What will my pension pot be?

Lemily14

Hi guys,

First post here and looking for some info. So I’m wondering if anyone could give me a rough figure of what my pension pot would be when I’m eligible to retire in 24 years (I’m currently 33). So I’m in a DB final salary pension scheme and 2 years ago I got a transfer value fee of £135,000 (after 8 years of service). I currently pay in £195 per month (6.5%) and my company pay in £590 (19%). As I said, I have 24 years left till I can retire at 57. I don’t know if it makes a big difference but I also get what’s called ‘shift credits’ due to working shifts (I don’t fully understand how shift credits work to be honest). So, yeah, a lot of older guys in my work are now transferring their pot out rather than taking the annual pension. Would just like a rough figure based on what is paid into my pension pot, what inflation is set at and that I’ve got 24 years to go.

Any more info needed then I’ll try to supply it if I know it.

Thanks guys

vulcanrtb

Difficult to answer accurately, as we don't know what will happen to inflation etc. But there is a nifty tool at thecalculatorsite[.com] (sorry, I can't post links) that gives at least a ball park figure. Setting interest at 3.5% (maybe on the low side for an investment portfolio) and putting in £785 total per month and setting inflation at 2%, you'll have very roughly £750,000 in 24 years time.

Again - this is a rough calculation based on what we know today.

JoeCrystal

Lemily14. Please understand your DB final salary pension scheme. Please read up on it and realise that there is no pension pot for you.

A defined benefit (DB) pension scheme is one where the amount you’re paid is based on how many years you’ve worked for your employer and the salary you’ve earned.

What is your accrual rate? At the moment, your salary is £36,000 and if your accrual rate is 1/60 with 10 years service, then your pension is already £6,000 per year. This is why access to a final salary pension scheme is like gold dust.

It doesn't matter what your employer pay as the contribution since what you got is a promise to pay you a pension when you reach the pension retirement age.

Lemily14

Thanks for the quick reply, I’ll have a look at that site. I know it’s very hard to predict and from what I hear there is a good chance I won’t have a DB pension by the time I retire anyway.

Lemily14

Hi Joecrystal,

I understand that my DB pension scheme is a final salary and that there is no pot but I’m sure the law has changed in the last few years and that we are now allowed a transfer value for the pension. So you can have a set amount you can take and invest somewhere else, rather than take the guaranteed company pension

JoeCrystal

Lemily14 wrote: »

Thanks for the quick reply, I’ll have a look at that site. I know it’s very hard to predict and from what I hear there is a good chance I won’t have a DB pension by the time I retire anyway.

I would say it is impossible to predict since the transfers value are based on whatever the trustees calculate or based on GAR. Beside, you will have the a DB pension already accured so far and will hopefully have many more years in it!

Lemily14

Yes, hopefully it runs for many more years ��

JoeCrystal

Lemily14 wrote: »

Hi Joecrystal,

I understand that my DB pension scheme is a final salary and that there is no pot, but I’m sure the law has changed in the last few years and that we are now allowed a transfer value for the pension. So you can have a set amount you can take and invest somewhere else, rather than receive the guaranteed company pension

Thanks that does make sense now. I was worried for a moment that you did think there is a pot of money with your name on it.

Lemily14

Yeah, I’m staying in the scheme until they either close it or I hit that magical 57. £135,000 transfer value was only for my first 8 years of service, is that not a good amount for so little time in the job?

sandsy

The transfer value is nothing to do with the amount you put in so calculators are useless.

A transfer value is based on how much your scheme needs to notionally have invested in order to pay you the promised pension at retirement age. It's notional because there aren't individual accounts as such - everyone's money is pooled together.

It's generally considered a bad idea to transfer out of a DB scheme as it would cost you much more personally to provide the same level of pension as the scheme can provide.

And for someone who is so far from retirement, it's a bit silly to transfer out as you're closing off a retirement income option that can never be reinstated.

Transferring the accrued benefits and forgoing future benefits is not the way to go - rather read up on how valuable DB schemes are and count your lucky stars you've got one!

JoeCrystal

Lemily14 wrote: »

Yeah, I’m staying in the scheme until they either close it or I hit that magical 57. £135,000 transfer value was only for my first 8 years of service, is that not a good amount for so little time in the job?

If I am reading this right and the default pension age is 57!! :eek: Then that makes it even more valuable. I think that is a terrible deal. Are there Ill-Health retirement and death in service benefit ties in with your DB pension scheme?

Let say you decided to transfer out £135,000 into your private pension and still want £6,000 per year at age 57; you would need to contribute 34% of your salary or £1,020 per month for that next 24 years to maintain that potential income and pray that market condition is good all the way. Or if you transfer the amount out and do not contribute any more, relying just on the market, then the index-linked annuity at 57 would be something a little over £2,000 per year.