the pension, but to a much lesser extent than for Firefighters.

also those years spent at uni and teacher training don't even qualify as no years for the state pension

That shouldn't make any difference, as only 35 qualifying years are needed in total (currently only 30).

atush

Marktheshark wrote: »

Public sector pensions are a pyramid scheme.
Those paying in now are paying the pensions of those already retired.
At some point the scheme will collapse like all pyramid schemes.

Those that are buying property instead will at least have the property.
When will it collapse who knows, but it will do that is mathematical statistic.

Public sector schemes will not collapse like a typical pyramid, as there is the PUBLIC to back them up- is you.

mania112

dunstonh wrote: »

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

QFT.

This is all you need to know.

hugheskevi

QFT.

This is all you need to know.

Examine the situation for a young Firefighter who leaves the scheme early. Use the following characteristics:

• Age 20
• Earns £27,000
• Contributes 12.2% member contributions
• Is in the scheme for slightly over 2 years, then leaves permanently
• Accrues pension at the rate of 1/58.7

And make the following assumptions:

• Rate of return in DC pension is 6% net of charges
• State Pension age for this individual will be age 70
• Accrued pension increases in line with average earnings at 2% in the first year and 3% in the second year (based on Office for Budget Responsibility forecasts for the next couple of years) and once the member is deferred increases in line with CPI at 2%

Using the assumptions above to calculate the value of the first year of pension accrued shows the individual accrues pension of £460 per year, in return for member contributions of £3,294.

By age 70 the pension will be worth £1,250 p/a in cash terms.

If the member instead put the £3,294 into a DC pension instead it would have grown to £60,000 (in cash terms) by the time the individual was aged 70.

Using the annuity rates from Annuity Bureau (with some adjustments to try to get an index linked annuity for a male aged 70 with spouse benefits) suggests an annuity rate of about 3.8% would be reasonable. Adjust this down to 3.5% to account for increasing longevity (rather arbitrary in the absence of any available future annuity rate). That suggest an annuity of £2,100 could be secured, compared to the Firefighter pension of £1,250. The escation on the annuity would also be RPI, better than the CPI escalation of the Firefighter pension.

In this particular case (of young early leavers) I would argue that following the old dogma that public service pensions are amazing and nothing comes close is simply incorrect. Whilst there are still many individual factors which would need to be considered to calculate the optimal course of action, the best course of action is not clear-cut for a young member who is not committed to a long period of service.

Please note all the above is based on the very specific case of a young, early leaver. The situation is very particular, and cannot be used to make any generalisations about the scheme as a whole.