Is this worth it? Paying 19% of salary to get 1.1k in 30 years time?

snowqueen555

Public sector pensions have no "pot". You could throw in thousands and thousands and you may not realise the value of the pension. It's a good idea to increase pensions contributions, but I would also look at other options as well.

chucknorris

FIRSTTIMER wrote: »

So worth it then in your opinion? It has hiked up by around 3% this year and I was contemplating stopping paying in any extra as it is quite expensive, hence just a general ask on here on whether it is worth it.

I'm in the TPS (Teachers Pension Scheme), and like your scheme that also changed a few years ago, and we had to pay more for a slightly less valuable scheme. It changed from an unbelievably absolutely fantastic pension to a mere fantastic pension scheme, and that's what you have now. I am always amazed how many of my fellow university lecturers simply do not understand the value of the scheme.

justme111

These are general words. Have you calculated how good or not so the additional benefits that op pays for are ?

chucknorris

justme111 wrote: »

These are general words. Have you calculated how good or not so the additional benefits that op pays for are ?

The acid test is to compare his pension to buying an annuity that would pay the same as his pension would, and with the same benefits (indexing etc.). I can guarantee (if he is in reasonable health and not comparing to a substantially enhanced annuity) that his pension would easily be better value than an annuity.

Personally I am not a particular fan of annuities, which is why I value my TPS with a multiplier of 28.5 (rather than circa 32) on my spreadsheet. Which is why comparing to annuity is merely a guide (but an extremely good one), but you have to know how you feel (numerically) about annuities, no one can second guess this for other people.

I invested about £75k (gross) buying the max allowed additional pension in the TPS, which will pay about £6,300 per annum in my retirement, and when I join the new scheme next year, I will buy as much as I can in that scheme before I retire.

justme111

If most people don't buy annuities but draw down their pensions why would you compare it to annuities ? Comparison with average investment returns would be more appropriate ( taking into account no survival and other benefits of course)

chucknorris

justme111 wrote: »

If most people don't buy annuities but draw down their pensions why would you compare it to annuities ? Comparison with average investment returns would be more appropriate ( taking into account no survival and other benefits of course)

Because annuities guarantee to pay out an income for someone's lifespan, exactly as a DB pension does, which makes it the only really meaningful comparison.

Yes of course you can assume a lifespan, but that assumption introduces risk, it is not guaranteed. The less you have the more important that guarantee is, which is why it isn't particularly important to me, but it will be to most others.

A DB pension (and an annuity) also introduces additional diversity into an investment portfolio, and I already have about as much as I want in property and equities (I'm not a huge fan of bonds, but I'll probably end up sticking about £500k in them after the next bout of selling property).

justme111

Indeed indeed
Still does not mean that buying additional benefits with NHS pension is the best use for OP's money in the context of providing income once he stopped working. We are talking about OP, not you here. He will have his NHS pension anyway even if he does not pay additional benefits so for him diversification would consist of something else.

chucknorris

justme111 wrote: »

Indeed indeed
Still does not mean that buying additional benefits with NHS pension is the best use for OP's money in the context of providing income once he stopped working. We are talking about OP, not you here. He will have his NHS pension anyway even if he does not pay additional benefits so for him diversification would consist of something else.

It is subjective, we are stating opinions, not facts, how come you are entitled to an opinion, and I am not? IMO out of all my investments the additional pension that I invested in the TPS was by far the best value. If you don't like that, well that's just tough.

nigelbb

chucknorris wrote: »

It is subjective, we are stating opinions, not facts, how come you are entitled to an opinion, and I am not? IMO out of all my investments the additional pension that I invested in the TPS was by far the best value. If you don't like that, well that's just tough.

Some people just seem to relish advising other people how to gamble with their savings.

zagubov

I'm in the TPS as well and like chuck I paid extra into the scheme as I started my career late. I had an AVC and extra payments into the TPS but after a long look at the costs I stopped paying into the AVC and switched to extra payments to the TPS. It was easily the most affordable way for me to get the most for my money.

I took early retirement and now gone back to work and still thinking of paying more into my pension.

It's the fact it's an inflation-proof DB scheme that makes me want to make it my main investment for my future. Bear in mind teachers retiring about 60 can still be drawing pensions in their late 80s and beyond.