Been kicked out of my DB Pension Scheme and now have to start again with a work place pension DC

WayOutNow2

I have reached 50 and most of my life I have been paying into two DB pensions, my second one is about to become deferred.  Between the two I've built up some 24 years in the two of them.  20 Years in the last one and further 4 years in one back in the mid 90's (But was not earning a lot back then).  Think this currently equates to about £14k per year in terms of a pension from 60.  Then get full state pension at 67.

I now have to start all over again from scratch in a new scheme, other than about 10k sitting in a HL SIPP (Vangurd Life Strategy 80% equity fund) I now have to choose a Standard Life Fund for my work place pension.  I guess I should max that one out at 6% with employer double matching up to 12% right?  But to throw a spanner in the works due to the employer forcing me out the DB scheme they offer me the option to take 10.5% salary increase?  What would you do take the Workplace pension or take the salary uplift and pay it into the HL SIPP or ISA.
Someone said I need to fund this pension at 25% (Half my age, assuming my age now is 50) - which means I need to put away another 7% in pension right?

I don't have any other "investments" as such no ISA, but do need to start focusing on the mortgage which I figure I will be 70 by the time I get that paid off, if I don't touch my pensions to pay that back. Through a lump sum.

Any advice on here?

ian16527

I would have thought you could still add to the DC works pension even if you get a pay rise.
The age % thing is when you start a pension, so you have got 20 odd years in the DB scheme already so you well ahead. For example, if you are 25 years old, then you put 12.5% in each year I think.
Put at least the 6% in to get the maximum employer contribution

WayOutNow2

Its one or other, they give you 10.5% pay increase, OR they give you a DC scheme where they double match your contribution max 6% me, 12% them - The 10.5% is paid if you opt out of the work place pension and do your own thing.

Thanks for clarifying that halving your age thing though, it don't seem that bad in that case.

LHW99

I thought employers weren't supposed to offer encitements to opt out of a workplace pension?

dunstonh

Someone said I need to fund this pension at 25% (Half my age, assuming my age now is 50) - which means I need to put away another 7% in pension right?

No, that is rubbish.   The half age guide is a very old "sales aid" to get people who have never paid into a pension before to realise the sort of ballpark that they should be contributing.  It does serve that purpose well, so you cannot criticise it.  However, it is meaningless if you already have pensions or other retirement planning.  (e.g. if you are aged 25 and set up a pension and choose £30pm to pay into it, then you are woefully under contributing.  using the half age guide would avoid that)

Pensions are really no longer a product.  They are a tax wrapper, like the ISA.   Indeed, the pension wrapper is actually better than pension nowadays if you dont need access to the money until after age 55.  The more you have in them, the better it is for you.

You should aim to maximise the employer benefit as the very minimum. That is free money.    The 10.5% salary increase will be subject to NI.   Not only that, it is less than the employer and personal contribution. So, poor value.

hugheskevi

WayOutNow2 said:

Its one or other, they give you 10.5% pay increase, OR they give you a DC scheme where they double match your contribution max 6% me, 12% them - The 10.5% is paid if you opt out of the work place pension and do your own thing.

Something has been misunderstood here. The employer has to offer at least statutory minimum pension, which is a minimum of 3% employer contributions on a band of earnings between £6,240 and £50,000. So the 10.5% cannot be conditional on completely opting-out.

NedS

dunstonh said:

You should aim to maximise the employer benefit as the very minimum. That is free money.    The 10.5% salary increase will be subject to NI.   Not only that, it is less than the employer and personal contribution. So, poor value.

Agreed - take the 6% employee + 12% employer option so long as you intend to pay in 6% to take full advantage, as this represents the best value for you.

If you want to contribute more, you can do so, either via this scheme or via your existing SIPP.

StephenM_2

LHW99 said:

I thought employers weren't supposed to offer encitements to opt out of a workplace pension?

My employer pays 10% into their DC scheme regardless of employee contribution. But you can choose to take the 10% as extra pay instead, though it will then be subject to tax and NI. I'm currently in an old DB scheme so I don't get the 10%, but the DB scheme will close at the end of the year. FWIW, I'll be taking the 10% as a pension contribution when I get to that point, not extra pay.

Thrugelmir

LHW99 said:

I thought employers weren't supposed to offer encitements to opt out of a workplace pension?

Nothing to suggest it's an inducement. Simply a choice of benefits now the the DB scheme has closed. 

TVAS

Oi you are not starting from scratch you have a guaranteed pension of 14k a year plus your state pension.
Your employer is not kicking you out you are still in the scheme which has been closed to further accrual  or would  you rather they continued it and then could not afford it and it had to be transferred to the Pension Protection Fund where you would have a 10% reduction in benefits and no inflation increases once in payment? 

They have been sensible and by closing the scheme the employer is trying to ensure their own survival thus securing your job
Okay Firstly you have not told us what income you would like in retirement. You have also not told us when you are planning to stop work completely. The mortgage not being repaid until 70 suggests that you will have to continue work beyond 60 when the DB pensions get paid. 

Pension of course. Whilst you are on here you need to examine all your outgoings to see if you can make any savings. I will give you my example: ceased National Lottery £40pm; Stopped having my posh coffee £3.25 x 30 = £97.50, reduced takeaways £20 x 4 =£80. £217.50. Can you do the same to make mortgage overpayments? Can you pay more into your workplace or SIPP?

If the mortgage continues beyond state pension age and indeed beyond 60 Ipswich Building Society are happy to use pension income from a DB scheme as it is guaranteed. 

WayOutNow2

They are not inducing anything.  They will auto-enrol everyone into the DC scheme from a DB scheme from end of this month. Then we will have about a month to "opt out" of it get the first months contribution back and get the 10.5% salary uplift.  Though reading through these comments here that would seem to be a bad option and I'd be better off with the work place pension and putting in 6% with 12% double matching..