Value of db pension

bigadaj

Went for an interview today at network rail.

All pleasant and went reasonably well but location is a bit far for me so probably won't progress.

Anyway discussing salary they stated their bands are fairly rigid and the role is set at around 10-15% below what I'm currently on. There are others benefits, bonus etc

I then raised the pension and said I thought their scheme was quite good. Nods from interviewers and comments that it's quite good, but they weren't sure what options were currently available.

So I got home and googled and found an April 2016 document stating the options. Final salary scheme closed to new entrants, dc pension and a care scheme at 1/60 accrual with 5% employee contribution.

By my calculation that care scheme would be worth 25% or more of base salary but the value just wasn't discussed or acknowledged.

I'm a bit shocked by that, and also by the fact that if its not acknowledged that it doesn't seem to be valued and one wonders whether it's worth keeping in place given the huge costs involved.

kidmugsy

bigadaj wrote: »

it doesn't seem to be valued and one wonders whether it's worth keeping in place given the huge costs involved.

I sing this song every few months. Horribly expensive DB schemes don't do a good job attracting and retaining staff. That, after all, is what many companies have decided: the damn things aren't worth the costs they incur. Because people.

marlot

I make sure I run through the pension scheme with my staff, even junior people for whom pensions are a long way off.

The CARE scheme we have is very attractive to people who are 50+, and don't expect to progress further up the ranks. In my case, I reckon it's worth nearly 40% of salary, less my 8.5% contribution - so about 30% overall.

JoeCrystal

Yeah, it is so disappointing to see such benefits that so undervalued or not worth discussing it. The sooner that all bodies and companies stopped offering the DB pension scheme, the better. It would encourage more people to look into making their own retirement provision instead.

greenglide

The sooner that all bodies and companies stopped offering the DB pension scheme, the better. It would encourage more people to look into making their own retirement provision instead.

No it wouldnt!

If all DB schemes were discontinued it would just end up with even more people failing to make adequate provision for retirement.

If people totally undervalue DB schemes (and they generally do) there is absolutely no chance of them voluntarily putting the 10%, 15%, 20% and more into a DC scheme, at least not until it is too late.

As a nation we dreadfully underestimate just how much retirement will cost us. Poor annuity rates and easier access to DC schemes as lump sums dont help either. So many people want the money "today", to spend it "while I can" and woefully underestimate the life expectancy.

PensionTech

I'm a bit shocked by that, and also by the fact that if its not acknowledged that it doesn't seem to be valued and one wonders whether it's worth keeping in place given the huge costs involved.

I don't think it's the scheme's fault that the people who interviewed you weren't informed/interested enough to tell you how great it is.

It's really hard for me to step outside and try to judge how attractive a DB scheme would be to the average jobseeker. Obviously it would be a huge deal for me but that's because I work in pensions and know how enormous the gulf is between DB and DC. But an interviewer, an HR representative, a recruiter or a marketer is falling down on the job hideously if they don't bother to sell this to prospective employees, much as they would be if they failed to mention that the job comes with a free trip to Hawaii each year. I think it would be a terrible thing for their laziness to be used as a reason to scrap DB where it still exists. DB isn't just a recruitment tool for employers either; it allows older employees to retire and not keep working past their sell-by date. That's how occupational pensions came about in the first place. Ditching it will only ensure that more people end up in the situation of not having enough savings to retire - which is a looming crisis for many of the middle-aged and younger generation today.

bigadaj

greenglide wrote: »

No it wouldnt!

If all DB schemes were discontinued it would just end up with even more people failing to make adequate provision for retirement.

If people totally undervalue DB schemes (and they generally do) there is absolutely no chance of them voluntarily putting the 10%, 15%, 20% and more into a DC scheme, at least not until it is too late.

As a nation we dreadfully underestimate just how much retirement will cost us. Poor annuity rates and easier access to DC schemes as lump sums dont help either. So many people want the money "today", to spend it "while I can" and woefully underestimate the life expectancy.

That depends where the money is coming from I suppose.

For public sector schemes then it might be better for all if people had the opportunity to get say a 10% pay rise and give up their db pension or not. Savings for the giver meet would be large and with the introduction of the flat rate pension scheme then whether people save or blow it shouldn't make much difference as the new panino should take people who have worked for most of their lives out of means tested benefits.

A different story for private sector schemes of course.

Andy_L

http://www.mynrpension.co.uk/media/1494/NR-CARE-Scheme-book.pdf

"The overall costs
are shared between the member and Network Rail,
so that Network Rail meets 60% of the costs and
the member 40%."

with a 7.2% employee Network rail reckon it costs them about 10%. Seems low but then it is a CARE rather than FS scheme and those numbers will have just gone up as it was a contracted-out scheme

1/60 ths accrual, 65 Retirement age, revaluation at RPI with a 5% cap for deferred/retired members

bigadaj

Andy_L wrote: »

http://www.mynrpension.co.uk/media/1494/NR-CARE-Scheme-book.pdf

"The overall costs
are shared between the member and Network Rail,
so that Network Rail meets 60% of the costs and
the member 40%."

with a 7.2% employee Network rail reckon it costs them about 10%. Seems low but then it is a CARE rather than FS scheme and those numbers will have just gone up as it was a contracted-out scheme

1/60 ths accrual, 65 Retirement age, revaluation at RPI with a 5% cap for deferred/retired members

The summary I saw showed employee contributions of 5-6%, can't believe that costs them only 10%. Retirement age is high but not surprising and I suppose impacts on value, but I'd have thought the real cost to the comoany is closer to 20% rather than 10%.

roysterer

How many companies will still have defined benefit pensions in 5 years time!!!!!!
To leave a job with a higher salary to move to a lower salary but gain on the pension being offered would be a huge gamble!!!!!!!
Final salary and Care schemes are closing down every day to move to defined contribution pensions.
Be very careful when making this decision.

bigadaj

roysterer wrote: »

How many companies will still have defined benefit pensions in 5 years time!!!!!!
To leave a job with a higher salary to move to a lower salary but gain on the pension being offered would be a huge gamble!!!!!!!
Final salary and Care schemes are closing down every day to move to defined contribution pensions.
Be very careful when making this decision.

As I stated in my opening post it isn't attractive and I'm unlikely to accept it if offere, this was only a first interview. I'm also being made redundant from my current role so will have to find an alternative.

I also, possibly unwisely, stated that this was network rail. So effectively a public sector scheme which are unlikely to remove db schemes though they will be diluted in the future, this would be very differ et for a private sector company.

I'd look up terry pratchetts view on multiple exclamation marks as well, think you need to calm down a bit!!!