Civil Service DB Pension

LilSmiler

Hi all,

I've applied for a new role within the Civil Service and just wanted to double check on the DB pension contribution amounts...

I've seen the contribution % here: 

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/ Are these rates PA..? So for example a £50k role will have a yearly contribution of £14,485 ? That would seem to me as though it were a DC pension.. I always understood a DB pension to be as a % of your final salary for life..?

Dazed_and_C0nfused

LilSmiler said:

Hi all,

I've applied for a new role within the Civil Service and just wanted to double check on the DB pension contribution amounts...

I've seen the contribution % here: 

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/ Are these rates PA..? So for example a £50k role will have a yearly contribution of £14,485 ? That would seem to me as though it were a DC pension.. I always understood a DB pension to be as a % of your final salary for life..?

Where are you getting £14,485 from?

5.45% of £50,000 is £2,725 (probably just £2,180 after tax saving).

The contributions rate is completely separate to the accrual rate (2.32%).

pterri

Well yes, but you ‘pay for membership’. The gov (via tax payer) picks up the obligation. I’ve got a DB, it’s ‘funded’ in that my and the employers contribution has a fund (with shares, bonds etc) that covers the obligation with the employer underpinning any short fall. The civil service is ‘unfunded’ in that it’s paid out of gov funds. It’s a good deal whichever model you have but it ain’t free. 

FIREDreamer

Dazed_and_C0nfused said:

LilSmiler said:

Hi all,

I've applied for a new role within the Civil Service and just wanted to double check on the DB pension contribution amounts...

I've seen the contribution % here: 

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/ Are these rates PA..? So for example a £50k role will have a yearly contribution of £14,485 ? That would seem to me as though it were a DC pension.. I always understood a DB pension to be as a % of your final salary for life..?

Where are you getting £14,485 from?

5.45% of £50,000 is £2,725 (probably just £2,180 after tax saving).

The contributions rate is completely separate to the accrual rate (2.32%).

I think he was looking at the employer contribution tab which is around 29%.

Universidad

LilSmiler said:

I always understood a DB pension to be as a % of your final salary for life..?

They talk about the employer contribution on job ads to indicate how valuable it is, which I can see the point of, but you're completely right that it has absolutely no bearing on the benefits you earn in a DB pension.

There aren't any "final salary" pensions left open in the public sector. These were pensions where your entire pension was based on what your salary was at the end of your career. The current type of Defined Benefit pension is Career Average or CARE, where every year a certain percentage of your annual salary gets added to the annual pension you will recieve in retirement. 

For the civil service that's a whopping 2.32% - if you worked for 43 years you'd get your entire (average) salary every year as a pension for the rest of your life (subject to when you retire - as you can see a pension this good still makes it quite possible to retire earlier than your normal pension age, with the attendant reductions).

FWIW there is the option to take a DC pension with the civil service instead - called "partnership" - but it does have lower contribution rates than Alpha, and that's when contribution rates actually matter of course.  

If you're uncertain about which one will be better for you, the default is Alpha and you're unlikely to go far wrong with it.

pterri

FIREDreamer said:

Dazed_and_C0nfused said:

LilSmiler said:

Hi all,

I've applied for a new role within the Civil Service and just wanted to double check on the DB pension contribution amounts...

I've seen the contribution % here: 

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/ Are these rates PA..? So for example a £50k role will have a yearly contribution of £14,485 ? That would seem to me as though it were a DC pension.. I always understood a DB pension to be as a % of your final salary for life..?

Where are you getting £14,485 from?

5.45% of £50,000 is £2,725 (probably just £2,180 after tax saving).

The contributions rate is completely separate to the accrual rate (2.32%).

I think he was looking at the employer contribution tab which is around 29%.

In my case they have slashed the employer rate as the fund is in rude health and with a considerable surplus. It’s a bit academic as the obligation is the same whatever the employer contribution. 

LilSmiler

FIREDreamer said:

Dazed_and_C0nfused said:

LilSmiler said:

Hi all,

I've applied for a new role within the Civil Service and just wanted to double check on the DB pension contribution amounts...

I've seen the contribution % here: 

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/ Are these rates PA..? So for example a £50k role will have a yearly contribution of £14,485 ? That would seem to me as though it were a DC pension.. I always understood a DB pension to be as a % of your final salary for life..?

Where are you getting £14,485 from?

5.45% of £50,000 is £2,725 (probably just £2,180 after tax saving).

The contributions rate is completely separate to the accrual rate (2.32%).

I think he was looking at the employer contribution tab which is around 29%.

That's correct I was referring to the employer contribution % - thanks for clarifying

LilSmiler

Is there a calculator somewhere that anyone knows of, that I could use to calc the projected payment amounts at  different retirement ages: 60, 65, SPA etc..?

many thanks in advance

Marcon

LilSmiler said:

Is there a calculator somewhere that anyone knows of, that I could use to calc the projected payment amounts at  different retirement ages: 60, 65, SPA etc..? I'm currently 50

many thanks in advance

The Retirement Modeller. See https://www.civilservicepensionscheme.org.uk/knowledge-centre/tools-and-calculators/pension-calculators/

LilSmiler

Many thanks everyone..! Your replies have helped so much

michaels

LilSmiler said:

Is there a calculator somewhere that anyone knows of, that I could use to calc the projected payment amounts at  different retirement ages: 60, 65, SPA etc..? I'm currently 50

many thanks in advance

The 2.32% is the key bit - earn 50k this year and you have built up 50k x 2.32% = £1160 pension per year from state pension age (between 67 and 68 for a 50 year old?).  The £1160 is index linked so will always be worth the same as it is in todays money terms.

The same will happen every year you work for the civil service, so if you do 17 years to retirement age you will have accrued a pension of 17 x 1,160 = £19,720 per year.