What is a DB pension worth compared to the typical salary?

jimi_man

I was in the public sector and retired a couple of years ago, after 30 years, aged 51. My pension was £30k on retirement, on a salary of just over £50k (not all pensionable). For that I paid slightly under 12% pension contributions, for the majority of my time. It works out to 1/45 accrual rate (it's a slightly odd scheme that the accrual rate doubles from 20 years onwards).

I have no idea what the cost of providing that is, but I'm extremely thankful to have it. 

ffacoffipawb

jimi_man said:

I was in the public sector and retired a couple of years ago, after 30 years, aged 51. My pension was £30k on retirement, on a salary of just over £50k (not all pensionable). For that I paid slightly under 12% pension contributions, for the majority of my time. It works out to 1/45 accrual rate (it's a slightly odd scheme that the accrual rate doubles from 20 years onwards).

I have no idea what the cost of providing that is, but I'm extremely thankful to have it. 

Well over £1million I would guess, based on the young age and an inflation linked payout.

Thrugelmir

jimi_man said:

I was in the public sector and retired a couple of years ago, after 30 years, aged 51. My pension was £30k on retirement, on a salary of just over £50k (not all pensionable). For that I paid slightly under 12% pension contributions, for the majority of my time. It works out to 1/45 accrual rate (it's a slightly odd scheme that the accrual rate doubles from 20 years onwards).

I have no idea what the cost of providing that is, but I'm extremely thankful to have it. 

Isn't the double accrual rate down to the nature of the work you undertook? 

michaels

ffacoffipawb said:

jimi_man said:

I was in the public sector and retired a couple of years ago, after 30 years, aged 51. My pension was £30k on retirement, on a salary of just over £50k (not all pensionable). For that I paid slightly under 12% pension contributions, for the majority of my time. It works out to 1/45 accrual rate (it's a slightly odd scheme that the accrual rate doubles from 20 years onwards).

I have no idea what the cost of providing that is, but I'm extremely thankful to have it. 

Well over £1million I would guess, based on the young age and an inflation linked payout.

I don't think it is possible to get an annuity quote easily for any age below 55 but I suspect it would take a £2m pot to give that level of pension - £2m / 30 years = an average of 67k per annum for each year worked.

sammyjammy

GunJack said:

and another inaccuracy in your calcs, the Civil Service have had a pay freeze (well, real-terms reduction, actually) of max 1% for 10 years, which has drastically undercut inflation for that period which has duffed pensions as well as buying power. 
The other reason the comparison DB/annuity pot is wrong, is that the scheme holds a collective pot of assets, which are used to pay the pensions, NOT an individual pot to buy an annuity with - comparing apples and oranges..

Just as we were coming out of that period of long term austerity looks like we'll have another ten years of it to come.  The pension of someone retiring in ten years time (like me) will have been decimated for half of my career, not that I don't consider myself very lucky.

sammyjammy

Thrugelmir said:

Andy_L said:

michaels said:

My understanding is that long term real wages increase by about 2% per annum.  However over the typical career an employee does not stay in the same job, they progress up their pay spine and potentially get promoted to a higher grade.  I agree that recently the public sector have not seen annual increases at all (let alone real terms) but I am sure most at least those in 'professions' have seen the sort of salary progression I am talking about. 

A nurse starts on 25k. 40 years of 3% above inflation gets them to 80k. It's impossible for every nurse to achieve that sort of career progression.

That's the pay of a senior Director of xxxx level in a sizable trust. Far from an nursing average role.  
With public sector roles after 10 years you hit a ceiling . Then it's inflation rises only. Like the private sector. Pyramids narrow towards the top.
BP is cutting half of it's senior management, around a 100 roles. No one is immune to change either. Private or public sector. Reorganisations being common place. 

Your 10 years of pay progression maybe true for NHS but most civil service departments removed spine points many years ago, at least 12 in my department if I recall correctly.  That means wherever you were on the pay scale 12 years ago unless you've been promoted you'll stay there and if you get promoted you'll be on the mimum of that grade for the forseeable.

Thrugelmir

sammyjammy said:

Thrugelmir said:

Andy_L said:

michaels said:

My understanding is that long term real wages increase by about 2% per annum.  However over the typical career an employee does not stay in the same job, they progress up their pay spine and potentially get promoted to a higher grade.  I agree that recently the public sector have not seen annual increases at all (let alone real terms) but I am sure most at least those in 'professions' have seen the sort of salary progression I am talking about. 

A nurse starts on 25k. 40 years of 3% above inflation gets them to 80k. It's impossible for every nurse to achieve that sort of career progression.

That's the pay of a senior Director of xxxx level in a sizable trust. Far from an nursing average role.  
With public sector roles after 10 years you hit a ceiling . Then it's inflation rises only. Like the private sector. Pyramids narrow towards the top.
BP is cutting half of it's senior management, around a 100 roles. No one is immune to change either. Private or public sector. Reorganisations being common place. 

Your 10 years of pay progression maybe true for NHS but most civil service departments removed spine points many years ago, at least 12 in my department if I recall correctly.  That means wherever you were on the pay scale 12 years ago unless you've been promoted you'll stay there and if you get promoted you'll be on the mimum of that grade for the forseeable.

I contracted for the last 7 years of my full working life in the public sector (non NHS, although have a thorough insight). Fully aware of the constraints imposed along with the increases in pension contribution %'s and the payment of full rate employee's NIC. Only remained for the very welcome late boost to my pension provision.