Pension confusion

rivalse

Hi all,

I am a long time lurker of these boards, and hope I can gain some advice. I have had a letter today reminding me that I have until the 8th August to decide if I wish to join the RPS65 pension. I am currently in the CARE pension scheme. I will try and seek out some professional advice, but typically i go on holiday on Wednesday, and don't return until the end of the month, so realistically i have Monday to get some advice, and Tuesday to submit the forms if i wish to join.

My question is, i thought the RPS65 was meant to be superior to the CARE scheme, but i cannot get the calculations to prove this. My workings out as below;

RPS65(A defined benefit arrangement, pension is based on pensionable service(PS) and final average pay(FAP). Final average pay is your pensionable pay in the last 12 months before retirement, minus 75% of state pension. The Formula is 1/60 * FAP * PS)

So say my pensionable pay is £40000, i work it out as such;

1/60 * £34961.20 (£40000-5038.80, 75% of state pension) * 31.94 (Years until 65) = £18611.01 yearly pension.

However, the CARE pension (A defined benefit arrangement based on your career average pensionable pay, with a formula of 1/60 * Pensionable pay)

So again, based on a £40000 salary would work out as such;

1/60 * £40000 * 31.94 = £21293.33

So the CARE pension seems to give me an additional yearly pension of £2682.32.

Another thing to note is RPS is a cost of £215.38 a month, and CARE is £182.15. So i seem to currently be paying less for a higher pension?

Have i got my calculations right, or am i completely misunderstanding something?

Apologies if this doesn't make any sense, but Id appreciate any help given.

Rivalse.

GDB2222

In the CARE scheme how are your earnings revalued? Do you expect your actual earnings to rise faster or slower than that?

rivalse

Hi GDB thanks for the reply, from my fact sheet it says

"Whilst you are a contributing member these units are increased by CPI to protect from inflation. As for salary we tend to get an above inflation pay rise each year.

Rivalse

xylophone

See https://forums.moneysavingexpert.com/discussion/5424903/final-salary-v-career-average




https://www.rmt.org.uk/news/publications/nr-basic-pension-rules/

CARE

Your pension will be based on your PP in each year of membership.

The formula used for the unit of pension earned each year is 1/60 x PP.

While you are a contributing member these units are increased by CPI (from April 2016) in each subsequent year to help protect your pension from inflation.

RPS

Your pension will be based on your pensionable service and Final Average Pay (usually your PP in the final twelve months before retirement) reduced by 75% of the average Basic State Pension at that date.



http://www.mynrpension.co.uk/media/5705/rps65-booklet-october-2016.pdf is the current version of the pension booklet and gives the following definitions of the above.

Basic State Pension
Basic State Pension has been replaced for people who reach State Pension Age on or after 6 April 2016. The Section however, will continue to use Basic State Pension as published by the government annually.

Final average basic State Pension
The single person’s basic State Pension averaged over the 12 months before you: take your benefits; leave the Section of your Scheme; or die; whichever is earlier.