How Does My Pension Pot Compare?

michaels

Off topic I know.

Public sector pensions are less lucrative now than they used to be.

However if would be interesting to work out how much it would have cost as a percentage of salary via a standalone pension contribution to purchase an annuity giving the same level of benefit as public sector workers retiring now get. I suspect it most cases it would have much more than covered any salary differential with the private sector.

crv1963

michaels wrote: »

Off topic I know.

Public sector pensions are less lucrative now than they used to be.

However if would be interesting to work out how much it would have cost as a percentage of salary via a standalone pension contribution to purchase an annuity giving the same level of benefit as public sector workers retiring now get. I suspect it most cases it would have much more than covered any salary differential with the private sector.

I think without doing the calculation that you are probably correct, but there has to be a big but in there. Pensions form part of the terms and conditions of working for an employer.

Many public sector employees are not able to have gained their roles/ posts/ training outside of the public sector- the Military, the Police, the Ambulance Service. There are of course areas that cross over such as teaching, nursing, council staff however most have to at least get their basic or initial training in the public sector or least used to have to.

Once training is completed there are career choices to work in the public or private sector for some professions but not all. Every change has consequences- stopping bursaries for trainee nurses hasn't stopped people training but has led to a large drop in numbers doing it. That doesn't matter now but it will in ten years time when the current work force has a 40% reduction as my cohort/ peers retire.

We train too few doctors to fill current vacancies and demonise the GMC for this and the BMA for junior doctors striking for better terms or defending existing terms now. How much greater is the pressure going to be when the vacancy rates are even higher and experienced staff call it a day and take their hard earned pensions?

Some services are better organised and supplied at a national level but if you divide and rule you may solve todays problem but you create problems for the future. I'm sure that there are always people that moan, but the numbers of senior Police officers coming out saying that they cannot provide a service that meets expectations after the current budget reductions have been swallowed is not all scaremongering.

I'm a frontline nurse, but without the "backroom staff" how much harder would my role be? I have to worry about lots of immediate problems in front of me, I haven't time to worry about is my pay going to be correct, is my organisation compliant with CQC rules, I do my bit, knowing that others translate what I do into the format that the regulators need, that my payroll deductions go where they are supposed to.

Yes I get dragged away to fill forms in, 60 minutes with a patient may mean 90 minutes of paperwork, that is the way it has gone because of regulation, is it good? Who knows but at least the patient gets the treatment, the public the assurance it is both safe and relevant to need.

It is very easy to decide to cut a budget, very much harder to decide which services get cut. Are the "backroom staff" of lesser value than I as a "frontline staff" member so worth of a lesser pension allowance? I don't think so.

It is very easy to knock the public sector but if someone wants to work out how much I would have needed to get my projected pension if it was DC instead of DB here are my figures, ignoring my reduction due to divorce pension sharing order and shift allowances-

Earnings £36500pa basic ft pay.

Pension contributions- me 9.5%, employer 15% (based on my most up to date Total Reward Statement), each year worked accrues 1/80th of salary as pension for the first 20 years service, 2/80ths for the next 10 years service, then 5/80ths for the service age 55-58 inclusive. Started service age 20.

Expected pension is going to be 45/80ths of final salary + 3x pension as a TFLS assuming I don't take a reduced pension and larger TFLS. Survivor pension is 50% of my pension regardless of the size of TFLS I take. Pension index linked from starting to take it at age 58 and one week (if I don't work the one week over 58 I lose 1/80th, I'm not sure why but that is what the Pension Officer has advised me under the scheme rules).

Apologies for the moan in the middle!

Edit My particular role is not currently available in the Private Sector but a job recently offered to me equivalent to my grade as at 40.5k pa with pension at 6% employee matched by 6% employer contribution.

Kynthia

michaels wrote: »

Off topic I know.

Public sector pensions are less lucrative now than they used to be.

However if would be interesting to work out how much it would have cost as a percentage of salary via a standalone pension contribution to purchase an annuity giving the same level of benefit as public sector workers retiring now get. I suspect it most cases it would have much more than covered any salary differential with the private sector.

It's hard to compare just that way as annuities aren't good value and not the best choice for most people at present so it's not fair to compare public sector with the worst private sector option. Drawdown is now considered the most flexible and best value choice for many where you can often maintain tge full capital value should you ever need it and then leave it to yiur beneficiaries. There are many with public sector pensions who wish their pension was as inheritable as a private sector one. Anyone who dies early in retirement has a reduced pension paid to a spouse, and if no spouse then there's nothing for any adult children to inherit and it's lost. My partner will only get a pension worth a third of mine when I die, which is a big difference.

bostonerimus

Kynthia wrote: »

It's hard to compare just that way as annuities aren't good value and not the best choice for most people at present so it's not fair to compare public sector with the worst private sector option. Drawdown is now considered the most flexible and best value choice for many where you can often maintain tge full capital value should you ever need it and then leave it to yiur beneficiaries. There are many with public sector pensions who wish their pension was as inheritable as a private sector one. Anyone who dies early in retirement has a reduced pension paid to a spouse, and if no spouse then there's nothing for any adult children to inherit and it's lost. My partner will only get a pension worth a third of mine when I die, which is a big difference.

Drawdown will be promoted as "the best" way to fund retirement until there is a 50% drop in the stock markets and people deplete their pension pot early. Also DB pension and annuities give you a mortality credit and you don't have to worry about the money running out. Both DC and DB approaches have their pros and cons and IMO the ideal retirement income portfolio contains both.

michaels

crv1963 wrote: »

I think without doing the calculation that you are probably correct, but there has to be a big but in there. Pensions form part of the terms and conditions of working for an employer.

Many public sector employees are not able to have gained their roles/ posts/ training outside of the public sector- the Military, the Police, the Ambulance Service. There are of course areas that cross over such as teaching, nursing, council staff however most have to at least get their basic or initial training in the public sector or least used to have to.

Once training is completed there are career choices to work in the public or private sector for some professions but not all. Every change has consequences- stopping bursaries for trainee nurses hasn't stopped people training but has led to a large drop in numbers doing it. That doesn't matter now but it will in ten years time when the current work force has a 40% reduction as my cohort/ peers retire.

We train too few doctors to fill current vacancies and demonise the GMC for this and the BMA for junior doctors striking for better terms or defending existing terms now. How much greater is the pressure going to be when the vacancy rates are even higher and experienced staff call it a day and take their hard earned pensions?

Some services are better organised and supplied at a national level but if you divide and rule you may solve todays problem but you create problems for the future. I'm sure that there are always people that moan, but the numbers of senior Police officers coming out saying that they cannot provide a service that meets expectations after the current budget reductions have been swallowed is not all scaremongering.

I'm a frontline nurse, but without the "backroom staff" how much harder would my role be? I have to worry about lots of immediate problems in front of me, I haven't time to worry about is my pay going to be correct, is my organisation compliant with CQC rules, I do my bit, knowing that others translate what I do into the format that the regulators need, that my payroll deductions go where they are supposed to.

Yes I get dragged away to fill forms in, 60 minutes with a patient may mean 90 minutes of paperwork, that is the way it has gone because of regulation, is it good? Who knows but at least the patient gets the treatment, the public the assurance it is both safe and relevant to need.

It is very easy to decide to cut a budget, very much harder to decide which services get cut. Are the "backroom staff" of lesser value than I as a "frontline staff" member so worth of a lesser pension allowance? I don't think so.

It is very easy to knock the public sector but if someone wants to work out how much I would have needed to get my projected pension if it was DC instead of DB here are my figures, ignoring my reduction due to divorce pension sharing order and shift allowances-

Earnings £36500pa basic ft pay.

Pension contributions- me 9.5%, employer 15% (based on my most up to date Total Reward Statement), each year worked accrues 1/80th of salary as pension for the first 20 years service, 2/80ths for the next 10 years service, then 5/80ths for the service age 55-58 inclusive. Started service age 20.

Expected pension is going to be 45/80ths of final salary + 3x pension as a TFLS assuming I don't take a reduced pension and larger TFLS. Survivor pension is 50% of my pension regardless of the size of TFLS I take. Pension index linked from starting to take it at age 58 and one week (if I don't work the one week over 58 I lose 1/80th, I'm not sure why but that is what the Pension Officer has advised me under the scheme rules).

Apologies for the moan in the middle!

Edit My particular role is not currently available in the Private Sector but a job recently offered to me equivalent to my grade as at 40.5k pa with pension at 6% employee matched by 6% employer contribution.

Thanks for this.

If you do 34 years service from 25 - 59 you seem to earn 60/80th of your income as a pension so lets say in one year you earn a lifetime pension payment of 60/80 x 36.5k x 1/34 = £805 per annum pension on average earned for each year worked.

Cost of an annuity at age 59 paying 805 index linked with 50% for same age spouse is about 45k. So your average pension contribution is worth about 45k pa or the size of pension pot needed to buy your pension is £1.5m.

Or put it another way, that nominal 24.5% you are currently paying costs you and the employer 14k but is worth 45k, the private sector contribution costs and is worth 5k.

I don't think the extra 4k annual salary in the private sector is worth a 40k reduction in pension contribution - do you?

Andy_L

michaels wrote: »

Thanks for this.

If you do 34 years service from 25 - 59 you seem to earn 60/80th of your income as a pension so lets say in one year you earn a lifetime pension payment of 60/80 x 36.5k x 1/34 = £805 per annum pension on average earned for each year worked.

Cost of an annuity at age 59 paying 805 index linked with 50% for same age spouse is about 45k. So your average pension contribution is worth about 45k pa or the size of pension pot needed to buy your pension is £1.5m.

That's 8 years earlier than NRA in the current crop of PS pension schemes so you need to reduce the pension by ~1/3 for early payment

Silvertabby

“ Thanks for this.

If you do 34 years service from 25 - 59 you seem to earn 60/80th of your income as a pension so lets say in one year you earn a lifetime pension payment of 60/80 x 36.5k x 1/34 = £805 per annum pension on average earned for each year worked.

Cost of an annuity at age 59 paying 805 index linked with 50% for same age spouse is about 45k. So your average pension contribution is worth about 45k pa or the size of pension pot needed to buy your pension is £1.5m.
Originally posted by michaels

Michaels - it isn't 60/80th, you seem to be mixing accrual rate options of either 1/60th or 1/80th (the latter with an automatic lump sum of 3 x annual pension).

Using your example of a final salary of £36,500, 34 years service and accrual rate of 1/60th:

£36,500 / 60 = £608.33 x 34 = £20,683.33

Andy_L wrote: »

That's 8 years earlier than NRA in the current crop of PS pension schemes so you need to reduce the pension by ~1/3 for early payment

So, if taken at 58, that's £20,683.33 minus (typical) reduction for early payment 0f 35% = £13,444.16 annual pension.

On the other hand, most PS schemes are now Career Average with accrual rates of - for example - 1/54 NHS, 1/49 LGPS (with the difference being levelled out by the NHS's better annual revaluation rate).

crv1963

michaels wrote: »

Thanks for this.

If you do 34 years service from 25 - 59 you seem to earn 60/80th of your income as a pension so lets say in one year you earn a lifetime pension payment of 60/80 x 36.5k x 1/34 = £805 per annum pension on average earned for each year worked.

Cost of an annuity at age 59 paying 805 index linked with 50% for same age spouse is about 45k. So your average pension contribution is worth about 45k pa or the size of pension pot needed to buy your pension is £1.5m.

Or put it another way, that nominal 24.5% you are currently paying costs you and the employer 14k but is worth 45k, the private sector contribution costs and is worth 5k.

I don't think the extra 4k annual salary in the private sector is worth a 40k reduction in pension contribution - do you?

I know it is good value but I accrued 40/80ths by age 50, then "marked time" could accrue no additional pension until the clock started again on the date my incremental date following my 55 birthday- luckily for me 2 days after my birthday. My 1995 scheme is 1/80 pa accrual, the 2008 (never a member) 1/60th, 2015 is 1/54th also never a member. I was too close to my NRA to be mover from the 1995 scheme.

I agree about the 4k additional salary not being worth the reduced pension contribution.

In my real life case I am following pension sharing order some years ago working at least until 58 to accrue the additional 5/80 and will probably remain a member until I retire aged 58-60 as the life cover also included in the deduction is worth it to me - well to my potential widow!

crv1963

Andy_L wrote: »

That's 8 years earlier than NRA in the current crop of PS pension schemes so you need to reduce the pension by ~1/3 for early payment

The scheme rules for my pension are that I cannot accrue any greater than 40/80ths before my 55 birthday, then I can accrue an additional 5/80ths from 55-58, after which I cannot accrue any more pension.

My NRA under scheme rules are hit 40/80ths and retire at 55 or stay an additional 3 years and retire with 45/80ths. I can then work as long as I wish/ am able but do not get ant additional pension. Hence many retire and return on reduced hours or work agency/ private sector.

point5clue

Earlier in the thread there was discussion on how much you'll need to live on in retirement - I've always found it hard to know, because with several children its hard to predict how much cheaper (or more expensive) it will be when they have left home.

I've tried to track expenditure, but still don't really feel confident I know what we'll need.

However, I did come across this Which? article which gave me hope...
https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

I suspect the higher number is influenced by wealthy pensioner 'choosing' to be just at the HRT threshold though ?