Final Salary pension, capped

PeacefulWaters

greenglide wrote: »

According to the LBG info in the link above the contributions are based on the pensionable pay (which is capped) rather than the actual pay which is better than closing the scheme completely?

If you're close to retirement age, it's probably better.

If you're a career minded 40 year old hoping to add 50% to your pay via promotions it's terrible.

Even if you're a non-career minded individual aged 40 the inflation lag compounding over 20 years is huge.

Members are left with complex choices based on personal circumstances and need to take into account job security, career progression, planned retirement age, inflation projections, potential future changes to the scheme, impact on spousal benefits, potential investment returns in alternative scheme and lots more.

A myriad of moving parts that makes it far more difficult a decision to make to stay in the DB scheme or exit and join the DC scheme.

Apologies for switching the focus of the thread to LBG. Remember it's an RBS scheme the OP has queried.

PeacefulWaters

PeacefulWaters wrote: »

How old are you?

What's your salary?

What's your capped pensionable salary?

What percentage of your salary goes into the defined benefits scheme? Clarify if this amount is pensionable salary or actual salary. (Ignore what your employer pays in)

What's the maximum amount your employer will pay into a defined contribution scheme and what contribution do you have to make to optimise this?

Answer these questions and the right course of action should become more obvious.

I do hope the OP can return with answers to these fairly straight forward questions.

hyubh

PeacefulWaters wrote: »

I do hope the OP can return with answers to these fairly straight forward questions.

The answers were almost all provided before the questions were actually asked.

regprentice

The rbs defined contribution scheme is a funny one also.

Staff are given a basic salary and then paid and extra 15% on top of that base salary as a 'pension' contribution. You can pay the pension contribution into your pension or , as many do, you can simply treat it as cash and be paid it.There is another component of your salary (a funding account) set at 10% or 15% dependant on grade which is also paid above base salary.

There is no employers contribution whatsoever. They have really just cut up your salary in to a few chunks and said 'here is the %age of your pay we earmark for your pension....do with it what you will'. Largely the pay structure is just a wheeze to keep qualifying base salary low for redundancy payment calculation and such like. Its probably also a tax dodge of some kind.

Rbs are determined to 'encourage' staff out of the defined benefit scheme. Recent employers ni increases were passed to staff...wiping out whatever pitiful payrises they may have had for the last two years.

According to a recent article in the ft rbs has the 4th largest pension liability in the uk and the 6th largest fund defecit.

Essingeviken

Somewhere in the bigger scheme of things, your 16% contributions are probably financing Sir Fred Goodwin's pension....

Here are some of the extracts from the Wikipedia entry on this subject....

".....but Goodwin's pension entitlement, represented by a notional fund of £8 million, was doubled, to a notional fund of £16 million or more, because under the terms of the scheme he was entitled to receive, at age 50, benefits which would otherwise have been available to him only if he had worked until age 60...."

"In March 2009 Lord Myners revealed that part of the reason Goodwin's pension was so large was that RBS treated him as having joined the pension scheme from age 20 (instead of 40, when he actually joined) and ignored contributions to his pension from previous employment."

agarnett

I would look beyond Goodwin. He left in 2008. He may have signed the papers for this very weird half a continuation of an existing DB arrangement, but it was others that followed through and didn't question it perhaps.

Furthermore, did Hester get paid an RBS pension (as a pensioner) as well as an RBS salary? I am not asking whether he received contributions to a pension scheme, I am asking if the RBS pension scheme was rigged not only to pay Goodwin off far too generously with twice the qualifying years his actual service would indicate, but also to start paying Hester a pension with zero qualifying years of service in the RBS scheme at the same time as his new employer started paying him a salary? Or maybe Hester worked for RBS on 2 weeks work experience at 16 and they joined the dots?

In February 2013 RBS executives gave evidence before the Parliamentary Commission on Banking Standards.


It was reported at the time that Hester ...would get a bonus of £963,000 as the taxpayer-backed lender bowed to political and public pressure to ensure its chief executive was not handed more than £1m.
However, the bank admitted Mr Hester was still potentially eligible for an award under a long-term incentive plan (LTIP) worth as much as £4.8m.
This means his total pay package for last year including his £1.2m salary and £420,000 pension could reach £7.38m
Hester was born in 1960 and he was 48 in 2008 when he joined RBS, but was 53 by 2013. Goodwin got a pension at 50. Did Hester negotiate a similar deal for his 50th birthday? A salary and an unfunded pension in payment at age 50?

Where is he now?
In charge of the employer and trustees of my last remaining deferred DB scheme, that's where
:mad:
Can anyone provide any information about what that £420,000 was? Was it for example an annual payment in perpetuity as of his 50th birthday? Nothing would surprise me now.

Essingeviken

"Can anyone provide any information about what that £420,000 was? Was it for example an annual payment in perpetuity as of his 50th birthday? Nothing would surprise me now."

Well I can't, but it is a very interesting question. According to the 2013 accounts it was part of his payment in lieu of notice. Should it have said "pension contribution" though? His annual salary according to the same set of accounts was £900,000 on which he got a pension contribution of £315,000, so it makes no sense for him to have got an annual pension of £420,000 for five years service. That would have necessitated having build up a pension pot of what....£15m?

But as you imply...nothing is impossible.

atush

There should have been NO

payment in lieu of notice

He should have been sent to jail.

Essingeviken

We are talking about Hester, not Fred the Shred. People don't usually get sent to jail for trying to clean up someone else's pile of !!!!.

atush

PeacefulWaters wrote: »

Surely utilising the same employer's DC scheme first would be a better option.

exactly what I said up in post 22

If the DB pension is no longer good for ongoing contribs, look to DC instead.