Transfer to private sector - pension query

Diggersailing

I am considering moving back to the private sector after 12 years as a Civil Servant.

In short, how can I compare my present job and pension contribution with private sector offers? I am concerned that the higher salary looks great, but after deductions I'm back at the same or worse situation.

One of the main drivers to move to the Civil Service has been for me to build up a pension. I have 13 years in the schemes, which means circa 13 x 2.5% of avg/final salary. I have overpaid a bit too.

If anyone has advice on how to estimate what a pension may add to the value of a job offer etc. it would be most welcome as long term security is the goal.

hyubh

Diggersailing wrote: »

In short, how can I compare my present job and pension contribution with private sector offers?

Assuming you aren't in Partnership, as a rough approximation, you can consider the 'actual' employer rate paid by CSPS employers (20%-27.9%), add that to your current salary, then net off what pension contribution the potential private sector employer is offering:

http://www.civilservicepensionscheme.org.uk/employers/employer-contribution-rates/

If anything the CSPS rates under-report the 'real' cost of the pension though. On the flip side, unfunded public sector pensions are relatively inflexible, though that's a minor quibble.

One of the main drivers to move to the Civil Service has been for me to build up a pension. I have 13 years in the schemes, which means circa 13 x 2.5% of avg/final salary.

Premium until 2015 then Alpha...? Remember you maintain a final salary link for your pre-Alpha membership while you remain a member (or leave but rejoin within 5 years).

I have overpaid a bit too.

You mean, you took out some sort of added years or additional pension contract...?

If anyone has advice on how to estimate what a pension may add to the value of a job offer etc. it would be most welcome as long term security is the goal.

If that's truly a concern, and you don't think your CSPS benefits to date achieve that, then consider the value of the CSPS employer contribution to be somewhat north of the actual one. A DC pension simply can't give the 'long term security' than a DB one (especially a public sector DB one) does.

Malthusian

I don't disagree with anything hyubh said, but valuing the pension as 28% of salary, while technically correct, is a very high bar, and I would be loath to tell someone to turn down a big advancement in their career, or carry on working in a job that they don't like, for the sake of the pension contribution.

If the basic salary of the private sector job is the same as the civil service job then it should certainly be viewed as taking a pay cut, if it's in the region of 10% higher than it becomes more of a dilemma.

How much income do you think you'll actually need in retirement? Guaranteed inflation-proofed pension income is exceptionally valuable, but when you've already got State Pension and nearly one third of your pensionable salary in the bag, swapping to private pension provision becomes less of a gamble.

Nowadays, once you've reached the point at which you have enough guaranted income to provide for at least your basic needs in retirement, private pension provision is more attractive than it used to be thanks to the increased flexibility, the ability to draw it earlier and that unused funds can be passed to your heirs. Providing you can manage it sensibly and cope with the risks.

hyubh

Malthusian wrote: »

If the basic salary of the private sector job is the same as the civil service job then it should certainly be viewed as taking a pay cut, if it's in the region of 10% higher than it becomes more of a dilemma.

I agree with the general point that further DB accrual shouldn't be everything for the OP, however gross pay of only 10% more would well undershoot the total renumeration package of the current job unless the new employer provided a very good DC arrangement.

private pension provision is more attractive than it used to be thanks to the increased flexibility, the ability to draw it earlier and that unused funds can be passed to your heirs. Providing you can manage it sensibly and cope with the risks.

If those are big considerations, then the OP should also take into account the spouse's pension and other secondary benefits that come with CSPS membership, or perhaps stay where they currently are and opt for Partnership going forward.