Defined Benefit Pension - APC

housebuyer143

I am due to start a new workplace soon and they have a defined benefit pension at 5.5%. Now I need to put about 20% into the pension to be able to bring my salary down enough to still qualify for carers allowance as my wage is £4 over a week!! No problem but I have looked it up and it says I will need to sign up for Additional Pension contributions separately.
I did the calculator on the website but the results make no sense to me. See photo.

If I put in £60 extra a month then how am I only buying £159.53 extra pension? I will have paid in over £700 a year?! Maybe I just dont understand how they work... does the money I pay extra go somewhere for me to claim when I am older like a stakeholder pension?

Barkin

I think it's saying that your extra pension of £79.77 is per month, for each year of the (2 year) agreement, and that the total extra pension is £159.53 per month, which costs you £60.

r6mile

You are buying an extra £159.53 a pension per year between retirement age and your death. So a very good deal as you get your money back in just over 4 years, I think.

Remember a Defined Benefit pension works very differently to a (more common) Defined Contribution one - there is no "pot" as such.

housebuyer143

r6mile said:

You are buying an extra £159.53 a pension per year between retirement age and your death. So a very good deal as you get your money back in just over 4 years, I think.

Remember a Defined Benefit pension works very differently to a (more common) Defined Contribution one - there is no "pot" as such.

Thank you - so what do the years mean? I makes me pick a timeframe for these payments to be over - is that how long I am committing to the extra payments for? 

It feels weird that there is no pot of money I can look at ha ha ha! 

HappyHarry

Over two years this will cost you 24x£60 = £1,440.

In return, you will get an index linked £159.53 per year from retirement, every year until death.

Albermarle

For a cost of £1440 you are buying an inflation linked pension of £159 pa from your normal retirement date to when you die . Typically 20 years on average.
This is very good value for money, especially with the inflation linking.

Albermarle

r6mile said:

You are buying an extra £159.53 a pension per year between retirement age and your death. So a very good deal as you get your money back in just over 4 years, I think.

Remember a Defined Benefit pension works very differently to a (more common) Defined Contribution one - there is no "pot" as such.

The £159 is in return for paying £60 pm for two years.
If you take the inflation linking into account the payback time is probably more like 7 years.

r6mile

Albermarle said:

r6mile said:

You are buying an extra £159.53 a pension per year between retirement age and your death. So a very good deal as you get your money back in just over 4 years, I think.

Remember a Defined Benefit pension works very differently to a (more common) Defined Contribution one - there is no "pot" as such.

The £159 is in return for paying £60 pm for two years.
If you take the inflation linking into account the payback time is probably more like 7 years.

You are absolutely right I didn’t spot that the 60pcm was for two years not one. Still a very good deal!

EthicsGradient

housebuyer143 said:

r6mile said:

You are buying an extra £159.53 a pension per year between retirement age and your death. So a very good deal as you get your money back in just over 4 years, I think.

Remember a Defined Benefit pension works very differently to a (more common) Defined Contribution one - there is no "pot" as such.

Thank you - so what do the years mean? I makes me pick a timeframe for these payments to be over - is that how long I am committing to the extra payments for? 

It feels weird that there is no pot of money I can look at ha ha ha! 

I'm pretty sure they wouldn't be able to say it's a commitment that you have to keep; it's an illustration, that if you contributed that amount for X years (2, as you've currently filled in), you would get that amount more on your pension. If you fill in 3, or 5 etc., you should see a higher amount.

I would expect you could stop the contributions, or change them, at any time; it would just be a matter of the paperwork going through. If they did require more notice than a month, I think they'd have to make that clear before you start.

Swipe

EthicsGradient said:

housebuyer143 said:

r6mile said:

You are buying an extra £159.53 a pension per year between retirement age and your death. So a very good deal as you get your money back in just over 4 years, I think.

Remember a Defined Benefit pension works very differently to a (more common) Defined Contribution one - there is no "pot" as such.

Thank you - so what do the years mean? I makes me pick a timeframe for these payments to be over - is that how long I am committing to the extra payments for? 

It feels weird that there is no pot of money I can look at ha ha ha! 

I would expect you could stop the contributions, or change them, at any time; it would just be a matter of the paperwork going through. If they did require more notice than a month, I think they'd have to make that clear before you start.

I pay APCs into my LGPS and I believe I can stop them but not amend them.

housebuyer143

Swipe said:

EthicsGradient said:

housebuyer143 said:

r6mile said:

You are buying an extra £159.53 a pension per year between retirement age and your death. So a very good deal as you get your money back in just over 4 years, I think.

Remember a Defined Benefit pension works very differently to a (more common) Defined Contribution one - there is no "pot" as such.

Thank you - so what do the years mean? I makes me pick a timeframe for these payments to be over - is that how long I am committing to the extra payments for? 

It feels weird that there is no pot of money I can look at ha ha ha! 

I would expect you could stop the contributions, or change them, at any time; it would just be a matter of the paperwork going through. If they did require more notice than a month, I think they'd have to make that clear before you start.

I pay APCs into my LGPS and I believe I can stop them but not amend them.

Was it relatively easy to set up, the extra payments? I'm hoping they enrol me and then set up the extra contributions right away.