DC Scheme - Company contributions

garmeg

We get a matching 6% maximum. Anything we pay over 6% is not matched by the employer. Salary sacrifice is offered with half the employer NI saving applied on top.

NedS

Snot said:

Just to close off, the company have provided more details. If the employee contributes 5% they will contribute a max of between 10% and 14% depending on the employees grade. They won't add any of the NI savings. 

The real eye opener is the comparisons between the DB continuing and the new DC scheme, based on standard assumptions for growth etc the DC gives a pension approx. 60% lower.

I was going to post that if the employer is contributing twice what the employee contributes then you are probably not doing too bad.

I'm not surprised the predictions are significantly lower. You now have 15% of your salary going into a pension whereas the DB benefits were probably costing your employer significantly more, maybe 30-40% of your salary, hence the move to end the DB scheme. The saving to the employer is massive.

garmeg

NedS said:

Snot said:

Just to close off, the company have provided more details. If the employee contributes 5% they will contribute a max of between 10% and 14% depending on the employees grade. They won't add any of the NI savings. 

The real eye opener is the comparisons between the DB continuing and the new DC scheme, based on standard assumptions for growth etc the DC gives a pension approx. 60% lower.

I was going to post that if the employer is contributing twice what the employee contributes then you are probably not doing too bad.

I'm not surprised the predictions are significantly lower. You now have 15% of your salary going into a pension whereas the DB benefits were probably costing your employer significantly more, maybe 30-40% of your salary, hence the move to end the DB scheme. The saving to the employer is massive.

I certainly miss the non contributory final salary scheme from when I was made redundant in 1993. It would have been nice to have been a member for longer but it was not to be. It will be a nice income addition to my DC scheme from its equalised retirement age of 60.

Intoodeep

We pay 5% and the Company 10%

L9XSS

Matched to 7.5% where I work in the Food Retail Sector.  

craig1912

When I worked for Aviva and they closed the FS scheme I received a £5000 (I think). Can’t remember the scale but ongoing contributions were 8% from me and 14% (the maximum they would contribute) from them. Salary sacrifice for my contributions. Think we also had 8x salary life cover and some form of widows.

Mistermeaner

I've been a transition arrangement where for several years the company was paying 21% on an employee's 6% - this was a chemical giant and was part of a bribe to get folk to voluntarily leave the db scheme (I joined too late to be eligible for db but got the enhanced dc )

After a couple of years the 21% was dropped to 11% (still good) and senior folk got the 10% as wages (which could obviously just go straight into the pension) - this wasn't open to most staff however

My current employer is 5% employee + 9% employer so not so good but I'm putting in total 40-50% to hit 40k per year ... I'm lucky (or worked hard enough) that I'm able to do this 

Cant give pension advice to my staff obviously but I encourage the young guys particularly to think through what happens it they save ~15% of their salary each year for 40years then retire now many years salary would that give them in retirement ?.... It's not hard maths but amazing how few people even think about this until their 40s 50s or worse even later

20years time expecting the "pensions scandal" with lost of angry people confused as to why they are selling their houses to fund retirement

JoeCrystal

Mistermeaner said:

20years time expecting the "pensions scandal" with lost of angry people confused as to why they are selling their houses to fund retirement

To be honest, you need to bear in mind that for most people, their pensions will be based on the state pension as the foundation which then gets built up with a variety of personal / workplace schemes as bricks (which thanks to auto-enrollment, became a lot more common in the private sector). So as long the state pension provision is reasonably improved upon, the auto-enrolment contribution rates are significantly increased and a better understanding of the DC pension schemes, then the pensioners retiring at SPA should be okay, providing they maintain a low expectation.

Joey_Soap

I'm afraid to say if anyone with more than a decade or two still to work thinks the state pension is going to be the bedrock of their retirement income, they better think again. As the country sinks under the quagmire of debt, things like pensions are going to have to come under intense pressure. Expect the entitlement age to increase gradually and expect the things like regular pension increases to fall by the wayside. It's political dynamite but the issue has to be tackled sooner or later. I expect it to become a means tested benefit like in Australia.

crv1963

Mistermeaner said:

Cant give pension advice to my staff obviously but I encourage the young guys particularly to think through what happens it they save ~15% of their salary each year for 40years then retire now many years salary would that give them in retirement ?.... It's not hard maths but amazing how few people even think about this until their 40s 50s or worse even later

I think that offering advice over pensions and savings to younger staff is useful, I keep explaining the benefits of our (DB) pension scheme when I'm asked and encouraged a couple of colleagues to look at how they can get on the property ladder when they asked me to. I'm not surprised at the lack of knowledge generally as I work with really bright people who mostly seem to live for the day and often beyond their means as being old (as I'm described in my 50s) is so far away!

My youngest son when he started work was sat down by his colleague/ supervisor who explained the benefit of paying the maximum percentage in to get the maximum employer contribution. Then at an interview last year he asked the interviewer about the company pension scheme and contributions- the interviewer told him he'd never been asked that from a 22 year old before and why had he asked. To which he replied "I want to be retired by the time I get to 55". He was offered the job but his current employer offered a promotion and payrise so he stayed put.

20years time expecting the "pensions scandal" with lost of angry people confused as to why they are selling their houses to fund retirement
I expect this too. Several colleagues of my wife in their 40s and 50s at the start of auto-enrollment told her they were pleased that they were now in a pension as it meant that they could retire in comfort. She disabused them of this misconception by pointing out saving 8% of salary as a starting point was fine for a 16 year old but that at their age they need to save significantly more- that saving small amounts now means small amounts later. I wonder how many auto-enrolled staff think to themselves pension box ticked and life set, so forget it, or worse drop out because they can't see a benefit of a small pension.