Career average Pension

RyanIre

Hello just wanting some advice

I'm about to take up a public sector role and the pension provider is Nilgosc whose is scheme 1/49th of my pensionable pay. I believe it's a career average pension as final salary no longer exists.

New to this all but I assume this is better than the defined contribution of 8% I make and my current employer makes? Also should I transfer my current smallish pot of pension across to my new employer pension if this is possible?

Thanks in advance!

JoeCrystal

It is a lot better. It is generally worth between a quarter to a third of your salary. It is certainly worth asking them to see how much it will get if you transfer your pension pot in, It also comes with ill-health retirement, a lump sum if you die and so on. Worth reading this site An iron-clad index-linked pension is very valuable.

If you tell us how old you are and on what salary, I could probably work out how much it would cost in term of DC pension, but it is a lot higher than 8%.

tacpot12

A career-average pension will be better than a defined contribution scheme because the employer is taking the investment risk, and other risks such as longevity.

If you are allowed to transfer your existing pension pot, then doing so would probably be a good idea, but just make sure you are clear what benefits your pot is buying you. You could post the details back here to see if it is good value.

RyanIre

JoeCrystal wrote: »

It is a lot better. It is generally worth between a quarter to a third of your salary. It is certainly worth asking them to see how much it will get if you transfer your pension pot in, It also comes with ill-health retirement, a lump sum if you die and so on. Worth reading this site An iron-clad index-linked pension is very valuable.

If you tell us how old you are and on what salary, I could probably work out how much it would cost in term of DC pension, but it is a lot higher than 8%.

Super thanks, I'm 35 and on 45k in the new role.
That's good news, shall check the contribution rates also

JoeCrystal

RyanIre wrote: »

Super thanks, I'm 35 and on 45k in the new role.
That's good news, shall check the contribution rates also

As you are on a high salary already, it is even more valuable. Let say you spend 33 years working for LGPS on 45k salary and assuming that CPI matched the pay rise for simplicity's sake. You can expect a pension of £30,300 by 68. To get that from scratch and getting an index-linked annuity, you would need to contribute £1,860 per month for the next thirty-three years and increase your contribution by inflation every year. For something that cost £255 per month, that is a pretty good deal. You can also transfer in your DC pension pot as well opt for up to added pension of up to £6,843 with an extra monthly contribution or a lump sum if you want to.

crv1963

RyanIre wrote: »

Super thanks, I'm 35 and on 45k in the new role.
That's good news, shall check the contribution rates also

Congratulations on your new job- and pension scheme. No one in the public sector earns 45k without a level of stress at some point. I'd suggest that with a bit of planning you could start now reading around and aim to retire before 68.

A bit put away elsewhere for this will be welcome to your future self- take it from someone who didn't pay much attention until much older than you are now.

edrushuk

JoeCrystal how did you calculate that I am trying to figure out what I would get with my NHS pension. I am 52 on £28K ( started about 3 years ago on 21K). If I carried on working full time until 67 I had guessed ( a very loose guess) a pension of about 14k. I assume it would make a difference if I wanted to reduce my hours.


Apologies Ryanire, for jumping onto your post, it is difficult to get a straight answer and I need to ensure I know where I stand


Thank you
Susanna

JoeCrystal

edrushuk wrote: »

JoeCrystal how did you calculate that I am trying to figure out what I would get with my NHS pension. I am 52 on £28K ( started about three years ago on 21K). If I carried on working full time until 67 I had guessed ( a very loose guess) a pension of about 14k. I assume it would make a difference if I wanted to reduce my hours

Hi Susanna,

Well, the beauty of CARE is that each part of the pension is based on your salary yearly. It would make a difference if you reduce the hours but only for that year. So you earn a pension each year of 1/54 of your pensionable pay. Which get increased by CPI+1.5%. So assuming you get a pay rise that matched CPI+1.5% every year, you can expect a pension of £8,950 in today's term by 67. It is difficult as we have no idea what your salary is going to be for the next 15 years and CPI. I hope that makes sense.

RyanIre

JoeCrystal wrote: »

As you are on a high salary already, it is even more valuable. Let say you spend 33 years working for LGPS on 45k salary and assuming that CPI matched the pay rise for simplicity's sake. You can expect a pension of £30,300 by 68. To get that from scratch and getting an index-linked annuity, you would need to contribute £1,860 per month for the next thirty-three years and increase your contribution by inflation every year. For something that cost £255 per month, that is a pretty good deal. You can also transfer in your DC pension pot as well opt for up to added pension of up to £6,843 with an extra monthly contribution or a lump sum if you want to.

Joe much appreciated

That appears much better than my current 8% contribution
I suppose the only negative appears to be the 68 pension age, if I didn't transfer in my DC pension pot could I retire at say 65 and still be eligible for the LGPS pension?

Also the £255 per month contribution is only 6.8%, that seems quite low conpare dot any private sector firm I've worked for!

Pension_Geek

RyanIre wrote: »

Joe much appreciated

That appears much better than my current 8% contribution
I suppose the only negative appears to be the 68 pension age, if I didn't transfer in my DC pension pot could I retire at say 65 and still be eligible for the LGPS pension?

Also the £255 per month contribution is only 6.8%, that seems quite low conpare dot any private sector firm I've worked for!

You can retire early, but it will be reduced;

https://www.nilgosc.org.uk/early-retirement-in-the-2015-scheme

Of course, you could make other provisions and wait for the pension.

JoeCrystal

RyanIre wrote: »

Joe much appreciated

That appears much better than my current 8% contribution
I suppose the only negative appears to be the 68 pension age, if I didn't transfer in my DC pension pot could I retire at say 65 and still be eligible for the LGPS pension?

Also the £255 per month contribution is only 6.8%, that seems quite low conpare dot any private sector firm I've worked for!

Not necessary. You can access it from age 55 although the pension will be reduced due to early payment. Let say you work until 55 and accrued the pension of £18,400 in today's term based on twenty years service. iPension will be reduced by 47% for early payment so you can get £9,700 from the age of 55.

You are right. 6.8% is very low for what you can get out of the pension scheme. If you stay on until 68 and on 45k salary, as it stands, you would pay £100,980 in pension contribution, but your pension at £30,300 from 68 will pay back all the pension contributions you made in a few years.

The fact is that such schemes will be unaffordable in the long term and the pension schemes will inevitably increase the employee contributions and reduce the generosity. The beautiful thing about NILGOSC is that it got an actual fund backing the payment unlike the NHS for example whose the combined number of deferred members and pensioners in payment will outnumber the active members eventually.