Pension Discussion

Moneycraver05

I am just wondering what other people's takes are on university pensions?

I worked in a university from 2018-2023 an paid in to their pension scheme for 4 years of this. I contributed 6.5% and my employer contributed 16.9% approx (great!... or so I thought!).

After doing some lengthy research, I think I may have finally grasped that unlike other pensions, none of the above mentioned contributions actually mean anything as all I was paying for was a 'membership' which is only beneficial to me if I had stayed with the university for 10 years or more realistically. 

I am now employed by another university, who's pension seems to operate the same. I gather this is a university thing across the board?

If so, I am considering opting out of this pension having paid in for 19 months. I would be refunded my contributions less tax, which I would then put into a Vanguard SIPP. 

Does anybody have similar experience and maybe can provide their input here?

I was told to go to Pension Wise however they state they cannot give personal financial advise and so it seems a bit pointless to wait 4 weeks for an appointment for them to not be able to help in any way.

Dazed_and_C0nfused

Moneycraver05 said:

I am just wondering what other people's takes are on university pensions?

I worked in a university from 2018-2023 an paid in to their pension scheme for 4 years of this. I contributed 6.5% and my employer contributed 16.9% approx (great!... or so I thought!).

After doing some lengthy research, I think I may have finally grasped that unlike other pensions, none of the above mentioned contributions actually mean anything as all I was paying for was a 'membership' which is only beneficial to me if I had stayed with the university for 10 years or more realistically. 

I am now employed by another university, who's pension seems to operate the same. I gather this is a university thing across the board?

If so, I am considering opting out of this pension having paid in for 19 months. I would be refunded my contributions less tax, which I would then put into a Vanguard SIPP. 

Does anybody have similar experience and maybe can provide their input here?

I was told to go to Pension Wise however they state they cannot give personal financial advise and so it seems a bit pointless to wait 4 weeks for an appointment for them to not be able to help in any way.

You really shouldn't do that, if you are insistent on leaving the pension (within 2 years of joining) then you should opt for a transfer out.

You will then avoid paying the (non refundable) tax and find you get the employer contributions included as well.  The difference is likely to be significant.

But why not try and learn what a defined benefit pension actually is.  I have no idea why you think 10 years is relevant, you get a pension based on the scheme rules.  Think of it more like deferred salary.

Leaving a defined benefit pension should not be done lightly. USS (is that your scheme?) might not be as good as it once was but DB pensions are generally the type of pension people will move job to be able to join, leaving it when you can remain a member is an unusual choice and, with all due respect, likely to be more about your lack of knowledge, not the pension being poor.

Moneycraver05

Dazed_and_C0nfused said:

Moneycraver05 said:

I am just wondering what other people's takes are on university pensions?

I worked in a university from 2018-2023 an paid in to their pension scheme for 4 years of this. I contributed 6.5% and my employer contributed 16.9% approx (great!... or so I thought!).

After doing some lengthy research, I think I may have finally grasped that unlike other pensions, none of the above mentioned contributions actually mean anything as all I was paying for was a 'membership' which is only beneficial to me if I had stayed with the university for 10 years or more realistically. 

I am now employed by another university, who's pension seems to operate the same. I gather this is a university thing across the board?

If so, I am considering opting out of this pension having paid in for 19 months. I would be refunded my contributions less tax, which I would then put into a Vanguard SIPP. 

Does anybody have similar experience and maybe can provide their input here?

I was told to go to Pension Wise however they state they cannot give personal financial advise and so it seems a bit pointless to wait 4 weeks for an appointment for them to not be able to help in any way.

You really shouldn't do that, if you are insistent on leaving the pension (within 2 years of joining) then you should opt for a transfer out.

You will then avoid paying the (non refundable) tax and find you get the employer contributions included as well.  The difference is likely to be significant.

But why not try and learn what a defined benefit pension actually is.  I have no idea why you think 10 years is relevant, you get a pension based on the scheme rules.  Think of it more like deferred salary.

Leaving a defined benefit pension should not be done lightly. USS (is that your scheme?) might not be as good as it once was but DB pensions are generally the type of pension people will move job to be able to join, leaving it when you can remain a member is an unusual choice and, with all due respect, likely to be more about your lack of knowledge, not the pension being poor.

Hi,
Thank you for your response.
I'm not sure if you're familiar with university pensions? Just that i've done research over the past few weeks due to my lack of understanding in general and sadly they do not work in the same way (whereby you build a pension pot with a deferred salary so to speak). My scheme isn't USS but another similar scheme tailored to my university.

Unfortunately for this reason, it's not possible to transfer out and there are no funds to transfer out (which makes me feel sick to say). Basically, i'm paying for a 'membership' to a pension scheme rather than building a pot. This 'membership' comes with 'benefits' of 1/48th of my annual salary. Having looked at the calculations of my pension with my previous employer, Between me and my employer, we paid in approx. £5000 over the first year. In this same year, I have been given 'benefits' of £340 (equal to 1/48th of my salary). In the following year, I accrued the same and so my annual pension went up to £700ish. The same happened for the following two years and so my annual pension for 4 years, is apparently just shy of £1400 / year for 4 years (even though, myself and my employer paid in £20000). This is why I mentioned 10 years - it was just a random number but I was basically saying that it would benefit me if I stayed with the same employer due to the accrual of 'benefits' but they're currently threatening redundancies which means I likely won't be with them for even the next year.

Of course, there may be something I am missing however the pension provider (both by email and in my account calculations) have stated the above which has prompted me to ask for other people's experiences really. I'm still convinced I must be misunderstanding as it seems a bit of a scam on the face of it.

Thank you once again for your response.

AlanP_2

You don't build a pot, as you say, which is an advantage of a DB scheme compared to a DC scheme where you do build a pot.

The amount of pension you can pay yourself from a DC pension pot in later life is very dependent on investment returns. If your pot runs out there is no magic top up that will refill it.

You are in the fortunate position of having a DB pension that will pay you £x per year for as long as you live and would pay your spouse a pension for their life If you die first.

£x is calculated by the scheme rules and sounds like it is 1/48th of annual salary that is added to the annual pension accrued for each year of employment.

If there isn't enough money to pay you and all the other pensioners your employer makes up the shortfall. How much your employer contributes has no impact on your pension accrual. Your risk exposure is effectively zero.

What scheme are you actually in?


It is worth hearing in mind that the typically accepted safe withdrawal rate from a DC pot is approx 3 to 4%. Do £1400 from a £20k "pot" is a much better deal than the £600 to £800 per year that people in a DC scheme could safely pay themselves.

Shimrod

Moneycraver05 said:

Dazed_and_C0nfused said:

Moneycraver05 said:

I am just wondering what other people's takes are on university pensions?

I worked in a university from 2018-2023 an paid in to their pension scheme for 4 years of this. I contributed 6.5% and my employer contributed 16.9% approx (great!... or so I thought!).

After doing some lengthy research, I think I may have finally grasped that unlike other pensions, none of the above mentioned contributions actually mean anything as all I was paying for was a 'membership' which is only beneficial to me if I had stayed with the university for 10 years or more realistically. 

I am now employed by another university, who's pension seems to operate the same. I gather this is a university thing across the board?

If so, I am considering opting out of this pension having paid in for 19 months. I would be refunded my contributions less tax, which I would then put into a Vanguard SIPP. 

Does anybody have similar experience and maybe can provide their input here?

I was told to go to Pension Wise however they state they cannot give personal financial advise and so it seems a bit pointless to wait 4 weeks for an appointment for them to not be able to help in any way.

You really shouldn't do that, if you are insistent on leaving the pension (within 2 years of joining) then you should opt for a transfer out.

You will then avoid paying the (non refundable) tax and find you get the employer contributions included as well.  The difference is likely to be significant.

But why not try and learn what a defined benefit pension actually is.  I have no idea why you think 10 years is relevant, you get a pension based on the scheme rules.  Think of it more like deferred salary.

Leaving a defined benefit pension should not be done lightly. USS (is that your scheme?) might not be as good as it once was but DB pensions are generally the type of pension people will move job to be able to join, leaving it when you can remain a member is an unusual choice and, with all due respect, likely to be more about your lack of knowledge, not the pension being poor.

 I have been given 'benefits' of £340 (equal to 1/48th of my salary). In the following year, I accrued the same and so my annual pension went up to £700ish. The same happened for the following two years and so my annual pension for 4 years, is apparently just shy of £1400 / year for 4 years (even though, myself and my employer paid in £20000). 

This means that for a cost to you of approx £5,500 you will be getting a pension of £1,400 per year from when you retire until when you die. There will be an element of inflation protection in that as well. So four years into retirement you will already be at breakeven, and with an average retirement of 18 years (age 67 to 85) you'll be quids in.

DRS1

Between me and my employer, we paid in approx. £5000 over the first year. In this same year, I have been given 'benefits' of £340 (equal to 1/48th of my salary). In the following year, I accrued the same and so my annual pension went up to £700ish. The same happened for the following two years and so my annual pension for 4 years, is apparently just shy of £1400 / year for 4 years (even though, myself and my employer paid in £20000).

You do realise that the £1400 is per annum for the rest of your life from your retirement age (67?).  If it doesn't increase then you get back more than £20k after 15 years.  But I am prepared to bet that it will increase probably both before and after you retire.  It may also come with a spouse's pension payable after you die.

You really should not opt out of the scheme.  Instead you should learn more about it.

By the way weren't there some strikes because people were proposing changes to the Universities Pension Scheme?  People don't do that over something that is worthless.

dunstonh

If so, I am considering opting out of this pension having paid in for 19 months. I would be refunded my contributions less tax, which I would then put into a Vanguard SIPP. 

That would be a very costly mistake.  Don't do it.

Aretnap

Moneycraver05 said:

This 'membership' comes with 'benefits' of 1/48th of my annual salary. Having looked at the calculations of my pension with my previous employer, Between me and my employer, we paid in approx. £5000 over the first year. In this same year, I have been given 'benefits' of £340 (equal to 1/48th of my salary). 

Sounds fantastic. How much of that £5000 is actually your money rather than your employer's money? Doing the maths in my head, about £1400 or so? In return for which you get £340 per year, increasing with inflation or more, for a retirement that could easily last 20 years or more. 

Frankly it's beyond my comprehension that anyone could possibly come to the conclusion that this is a bad deal, let alone a "scam".

Yes, your employer has to pay in a lot to make the maths work. That's your employer's problem, not yours. The money they pay in is part of your remuneration. Essentialy they are paying in something like £3600 on top of your salary to fund your retirement benefits. That's great - for you. If you opt out you would be essentially volunteering to take a £3600/year pay cut. I'm sure your employer would be very grateful to you if you did, but it wouldn't be a good move for you financially.

Moneycraver05 said:

The same happened for the following two years and so my annual pension for 4 years, is apparently just shy of £1400 / year for 4 years...

You do realize that it will pay out for as many years as you live after the scheme retirement age, don't you? Not just for four years? If so that's would at least explain why you think it's a bad deal - but you would have missed a rather crucial detail.

Dazed_and_C0nfused

Moneycraver05 said:

Dazed_and_C0nfused said:

Moneycraver05 said:

I am just wondering what other people's takes are on university pensions?

I worked in a university from 2018-2023 an paid in to their pension scheme for 4 years of this. I contributed 6.5% and my employer contributed 16.9% approx (great!... or so I thought!).

After doing some lengthy research, I think I may have finally grasped that unlike other pensions, none of the above mentioned contributions actually mean anything as all I was paying for was a 'membership' which is only beneficial to me if I had stayed with the university for 10 years or more realistically. 

I am now employed by another university, who's pension seems to operate the same. I gather this is a university thing across the board?

If so, I am considering opting out of this pension having paid in for 19 months. I would be refunded my contributions less tax, which I would then put into a Vanguard SIPP. 

Does anybody have similar experience and maybe can provide their input here?

I was told to go to Pension Wise however they state they cannot give personal financial advise and so it seems a bit pointless to wait 4 weeks for an appointment for them to not be able to help in any way.

You really shouldn't do that, if you are insistent on leaving the pension (within 2 years of joining) then you should opt for a transfer out.

You will then avoid paying the (non refundable) tax and find you get the employer contributions included as well.  The difference is likely to be significant.

But why not try and learn what a defined benefit pension actually is.  I have no idea why you think 10 years is relevant, you get a pension based on the scheme rules.  Think of it more like deferred salary.

Leaving a defined benefit pension should not be done lightly. USS (is that your scheme?) might not be as good as it once was but DB pensions are generally the type of pension people will move job to be able to join, leaving it when you can remain a member is an unusual choice and, with all due respect, likely to be more about your lack of knowledge, not the pension being poor.

Hi,
Thank you for your response.
I'm not sure if you're familiar with university pensions? Just that i've done research over the past few weeks due to my lack of understanding in general and sadly they do not work in the same way (whereby you build a pension pot with a deferred salary so to speak). My scheme isn't USS but another similar scheme tailored to my university.

Unfortunately for this reason, it's not possible to transfer out and there are no funds to transfer out (which makes me feel sick to say). Basically, i'm paying for a 'membership' to a pension scheme rather than building a pot. This 'membership' comes with 'benefits' of 1/48th of my annual salary. Having looked at the calculations of my pension with my previous employer, Between me and my employer, we paid in approx. £5000 over the first year. In this same year, I have been given 'benefits' of £340 (equal to 1/48th of my salary). In the following year, I accrued the same and so my annual pension went up to £700ish. The same happened for the following two years and so my annual pension for 4 years, is apparently just shy of £1400 / year for 4 years (even though, myself and my employer paid in £20000). This is why I mentioned 10 years - it was just a random number but I was basically saying that it would benefit me if I stayed with the same employer due to the accrual of 'benefits' but they're currently threatening redundancies which means I likely won't be with them for even the next year.

Of course, there may be something I am missing however the pension provider (both by email and in my account calculations) have stated the above which has prompted me to ask for other people's experiences really. I'm still convinced I must be misunderstanding as it seems a bit of a scam on the face of it.

Thank you once again for your response.

As others have explained I think you are missing the point here.

Instead of a pot of money you have now accrued a guaranteed pension of £1,400, payable from the schemes normal pension age for the rest of your life.  And there will doubtless be some form of inflation protection.

If you add up your contributions in those 4 years do you really think you could get a pension that pays that guaranteed amount for life from it?

You definitely are misunderstanding things as this is the total opposite of a scam.  Plenty of people in defied contribution (pot of money) pension schemes will be looking on enviously at the gold plated pension you have.

Moneycraver05

DRS1 said:

Between me and my employer, we paid in approx. £5000 over the first year. In this same year, I have been given 'benefits' of £340 (equal to 1/48th of my salary). In the following year, I accrued the same and so my annual pension went up to £700ish. The same happened for the following two years and so my annual pension for 4 years, is apparently just shy of £1400 / year for 4 years (even though, myself and my employer paid in £20000).

You do realise that the £1400 is per annum for the rest of your life from your retirement age (67?).  If it doesn't increase then you get back more than £20k after 15 years.  But I am prepared to bet that it will increase probably both before and after you retire.  It may also come with a spouse's pension payable after you die.

You really should not opt out of the scheme.  Instead you should learn more about it.

By the way weren't there some strikes because people were proposing changes to the Universities Pension Scheme?  People don't do that over something that is worthless.

Hi,
Thank you so much for your reply (and to others as well). It certainly helps to have it explained that way (not sure why my mind couldn't simply grasp this). The pension website doesn't make this clear at all and it's such a faf. I feel better about my previous pension with this in mind.

My current provider benefits are 1/80th of my salary but with higher membership payments which prompted me to really consider the SIPP this time around. 

I'll probably have to sit down with a legal advisor with all my stats and consider my current pension...

(BTW I realise a few have asked about my provider, the reason I haven't specifically said is because it will give away my employer which I am hesitant to do)

Thank you to everybody for your help and advice, I really do appreciate it.

Dazed_and_C0nfused

Moneycraver05 said:

DRS1 said:

Between me and my employer, we paid in approx. £5000 over the first year. In this same year, I have been given 'benefits' of £340 (equal to 1/48th of my salary). In the following year, I accrued the same and so my annual pension went up to £700ish. The same happened for the following two years and so my annual pension for 4 years, is apparently just shy of £1400 / year for 4 years (even though, myself and my employer paid in £20000).

You do realise that the £1400 is per annum for the rest of your life from your retirement age (67?).  If it doesn't increase then you get back more than £20k after 15 years.  But I am prepared to bet that it will increase probably both before and after you retire.  It may also come with a spouse's pension payable after you die.

You really should not opt out of the scheme.  Instead you should learn more about it.

By the way weren't there some strikes because people were proposing changes to the Universities Pension Scheme?  People don't do that over something that is worthless.

Hi,
Thank you so much for your reply (and to others as well). It certainly helps to have it explained that way (not sure why my mind couldn't simply grasp this). The pension website doesn't make this clear at all and it's such a faf. I feel better about my previous pension with this in mind.

My current provider benefits are 1/80th of my salary but with higher membership payments which prompted me to really consider the SIPP this time around. 

I'll probably have to sit down with a legal advisor with all my stats and consider my current pension...

(BTW I realise a few have asked about my provider, the reason I haven't specifically said is because it will give away my employer which I am hesitant to do)

Thank you to everybody for your help and advice, I really do appreciate it.

Please don't waste your money doing that.

You really don't need any legal (or financial) advice in connection with this pension.

You would be better off taking some time to look at some of the threads on the Pensions board on MSE and learning a bit more about defied benefit pensions. 

In all seriousness people take jobs specifically to get themselves into one of these DB pensions.  An accrual rate of 1/80th isn't as good as your previous 1/48th scheme but it's still better than many schemes.