Can a "medium" public sector job achieve £500 DB within 5 years ?

RNV

Hello,

In the context of:

1. 50 ½   y.o. with a relatively highly paid professional private sector job with 10% x base additional employer’s contribution to workplace DC pension
2. Absolutely fed up with this job – stress etc; recently became obsessed with the idea of retiring early, at 55
3. To achieve #2 above, SalSac max (incl. CF) for the last 2 financial years and will continue at the same level (~50k/annum; at least until the new 60k limit is in place) until 55 yo; so additional contributions ~200k
4. Today’s DC value (after yet another fall) ~330k, so with #3 above and hopefully some growth hoping to achieve £550k at 55.
5. I seem to have resigned to the fact that I will have to go through this job mill for 4 ½  years to achieve what I’m trying to achieve, however my mental state/stress/coffee intake do worry me and I’m questioning whether I will regret this later.  

Is below a potential alternative? And I truly hope I'm not going to offend anybody with my ideas. I've only ever worked in private sector and this might be completely out of scale.

Would appreciate comments from those familiar with the public sector jobs and their DB pensions whether below could be a potential alternative, purely for access to DB pension.  

1. Do any public sector jobs /salaries exist that could accommodate a late entrant (say at 52 yo  – I’m definitely holding on at least until the end of the current project) with, hopefully, some transferable skills to achieve $500/month DB pension ?  How long do you need for that - is it possible to build within 5 years?  I obviously would not want to change one stress for another, so this will have to be a relatively medium responsibility position allowing on the job training (rather than any additional formal qualifications).
2. At ~ 3.5% SWR, I would need 150-175k additional contribution (3.5 – 4  years at my current job, depending on where annual limit will end up within the next few years) to achieve the same 500/month. 

Thanks in advance for your comments.

Cotrelone37

As a civil service example, alpha accrued at 2.32% of pensionable salary each year and is then revalued using annual CPI. 

So a medium level job, say SEO on a top of scale salary of £50k p.a. would accrue CARE(Career Average Revalued Earnings) of £ 1160 p.a. so say £5800 plus revaluations for 5 years.

However there are then early retirement factors applied for taking this early. So say you take it at 57 as opposed to 67 it is reduced to 0.598 so that £5800 becomes approx £3500. In addition there are AVC schemes but there is no employer contribution.

Other public sector schemes such as NHS differ in accrual rates and revaluations.

Hope that this helps

Silvertabby

RNV said:

Hello,

In the context of:

1. 50 ½   y.o. with a relatively highly paid professional private sector job with 10% x base additional employer’s contribution to workplace DC pension
2. Absolutely fed up with this job – stress etc; recently became obsessed with the idea of retiring early, at 55
3. To achieve #2 above, SalSac max (incl. CF) for the last 2 financial years and will continue at the same level (~50k/annum; at least until the new 60k limit is in place) until 55 yo; so additional contributions ~200k
4. Today’s DC value (after yet another fall) ~330k, so with #3 above and hopefully some growth hoping to achieve £550k at 55.
5. I seem to have resigned to the fact that I will have to go through this job mill for 4 ½  years to achieve what I’m trying to achieve, however my mental state/stress/coffee intake do worry me and I’m questioning whether I will regret this later.  

Is below a potential alternative? And I truly hope I'm not going to offend anybody with my ideas. I've only ever worked in private sector and this might be completely out of scale.

Would appreciate comments from those familiar with the public sector jobs and their DB pensions whether below could be a potential alternative, purely for access to DB pension.  

1. Do any public sector jobs /salaries exist that could accommodate a late entrant (say at 52 yo  – I’m definitely holding on at least until the end of the current project) with, hopefully, some transferable skills to achieve $500/month DB pension ?  How long do you need for that - is it possible to build within 5 years?  I obviously would not want to change one stress for another, so this will have to be a relatively medium responsibility position allowing on the job training (rather than any additional formal qualifications).
2. At ~ 3.5% SWR, I would need 150-175k additional contribution (3.5 – 4  years at my current job, depending on where annual limit will end up within the next few years) to achieve the same 500/month. 

Thanks in advance for your comments.

If you were to join a public sector pension fund now, your NRA (normal retirement age) would be the same as your State pension age.

Yes, you could take your benefits from age 55/57, but they would be subject to a hefty actuarial reduction for early payment.

Based on my back of an envelope figures (and 20 years as a LGPS administrator) yes, it would be possible to rack up a pre-tax pension of £500 per month/£6K per year, taken 10 years before NRA/SPA.  But only if you were to take a job paying over £100K per year. 

Grumpy_chap

The OP has not said what they earn, except for the £50k SS pension contributions.

£500k pension fund is good for £25k (maybe) per year - a lot lower than current income level.  

hugheskevi

You could transfer in DC pension to get a DB pension which may be attractive.

You can transfer in a maximum amount such that your pension is half salary, eg, if salary is 50,000 you can transfer in to get a pension up to a maximum of 25,000 at Normal Pension Age.

Marcon

RNV said:

Hello,

In the context of:

1. 50 ½   y.o. with a relatively highly paid professional private sector job with 10% x base additional employer’s contribution to workplace DC pension
2. Absolutely fed up with this job – stress etc; recently became obsessed with the idea of retiring early, at 55

Provided you reach your 55th birthday before the minimum pension age changes to 57 on 6 April 2028, you'll be able to 'retire' (if by that you mean stop work and live off your private pension provision) at 55 - but taking any pension benefits at 55 will mean they have to last a very long time. Have you factored that in to what you describe as your 'obsession'?

If you joined a DB scheme which built up benefits at 1/60 for each year of service, you'd need to have a final pensionable salary of £72,000 to get to your target of £500 a month after 5 years of pension scheme membership - BUT that would be the amount payable at the scheme's Normal Retirement Date (which certainly won't be 55, and could be as high as 65 or more). Taking it early means it will be reduced - typically by between 3% and 5% for each year before NRD, so you could be looking at a reduction of 30-50% or more. 

Having said all that, why not investigate what opportunities exist in the public sector which might pay you the sort of salary (and provide a DB pension) you're hoping for? There's nothing to lose and if you just happen to have the core skill set needed...although one final note of caution: recruitment processes in the public sector, especially for higher paid jobs, can take a very long time!

Good luck.

RNV

Thanks a lot @Cotrelone37 and @Silvertabby . 

I wasn't thinking of taking it that early (55/57) but do admit  60 was in my mind rather than 67/68. 

Well, sounds like sticking with the devil that I know remains the only realistic choice.

RNV

Thanks @Marcon , I definitely should invest some time in exploring job vacancies. 

However, indicated pensionable salary of £72,000 would unlikely come stress free, so not keeping my hopes high.

r6mile

Not sure if this is helpful but I can give you my example. I am a current civil servant and have for 5 years been on the standard 'alpha' pension which is a career average scheme, at 2.32% for each year (1/43).

My gross salary over the last 5 years has increased from around £38k to around £60k. My current benefit projection is around £6k of pension per annum, at the State Pension retirement age. I know you can take alpha from age 55 but I imagine there will be some heavy discount on the benefits if so.

Lot of jobs in the civil service (and the wider public sector) that could accommodate a late entrant. And lots of flexibility, including to reduce your hours etc - which you may want to do as you get closer to retirement.

RNV

Grumpy_chap said:

The OP has not said what they earn, except for the £50k SS pension contributions.

£500k pension fund is good for £25k (maybe) per year - a lot lower than current income level.  

Light bulb moment only happened 2 years ago; many years of 40% income tax paid/money wasted (well, overpaid mortgage so not all in the drain) before that so DC contributions were 15k-ish  until 2 years ago. Trying to catch up now. 

michaels

Don't think any schemes with a final salary pension are still open to new entrants in the CS.

However although the standard accrual is 2.32% of annual pensionable salary you are allowed to purchase both additional pension and EPA (which brings forward the pension start date to 67).  This works on a new pay basis and at your age might cost 85-90k to purchase the maximim 7k pa extra pa (form age 67) so about 60% of that from age 57.

On the myCSP website there are links to a calculator that will tell you how much added pension will cost and the reduction tables that tell you how much you lose from taking the pension early - these should be 'actuarial fair' so the total amount you receive is the same whether you take it early or not (more years = less per year).

[I am a similar age and recently joined the CS at SEO (highest non-management grade) and transferred in some of my DC pension (about 240k of DC to purchase a DB of 19k pa from age 67) and am making added pension DB purchases of about £1500pa for £20k pa (similar to the sal sac I was doing before in the private sector but no employer or employee NI saving)]