How do i work this out

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LXdaddy wrote: »

My reading is that as long as you defer for at least 7 weeks they you get an increase of one seventh of one percent for each week deferred. So if you defer for 7 weeks you would get an increase of 1%. If you start with £10,000 then defering by 7 weeks you would get £100 extra.

In calculator terms if w is the number of weeks deferred you could do
w / 7 / 100 + 1 * 10000 = to find the total
so for 7 weeks the calculation is
7 / 7 is 1
1 / 100 is 0.01
0.01 + 1 is 1.01
1.01 * 10000 is 10100

Maelwys wrote: »

Yep, but it'll depend when they actually calculate what 1/7th of one percent is.

The way it's phrased above "we will increase the GMP by 1/7% for each complete week in the period of deferment" suggests that every week during deferment a fresh 1/7th of a percent is added... meaning that the effect would be cumulative.

If so it'd be:
((1 / 700) + 1) * [Current Sum]
and would get recalculated every week.

However if they just multiply the number of weeks by 1/7th of a percent it'd be:
(([Weeks] / 700) + 1) * [Initial Sum]
and would be calculated just once.

It'd not matter massively over shorter periods, but over a year it'd mean the difference between getting 7.71% or 7.43%. I suspect they'd probably use the option that costs them less, but the OP would likely need to read the small print to be certain.

agarnett wrote: »

Sounds to me more like a sentence in the communication to members of the ending of contributions to some DB scheme and the start of a much lesser value DC scheme in its place. A DB scheme could have been costing the company anything up to 40% of salary in recent years whereas by making big changes, the employer looks to be reducing its exposure right down to a contribution of just 10.5% of salaries for future service. Its liability for continued support of previously earned DB scheme benefits will not go away, but from their point of view, by stopping paying into it for future years' service, they have made a big step towards "stopping the rot" to their bottom line.

I wonder if the mention of Section 32 is also part of the same communication - one which offers the chance to transfer out accrued benefits from the existing DB scheme which is ending (into a Section 32 buy out plan, or into one of another couple of options proposed by the employer/existing scheme.

Maelwys makes a fair point and I would argue that if the language is exactly as stated then the contract would be for a compounded enhancement of 1/7 percent per week i.e. the higher of the two. I am getting deja vu from reading that text ... i am wondering if I have some paper somewhere relating to my own Section 32 buy out policy which says much the same.

And as for your original question OP, if it isn't yet clear, you only need to check the example already given i.e.
1
__
80 x 5 x 19,000 = £1,187.50

which is a correctly executed sum.

It uses the highest year's salary within the past five years service up to the end of 31st December 2013 which I am guessing is when the old DB scheme became "frozen", and taking the highest earning year in the last five is no doubt irrespective of whether the actual service is greater or less than five years.

In the example given, Mabel had exactly five years service as at 31st December 2013, and her highest year was not actually the last year but the year before that, so the figure of £19,000 became the base for her pension if she had retired the same day the old scheme became frozen. Taking the best year in the last 5 doesn't sound half bad actually. In most schemes, the base "final" salary used might be the actual final year's gross pensionable salary, else maybe some career averaged salary. The example given seems a better deal.

By giving that particular example, it doesn't mean that Mabel actually did retire on that date. It just shows an example of how every member's deferred pension base figure is being calculated as at 31st December 2013 for the file. That date is in the past and for each member the base pension as at 31st December 2013 will not change. However before the pension comes into payment it will have been inflation protected to a degree.

As others have said, as and when members reach their scheme retirement age, the old scheme will actually be expected to pay out (if it survives long enough!) the sum calculated as at 31st December 2013 but enhanced by index-linking in some fashion e.g. increased in line with CPI or some other accepted index, but bits of the entitlement may be at greater or lesser %age increases depending on exactly what the scheme rules are, and exactly how each member's entitlement was comprised e.g. vis-a-vis any periods of contracted out employment.

Thank you for your help

vvvvvvvvvvvvvvvv

Me again

is it common to have 2 different figures to work out your final pensionable earnings?Mine seems to be

1/60 before 1st june 2004 plus any proportionate amount for completed months.

1/75 after 1st june 2004 plus any proportionate amount for completed months.

LXdaddy

vvvvvvvvvvvvvvvv wrote: »

Me again

is it common to have 2 different figures to work out your final pensionable earnings?Mine seems to be

1/60 before 1st june 2004 plus any proportionate amount for completed months.

1/75 after 1st june 2004 plus any proportionate amount for completed months.

I don't know how common it is, but it is not something that surprises me. This sounds like on 1st June 2004 the scheme changed from "60ths" to "75ths" - effectively reducing the value of each year of working fairly significantly.

Somone who joined the scheme on 1st June 1989 would have 15 years service prior to 1st Jun 2004 so would have earned 15/60 (25%) of their final pensionable salary. If they want to add another 25% to their pension they would have to work a further 18 years 9 months - ie to 1st March 2023 (if the scheme were to last that long in this state)

Maelwys

vvvvvvvvvvvvvvvv wrote: »

Me again

is it common to have 2 different figures to work out your final pensionable earnings?Mine seems to be

1/60 before 1st june 2004 plus any proportionate amount for completed months.

1/75 after 1st june 2004 plus any proportionate amount for completed months.

Sounds like a pretty standard tactic of a defined Salary Pension. Whenever you start getting too much out of them they'll juggle the figures around a bit and then slap a "new version" badge on the scheme.

The old accrual rate should still apply to whatever number of years of service you built up before the swapover date.

The NHS pension changed from 1/80ths in 1995 to 1/60ths in 2008 to 1/54ths in 2015... but the age it pays out went up from 60 to 65 to SPA (68 in my case), and it's changed from "final salary" to "average salary"...

vvvvvvvvvvvvvvvv

11 years at 1/60 plus 21 years at 1/75(thats me eventually)

in an example they show this but i cant work mine out.

9 years 1/60 plus 21 years at 1/75

9/60ths plus 21/75ths, i.e. 43% of final pensionable earnings

bigadaj

vvvvvvvvvvvvvvvv wrote: »

11 years at 1/60 plus 21 years at 1/75(thats me eventually)

in an example they show this but i cant work mine out.

9 years 1/60 plus 21 years at 1/75

9/60ths plus 21/75ths, i.e. 43% of final pensionable earnings

Would be just over 46% in your case, assuming it is maintained at final salary rather than career average or similar.

vvvvvvvvvvvvvvvv

bigadaj wrote: »

Would be just over 46% in your case, assuming it is maintained at final salary rather than career average or similar.

Final pensionable earnings=The average of the best 3 years consecutive pensionable earnings in the 10 years ending on your normal retirement date,or earlier date of retirement or leaving service.