My DB pension: the promise, the reality, and the influence of wage suppression

Universidad
Universidad Posts: 414 Forumite
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I have been thinking recently about what I thought my pension would end up looking like when I started working for a University, as well as what it did look like by the time I decided to leave, and what it would have looked like if my salary had kept up with inflation over time.

Decided to post that here, as a point of reference for folks to see what has changed, as well as how wage suppression has masked it.

When I joined USS, I aspired and expected to reach spinal point 43 on the national pay scale before the end of my career, because of what that grade would be at my University, and that is pretty much exactly what I reached by the time I left the sector, after 15 years in USS. (We’ll ignore whether another 20 years might have seen further unexpected promotions).

When I joined, USS was a final salary scheme. So what I expected to get in retirement was 1/80th of my final salary, multiplied by the number of years accrued. (Plus a 3/80 lump sum). In the end, I accrued approximately 15 years of contributions.

Spinal point 43 has the following salaries:

  • 41,545 in 2008.
  • 51,805 in 2022.
  • 59,670 inflation adjusted (CPI) from 2008 to 2022.

(Note that at the point at which I joined, the UK tended to adjust for inflation by RPI rather than CPI, but we’ll totally ignore that further insult to injury).

Therefore, I would have expected my 15 years to earn me:

  • 7,790 per year, plus 23,369 lump sum in 2008 money.
  • 9,713 per year, plus 29,140 lump sum according to actual salary increases up to 2022
  • 11,188 per year, plus 33,564 lump sum in 2022 money, (adjusted for CPI inflation from 2008)

All three figures above assume that the FS scheme had remained in place. 

What I actually earned, due to early closure of FS scheme and introduction of CARE scheme, as well as due to wage suppression over time:

  • 8000 per year, plus 24,000 lump sump (in 2022 money)

In other words, the needle didn’t move forwards for me more than an inch from 2008, while prices increased by nearly 50%.

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Comments

  • 2nd_time_buyer
    2nd_time_buyer Posts: 807 Forumite
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    edited 9 November 2023 at 7:39AM
    I joined in 2000 but am at a similar grade. That analysis sounds about spot on.

    I recall at the time of joining the benefits were similar to the teachers and government schemes. However over time they have become less favourable. One distinction is that the USS have a pot of money that they have to maintain as opposed to paying directly from tax revenue.

    On the flip side, at the point of joining USS I was not expecting the state pension to still be around when I came to retire and certainly not to maintain the triple lock. So the state pension was not factored into my calculations but it is now. Hopefully it will still be around in 10 years or so when I come to retire.
  • Still not bad for 15 years service when compared to a dc scheme.
    It's just my opinion and not advice.
  • michaels
    michaels Posts: 29,044 Forumite
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    SO I joined the CS when it was already a career average scheme.  Without promotion the last 2 year pay increases have been 2.5% and 3.1%.  CPI adjustments will be 10.1% and 6.7% - I'm not complaining :)
    I think....
  • leosayer
    leosayer Posts: 581 Forumite
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    At least (unlike many) you understand the gap and have some time to fill it. 
  • bluenose1
    bluenose1 Posts: 2,767 Forumite
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    Great analysis Universidad. Wow depressing, makes me realise why my USS pension isn't as  good compared to my old Civil Service pension. 
    Money SPENDING Expert

  • michaels
    michaels Posts: 29,044 Forumite
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    Seems fair enough to point out that sometimes public sector salaries out perform inflation - may depend on the party in power.  2008 - 2022 was obviously mostly a Tory govt and probably part of the reason they have got away with real term pay cuts is the large real term rises seen under the previous Labour govt.
    I think....
  • The last 5 years of the last Labour government certainly did not give real term public sector pay rises
  • 2nd_time_buyer
    2nd_time_buyer Posts: 807 Forumite
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    edited 9 November 2023 at 10:20PM
    Is the USS the only non-public sector DB pension still accepting new members? 
  • JoeCrystal
    JoeCrystal Posts: 3,286 Forumite
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    edited 10 November 2023 at 7:32AM
    Quite a few. The Railway Pension Scheme is good, but it depends on which sections you are in. The SWR section is still a final salary pension scheme (1/60) with a generous tax-free lump sum (1/40) and a normal pension age of 62. The generosity of the Railway Pension Scheme causes no end of headaches for their employers, especially since they found it very difficult to change the conditions and terms of the scheme.
  • Is the USS the only non-public sector DB pension still accepting new members? 
    SAUL is another one in the higher education sector though I believe new members now join a DC section for the first 3? years before being allowed into the DB section.
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