Different Employer Schemes

Darozzi

Hello


First time poster here.


With my current job, my employer contributes the equivalent of 8% of my annual salary to a pension scheme. Whilst I have the option to contribute an additional 4% (that the company will match), I currently choose not to make any additional payments.


I have been offered a job at another firm who operate a Final Salary scheme. Membership of this scheme required a contribution of 9% of my pay (with the company adding another 19%).


The job comes with a 10% increase in salary, but if I am obliged to put 9% of my salary into the pension scheme, my take home pay will barely change. I realise it's a generous pension, but more cash in my take home pay would be more useful to me right now. I'm told I can opt out, but this means I can never join the scheme in the future, plus it would mean I'm not accruing any pension at all, which again effectively cancels out the pay increase as my current company are contributing on my behalf.


Do you think I would be mad to turn this down? Is it worth asking the company for a salary increase that would negate the 9% mandatory contribution (I wasn't aware of the specifics of the scheme when salary negotiations took place).


Thanks for any advice!

jamesd

You're not mad to turn it down but it's a great deal and you should take it if at all possible. You will be kicking yourself come retirement age for not taking it.

So far as salary negotiations go, what do you say about the 8% on top of pay benefit from the pension at your current place? That may well explain the 10% higher pay - the loss of that contribution and a bit more to sweeten the deal.

Better to look at the reasons why it's a problem and see if those can be worked on instead.

xylophone

Do you think I would be mad to turn this down?

If by mad you mean ready to be carted off by the men in white coats...no.

Misguided? I'd say so, particularly if the pension comes with the usual other benefits for widow, dependents etc.

Is it worth asking the company for a salary increase that would negate the 9% mandatory contribution

You want jam on it?:D

Darozzi

Thanks for the quick reply, jamesd. I'm making a pros and cons list... The new job will not come with any salary review until May 2017 (6 months probation + 1 year of service), so I'd have to be happy to potentially be on the same 'take home' pay until then, though I would also have built up around £20-25k in the scheme in the same period, as opposed to around £5k in my current role.


I'll more than likely take the new job (also comes with better bonus, better holiday allowance, less commuting, more senior role....), but I'm just not used to a pension scheme with employee contributions. I'm aware that the employee contributions can increase from time to time, do you know the rules surrounding this? Are there any laws regarding the frequency/amount of increases (or decreases for that matter)? As time goes by and the Pension fund needs propping up, I don't want to get into a position where the mandatory contributions rise to undesirable levels...

Darozzi

xylophone wrote: »

If by mad you mean ready to be carted off by the men in white coats...no.

Misguided? I'd say so, particularly if the pension comes with the usual other benefits for widow, dependents etc.



You want jam on it?:D

Thanks for the advice :-)


It does come with all the usual benefits, death in service etc.

ajbell

Death in service is not a benefit.
It is a hazard.

Darozzi

ajbell wrote: »

Death in service is not a benefit.
It is a hazard.

Good point :-) But you know what I mean :rotfl:

mgdavid

do you understand the difference between Defined Contribution (DC) and Defined Benefit (DB) pension schemes?

Mistermeaner

If it's a final salary scheme the company don't pay anything in and you don't accrue a pot - are you sure you've got your facts right?

Also you need to provide more details on the fs scheme; is it 1/80 1/50 etc. Is it career average or final salary etc. What is the retirement age and the tail off if you want to go early?

Replies in this thread are meaningless without that info.

Likelihood is any final salary scheme will batter a dc scheme but dc may give you more flexibility

El_Torro

I don't know how old you are or how big your current pension is but I'll hazard a guess and say that your current situation of 8% of your salary going into a DC scheme is probably not enough to set yourself up for retirement. With your new job you'll worry less about that and put less money aside for the future.

So my point is that you'll actually have more money to spend on what you want which is effectively a pay rise

hyubh

Mistermeaner wrote: »

If it's a final salary scheme the company don't pay anything in

Huh - where's the money come from then...?