Falling Transfer Values

Marcon

Laslos said:

With all of the answers given in mind, what would be the point in working lots of overtime, thereby increasing my pension contributions, if a) it’s designed to not to be financially beneficial for either me or the administrator and b) how is it possible to retire early if your personal pot isn’t allowed to grow? Again, thanks for all your comments and sorry if I’m missing the point of the DB scheme. 

Is your overtime pensionable? If so, that's quite unusual in a DB scheme, not least because it would mean your contributions fluctuate the whole time to reflect changes in each month's pay. Your scheme booklet, or the scheme administrators, should be  able to answer that very promptly.

The administrator administers the scheme. They are paid an agreed fee for doing so, unrelated to members' earnings or members' benefits.

If you are still an active member of the scheme (one who is contributing to it and building up benefits), your promised pension is indeed growing on a month by month basis - and guaranteed to do so.

GSP

My take is that the DB pension is a completely different ‘beast’ to the DC pension.

Unless any drastic changes are made to it, your DB pension will only ever rise in time through forecasts and until you take it, if you did. Your only deductions would be if you took it say 5 years early and triggered penalties up to 5% a year less than what the figure would be at actual retirement date.

On the other hand, your DC pension will experience rises and falls through time and is much less secure than a DB pension. But there again depending on circumstances, and amounts in the fund you could do more. E.g. drawdown more money p.a. than you would have from a DB pension (but always with the risk market forces and mismanagement of your strategy may lead to less money in time p.a. than your DB pension).

When you die, you can pass on any money left in your DC pension to others, but with a DB pension it dies with you, or a % may go to your spouse depending on the terms of the pension.

It seems at this time at least unless you have a very large TV, a DB pension is worth sticking with, unless you have very special circumstances.
There was a pendulum a few years back where people were borderline should I/ should I not transfer out with the larger TV’s. The latest information definitely suggests going for the DB pension.

Am I right in saying people don’t contribute to DB pensions, it’s all taken on by the employer and with DC pensions you have to contribute into it along with employer contributions?

AlanP_2

Some schemes will be employee contributory, very few won't be.

Bimbly

Usually, you will pay a set amount into your DB pension (eg, 7%) from your pensionable salary, which is usually your basic salary not including overtime. This will then pay a guaranteed amount per year from your normal retirement date.

If you wish to retire earlier than your normal retirement and start drawing your pension, you can usually do this, but it will be reduced each year to compensate. So, for example, if the NRD is 65 and you want to take it from age 60, you may get around 20% less per year (based on a 4% reduction per year - it could be more/less) if your scheme allows you to do this.

If it is not financially viable for you to do this (ie, you can't live on 20% less per year), you could bridge the gap (in this example, from 60 to 65) by saving into a separate DC pot. So, you have a separate pension which you contribute to (you could put your overtime pay in here, for example). If you retire at 60, you could draw on this to live on until your DB scheme comes into payment at 65.

Of course, retiring five years earlier also means having five less years to contribute.

For a separate pension, you could open a SIPP outside of work (through Vanguard, Hargreaves Lansdown or another). Or some employers run a separate DC scheme which you can contribute to through payroll.

For starters, take a good look at your employer pension scheme and see exactly how it works and what your options are.

Albermarle

Am I right in saying people don’t contribute to DB pensions, it’s all taken on by the employer and with DC pensions you have to contribute into it along with employer contributions?

Most people in DB schemes, public and private, have to contribute. The level is set by the employer but it does not affect the end result/pension, whether it is 2% or 10%. The pension is set by the scheme rules.

Of course with a DC pension, the more you contribute the bigger the pot will be, so it is in your interest to contribute as much as you can afford.