Confusion about the value of pension from last company

MoneyMonkey

A couple of years back, I left my BAE Systems, along with it's final salary pension scheme . At the time I thought I understood roughly what to expect at NRD. In my annual pension statement, it said if I had left the Scheme on <insert date here>, my pension at NRD would have been based on something like 48% (my contributions) x final salary, giving in the region of £17k a year. I take this to mean that would be roughly what I'd get at NRD (accrual and longevity factors will obviously play a part too).

I just recieved a 'deferred benefits statement', and the headline is something closer to £12k a year - quite a difference!

I suspect that I am missing something here! Are the benefits reduced when you leave the final salary scheme, or does this figure just means something else? Any ideas anyone?

Thanks,
MM

Silvertabby

It isn't your contributions that determine a final salary pension - it's the accrual rate.

Your pension hasn't been reduced - I think you have misunderstood the way it works.

I've just had a google, and it looks like you had the option of a 1/80th accrual rate - or 1/60th subject to paying higher contributions (which is unusual?).

Retirement

When you retire you will receive a pension that relates to your earnings and length of service.

Your pension will be calculated as the product of:

• your Final Pensionable Salary,
• the number of years of your Pensionable Service, and
• the accrual rate applicable to your chosen contributions.

For example:
Assuming your Final Pensionable Salary was £15,000 and you completed 15 years’ Pensionable Service, your pension would depend on the contribution level paid:

1/60 x £15,000 x 15 years = £3,750 per annum or


1/80 x £15,000 x 15 years = £2,812.50 per annum

MoneyMonkey

Thanks for the reply Silvertabby.

I suspect that it was the wrong terms I was using in the post.

From memory,

the accrual rate was 1.67% per year
the years of contribution was about 28
final salary was say £36k
= ~16.8k per year

This is similar to what I had on the old statement before leaving. The question for me is why the deferred pension seems to be about £12k per year!

hyubh

MoneyMonkey wrote: »

the accrual rate was 1.67% per year
the years of contribution was about 28
final salary was say £36k
= ~16.8k per year

This is similar to what I had on the old statement before leaving. The question for me is why the deferred pension seems to be about £12k per year!

Hmm, my maths is not great, but doesn't this back up what Silvertabby intimated? Namely, you were actually in a 1/60ths section, but this latest figure you've received assumes 1/80ths? (28 x 36K x 1/80 = 12.6K.) Get in touch with the administrator (Equiniti, but ex-BAE) and ask them to explain themselves (https://www.baesystemspensions.com/285/contact-details).

PS - there will be some revaluation on the pension amount on leaving too.

Silvertabby

Looks like it's down to the the accrual rate.

Using your figures and the BAE example copied into my Post No 2:

1/60 x £36K x 28 years = £16,799.93 per annum or

1/80 x £36K x 28 years = £12,600 per annum

If you are sure that you (always) paid the higher contributions needed for the 1/60th accrual rate, then you need to query it with BAE.