What constitutes a good pension?

6TD

I have a pension, I have been paying into it for 10 years but I have no idea if it's any good or not.
What can you expect at the end? Do all pensions result in paying out less than your salary? If so what % of your salary being earned in retirement would be good?
I currently earn 35k and my CARE pension forecast at NPA is 30k, is that a good benefit it sounds like it might not be much in 30 years? I pay at a rate of 1/49th, is that normal?
I have 30 years left to work so I'm wondering if I'm on the right path or should change what I'm doing.

Dazed_and_C0nfused

How do you propose to do better than 30k/year from a salary of 35k??

Why do you think it would be 30k in 30 years?

Have you read the scheme rules?

Silvertabby

LGPS ?  That £30K forecast is in today's money.  Each year, as long as you continue working/paying into the scheme, your accrued pension will not only increase by 1/49th of your pensionable pay, but also cost of living (CPI) and so, in theory, will have the same spending power as £30K today. 

If you want more than that, then you have the option of paying more into your pension (APC or AVC) or into a stand alone SIPP.

6TD

Dazed_and_C0nfused said:

How do you propose to do better than 30k/year from a salary of 35k??

Why do you think it would be 30k in 30 years?

Have you read the scheme rules?

I don't know if you can, that's what I'm trying to research.
It says the forecast at normal pension age, which for me is that far away.
I understand where the money comes from, I'm just not sure what you can expect from these things. 

6TD

Silvertabby said:

LGPS ?  That £30K forecast is in today's money.  Each year, as long as you continue working/paying into the scheme, your accrued pension will increase by cost of living (CPI) and so, in theory, will have the same spending power as £30K today. 

If you want more than that, then you have the option of paying more into your pension (APC or AVC) or into a stand alone SIPP.

Yes LGPS, I'll have a look at those other things, thanks. All I hear is that it's not as good as it used to be which is why I started to think about whether I'm getting the best I can get.

Dazed_and_C0nfused

6TD said:

Dazed_and_C0nfused said:

How do you propose to do better than 30k/year from a salary of 35k??

Why do you think it would be 30k in 30 years?

Have you read the scheme rules?

I don't know if you can, that's what I'm trying to research.
It says the forecast at normal pension age, which for me is that far away.
I understand where the money comes from, I'm just not sure what you can expect from these things. 

The scheme rules would explain how the amount accrued each year is increased (or not) for inflation.

You really need to think of it as £30k in today's money.

If you can achieve a better pension then feel free to post details of how you plan to do it as most posters on here would be very interested.

dunstonh

All I hear is that it's not as good as it used to be which is why I started to think about whether I'm getting the best I can get.

It is not as good as it used to be.   It is still far better than most you can get in the private sector and no alternative will come close to it.

Silvertabby

6TD said:

Silvertabby said:

LGPS ?  That £30K forecast is in today's money.  Each year, as long as you continue working/paying into the scheme, your accrued pension will increase by cost of living (CPI) and so, in theory, will have the same spending power as £30K today. 

If you want more than that, then you have the option of paying more into your pension (APC or AVC) or into a stand alone SIPP.

Yes LGPS, I'll have a look at those other things, thanks. All I hear is that it's not as good as it used to be which is why I started to think about whether I'm getting the best I can get.

The LGPS switched from final salary to CARE in 2014.  Many of your older colleagues are probably telling you that the CARE scheme isn't as good as the old scheme - but it depends on your career progress.

At extreme ends, if you joined as a tea boy/girl and then left 30 plus years later as a CEO then you would have indeed been better off on a final salary scheme.

However, if you spend your entire career on the same job on the same pay grade, then you'd almost certainly get more out of a CARE pension.

Wherever you fall, a public sector defined benefit scheme, such as the LGPS CARE, is far, far, better than the majority of private sector defined contribution pensions out there. 

6TD

Silvertabby said:

6TD said:

Silvertabby said:

LGPS ?  That £30K forecast is in today's money.  Each year, as long as you continue working/paying into the scheme, your accrued pension will increase by cost of living (CPI) and so, in theory, will have the same spending power as £30K today. 

If you want more than that, then you have the option of paying more into your pension (APC or AVC) or into a stand alone SIPP.

Yes LGPS, I'll have a look at those other things, thanks. All I hear is that it's not as good as it used to be which is why I started to think about whether I'm getting the best I can get.

The LGPS switched from final salary to CARE in 2014.  Many of your older colleagues are probably telling you that the CARE scheme isn't as good as the old scheme - but it depends on your career progress.

At extreme ends, if you joined as a tea boy/girl and then left 30 plus years later as a CEO then you would have indeed been better off on a final salary scheme.

However, if you spend your entire career on the same job on the same pay grade, then you'd almost certainly get more out of a CARE pension.

Wherever you fall, a public sector defined benefit scheme, such as the LGPS CARE, is far, far, better than the majority of private sector defined contribution pensions out there. 

Thanks, I was trying to work out whether defined contribution or defined benefits are generally better.

6TD

"At extreme ends, if you joined as a tea boy/girl and then left 30 plus years later as a CEO then you would have indeed been better off on a final salary scheme."

Out of interest, how would career average out do final salary when doing the same job, wouldn't this be equal sum at the end?

Silvertabby

6TD said:

"At extreme ends, if you joined as a tea boy/girl and then left 30 plus years later as a CEO then you would have indeed been better off on a final salary scheme."

Out of interest, how would career average out do final salary when doing the same job, wouldn't this be equal sum at the end?

Because the CARE scheme has a higher accrual rate (1/49th versus the final salary accrual rate of 1/60th) plus the extra annual revaluation lift.

For example, you say that based on your current salary of £35K, your estimated CARE pension after 40 years service will be £30K per annum.
So, for one year, £35K / 49 = £714.29 plus annual revaluation (say 1%) = £721.43.

As a final salary, however, that would be:
£35K / 60 = £583.33
£583.33 X 40 (years) = annual pension of £23,333.