Final salary question

amstel2

Hello

This sounds a bit thick but when the media goes on about a ""gold standard pension" being two thirds of final salary do they mean gross salary or net salary. Also does this two third figure include state pension?

Thanks

JoeCrystal

They meant gross salary and not including the state pension. They tend to refer to the DB pension scheme which tend to have 1/60 accrual rate for employees with forty years service which add up to two third of the final salary when they retire. (It is very good cheap deal for the employee and very expensive deal for the employer).

amstel2

JoeCrystal wrote: »

They meant gross salary and not including the state pension. They tend to refer to the DB pension scheme which tend to have 1/60 accrual rate for employees with forty years service which add up to two third of the final salary when they retire. (It is very good cheap deal for the employee and very expensive deal for the employer).

Does the two thirds apply if you have two final salary pensions across two employers (one frozen with prev private sector employer goes up annually with RPI 16 years service in it) & my current civil service final salary pension (earliest retirement age without reduction will equate to 24 years) so bang on the 40 years.

Obviously I never transferred the old pension in as I thought it best to leave it where it was & since the CS pension now only goes up with CPI I think I was right.

Also as we never get much of a pay rise in the CS anymore I am thinking of taking the first pension early with a reduction for early payment (going to get a quote anyway) as I am 55 soon.

Thanks

lovinituk

amstel2 wrote: »

Does the two thirds apply if you have two final salary pensions across two employers (one frozen with prev private sector employer goes up annually with RPI 16 years service in it) & my current civil service final salary pension (earliest retirement age without reduction will equate to 24 years) so bang on the 40 years.

So you will get 16/60ths of one and 24/60ths of the other.

greenglide

So you will get 16/60ths of one and 24/60ths of the other.

Only if both schemes are 60ths schemes.

Lots of schemes are (were?) 80ths, some 70ths (my current one is) some are 60ths.

I always thought that schemes tended to aim at 1/2 salary rather than 2/3.

My scheme is 70ths but people couldnt join until age 30 and service until 65 gave 1/2 pensionable salart. Pensionable salary is not, necessarily, the same as real salary. Mine has a deduction set at the NI lower earnings limit for that year - over £5,000.

jackyann

OP - I would check, so many schemes have changed, I certainly wouldn't assume that it is 60ths.
Greenglide - I think a lot of "old" schemes aimed at 1/2, but there are many. Even in the public sector - often lumped together - there are different schemes for different agencies, and most have changed a few times over the last 30-40 years!

bigfreddiel

And don't forget that when you start taking your pension there is no NI to pay. That's a 12% bonus!

And another drain from your work time salary is obviously your pension payment.

So not paying those two elements of your work time salary makes even a half salary pension quite attractive. You'll find your pension income will be almost the same as your work income, and you get s nice little boost when your state pension kicks in.

Cheers fj

lovinituk

greenglide wrote: »

Only if both schemes are 60ths schemes.

Lots of schemes are (were?) 80ths, some 70ths (my current one is) some are 60ths.

Well, yes, obviously. The OP gave the impression they were 60ths which is why I gave the answer I did.

My frozen bank pension is a 60ths.

lovinituk

bigfreddiel wrote: »

and you get s nice little boost when your state pension kicks in.

Some final salary pensions are reduced at state pension age by the amount of the state pension, so you don't end up receiving any more.

brewerdave

When I took my DB pension slightly early with a levelling option (higher pension til 65 then reduced when SP kicked in), the gross pension was ~ 53% of my final wage -but the net was more like 75% after losing higher rate tax,NI and pension contribution. As we also paid off the mortgage around the same time ,we were like pigs in s**t initially.:T
Not so good now -post 65, decrease by the notional SP PLUS much smaller increases because of the pre /post 88 GMP issues :eek:

Still -mustn't grumble:rotfl:

amstel2

lovinituk wrote: »

Some final salary pensions are reduced at state pension age by the amount of the state pension, so you don't end up receiving any more.

My understanding of that is that it's do with tax. As state pension is taxable & if you are over the personal threshold. Then the extra SP income will also generate extra tax. They do not take tax at source out of SP instead it gets added to the occupational pension whihc of course goes down but you still have more because of the SP.

Hope that makes sense & of course !!!! Turpin at no.11 might change that.