Railway Pension

ticketcollector

Hi I have just joined the Railway Pension scheme, which is Final Salary.

I pay in £20 a week on a 40:60 basis. The Company pays £30 a week. I have been told I will get a pension of around £8,000.
I am now 20 and The railways retirement age is traditionally 55 so I will be working 30 years (If I dont get a diff job).

I am wondering if it is worth paying say an extra £5-10 a week to BRASS or a seperate private pension to increase my salary at 55?
I know I wont get a State Pension till 68.

dunstonh

Hi I have just joined the Railway Pension scheme, which is Final Salary.

I thought the railways had moved to a defined contribution scheme a few years back and that the final salary scheme was no longer available for new members.

I pay in £20 a week on a 40:60 basis. The Company pays £30 a week. I have been told I will get a pension of around £8,000.

That sounds like defined contribution and not final salary.

I am now 20 and The railways retirement age is traditionally 55 so I will be working 30 years (If I dont get a diff job).

How would you find living on £8000 a year from 55 to 68 until state pension kicks in?

I am wondering if it is worth paying say an extra £5-10 a week to BRASS or a seperate private pension to increase my salary at 55?

It wont increase your salary but it will increase your income in retirement.

To be honest, at age 20, a £200pm (rough equivalent based on £50pw x4) is a very good contribution into a pension. Im not sure where the £8000 pension income comes from as that seems too low for that level of contribution.

If you assume future pay rises gives you the index linking you need to keep up with inflation then a 7%p.a. growth, that would result in a final fund value at age 55 of £346,361 (i have again assumed £200pm so in effect I have left £200 a year off). That £346,361 @ 5% = £17,318 income per year.

I wonder if they are using a lower projection rate and deducting inflation from it. 7% minus 2.5% for inflation gives a 3.5% projection rate which gives a lump sum that would provide an income of £8185pa at 55. However, that fails to take into account the increase in contributions you will make as your pay goes up. If the £20:£30 contribution is fixed then I can see why they would do that. If its percentage based (i.e. you pay 2%, they pay 3%) then its never going to be accurate.

testertrev

[/I thought the railways had moved to a defined contribution scheme a few years back and that the final salary scheme was no longer available for new members.QUOTE]

Some of the many companies that 'belong' to the scheme have indeed closed it to new members, however Network Rail employees have the opportunity to join the DB scheme after spending an initial 5 years in the DC scheme.

I am wondering if it is worth paying say an extra £5-10 a week to BRASS or a seperate private pension to increase my salary at 55?

Unless your employer is matching contributions then you could probably do better elsewhere.

ticketcollector

Based on the advice of people here, I have checked my pension account and I am part of the Defined benefits section.
(The Railways Pension Scheme is the defined benefit (also known as "final salary") pension arrangement for rail industry employees.)
Its however not guarenteed by tax payer like the BR section is.

I Have now found my first annual statement from them.
I pay in £18.49 a week. There is no mention of what my TOC pays in, even though they claim its a 40:60 bais.

Estimated Pension.
its saying Lump Sum of 0.00
and Pension of 6584.20

Mind you I had only been paying into it for around a year at the time of the statement.

dunstonh

I pay in £18.49 a week. There is no mention of what my TOC pays in, even though they claim its a 40:60 bais.

That makes more sense now. What the employer pays is largely irrelevant to you as the benefit is defined.

its saying Lump Sum of 0.00
and Pension of 6584.20

Based on currently salary and estimated time of service to normal retirement date (or earlier if you have asked them to show that). Pay rises and promotions can do wonders to your retirement plans with final salary schemes. What are your job prospects like?

ticketcollector

dunstonh wrote: »

Pay rises and promotions can do wonders to your retirement plans with final salary schemes. What are your job prospects like?

hmm not that great in my role.
Payrises are normally every year of around 2-4.5%