Final salary but not final salary!

WinceyWoo

Shellbell107 said:

WinceyWoo said:

Shellbell we might work for same company as the pension you describe sounds all too familiar (RBS/NatWest).  As my pensionable pay and actual pay moved further apart, I took the decision to defer DB scheme and start paying into the DC scheme.  Many colleagues have taken a different route and opted out.  

I would suggest you get some pension quotes to give you an idea on how much your pension will pay if you stay in/opt out and defer/CETV.  If you work for a RBS/NatWest you can access Willis Tower Watson via the intranet.

You’re right - it is NatWest 🙈 I’ve done some quotes online already so I was planning to take them to an IFA ad I’m assuming they’ll need that detail. There’s just such a big difference between actual and pensionable salary for me now. I can’t find anything online to estimate what the DC scheme might pay in retirement if I start paying into that instead / too but I guess it depends on how well the investments perform. What does CETV mean?

CETV - cash equivalent transfer value

A lot of very financially savvy people have opted out of the scheme.  My risk appetite is lower and having a guaranteed DB pension appeals, so I’m taking the approach of deferring and building up a pot in the Retirement Savings Plan.  
Take your time to decide what’s right for you.

Malthusian

Albermarle said:

However you do not want to transfer your rights in the existing scheme but want some advice on whether it is better to stay in it in future , or go for the DC option. In theory this should be less of an issue but the IFA is probably worried that if they advise you to move to the DC scheme, and the result is not great than you might sue them for not telling you to stay in the DB scheme.

Giving advice on that question is practically speaking just as risky as advising on transferring the existing benefits. (As in, both could sink the IFA's business by themselves.)

We're potentially talking about two or three decades' worth of pension contributions; the liability is equivalent to the lost growth if the IFA advises staying in the DB scheme and it's the wrong decision, or the cost of buying the forfeited guaranteed benefits back if they advise leaving the DB scheme to contribute to a DC scheme.

Even if the OP never complained, the advice would very likely result in the IFA having to pay more for professional indemnity cover by itself. There's a reason every pension application form asks "did you leave a defined benefit scheme to start this defined contribution pension" - to which the OP would be one of very few people to tick "yes".

The OP is probably looking at a fee in the low four figures (at least) to get an IFA to run the numbers and give a definitive opinion. If they had an IFA already on retainer they'd probably be able to get some informal guidance from them. Which would help them make a decision but without the IFA being legally liable for it. But that's moot. And you can't pay an entirely new IFA for informal guidance, because being paid makes you liable and being liable means you have to do the job fully.

I don't suppose NatWest offers financial advice to its employees as part of the benefits package? (Companies sometimes pay for limited financial advice for their employees as part of their benefits, so might be worth checking.)

Albermarle

 I can’t find anything online to estimate what the DC scheme might pay in retirement 

If you google 'pension calculator' you get rather a lot of results ....

Shellbell107

Thanks everyone. I think what I’m
realising is that without paying thousands for advice, whether I come out of the DB scheme or not is going to be my call to make. I’ve never looked too much into pensions before as I had my work pension so this is all new things for me to think about. I’ll do some research myself before I speak to an IFA :-)

Shellbell107

Albermarle said:

 I can’t find anything online to estimate what the DC scheme might pay in retirement 

If you google 'pension calculator' you get rather a lot of results ....

Lol! I’ve tried doing that but all it asks me about is what I currently have which isn’t what I’m looking for.

Gary1984

Are you sure you'd get the 15% employer contribution back to put into something else? Normally you'd lose this by opting out

What contribution does the employer make on the DC scheme? 

Thrugelmir

Shellbell107 said:

molerat said:

You completely misunderstand how pensions work.  You have 2 pensions, a DB for the years up until 2010 and a DC from then on.  The DB will pay out based on the period you were in that scheme increased by inflation in the same way as if you left the job and the DC will build up a fund based on the amount paid in and the increase with how it is invested with which you have many options at retirement . The increase in NI is likely because of you no longer being in a contracted out pension scheme along with your increase in pay, no responsibilities have been shifted on to you.  Do you really want to give up 15% of your pay by coming out of the pension ?  Yes IFAs are wary of moving you out of a DB scheme because in the vast majority of cases it is a stupid thing to do.

The increase to NI was a result of increases to NI that my employer should be paying on behalf of members of DB schemes. So, quite the opposite to what you’ve said, I get charged it for staying in the scheme as opposed to coming out of it (which I haven’t done). Most companies in the same sector as my employer absorbed the cost.

Due a change a few years back. Those still in DB schemes pay the same rate of Employees NIC as everybody else. Employers did not absorb the cost. Impacted both the public and private sectors alike. 

Shellbell107

Gary1984 said:

Are you sure you'd get the 15% employer contribution back to put into something else? Normally you'd lose this by opting out

What contribution does the employer make on the DC scheme? 

I’m sure. The money is paid as an additional benefit and shows on our payslips and is then deducted straight away if you’re in the DB scheme (before tax I think). Any staff not on the DB scheme can choose to do what they want with the money - some will pay it to the DC Scheme. I may have terminology wrong and this isn’t employer contribution, buts it IS above and beyond our base salary and is marked as a benefit. Plus I’m sure I was told our pension was non-contributory at some point.

xylophone

I am in the DB scheme at the moment and have one pension which has run from 2003 (when I started working there) to now. They changed how pensionable salary was calculated in 2010, 

https://citywire.co.uk/funds-insider/news/rbs-to-cap-payouts-for-staff-pensions/a355074

Below  the scheme (s) guide with other links.

https://rbs.tbs.aon.com/rbs/media/default/pdfs/current pension plan/pensions_explained_181016_2.pdf

Albermarle

Shellbell107 said:

Albermarle said:

 I can’t find anything online to estimate what the DC scheme might pay in retirement 

If you google 'pension calculator' you get rather a lot of results ....

Lol! I’ve tried doing that but all it asks me about is what I currently have which isn’t what I’m looking for.

Yes not all will be useful but there some ( I think) where you put in the income you want and then you put existing pension as zero and it will tell you what contributions you need to make . With a bit of trial and error you should be able to get an idea, .
Like this one Pension Pot Calculator | Private Pension Growth Projection - Nutmeg