Pension statement from work..

happymum37

Hello all. I am in the police CARE pension scheme. After a few breaks for maternity and then a career break to bring up the kids i started taking this all seriously and began over paying in 2022. That was by £125 per month.  I increased it last April 2024 to £150 over payment which I plan on keeping up for good now if I can. 

I got my statement today and it seems to say my contributions in 2023-24 of £125 extra per month have given me a further £101 in my pension per year. 

Does that mean if I stop paying in my additional contributions I will still get the extra £101 per year for life in retirement or is that something I have to keep doing?

Does this seem a good return to you? 
Thank you

Linton

In the 23/24 year you contributed £1500 and will receive  £101/year, presumably inflation-linked, extra for the whole of your life.

To get a very crude assessment of what that means financially:

The average life expectancy for a woman who survives until 65 (I assume you get the pension at that age) is about 20 further years.  So if you are average you will get back a total of about £2000 +inflation but of course the pension scheme would be holding your money for the full period and so getting returns from that.

.  The maths would be a little complicated to work out but without doing the calculations I think it is fair, not particularly generous nor particularly mean.  The alternative would be to pay the money into a private pension and hope you would make more through investment.  However this would involve effort and some investment knowledge on your part. You could question whether this is worth the effort for a relatively small amount of money.

Yorkie1

CARE pensions work by gaining future pension entitlement each year that you contribute. So yes, once accrued you won't lose it and the amount is also likely to be increased with inflation or similar.

If you contribute the same next year, you will add another £101 to your future pension, and the figures will be uplifted to keep the same value as when first accrued.

happymum37

Yorkie1 said:

CARE pensions work by gaining future pension entitlement each year that you contribute. So yes, once accrued you won't lose it and the amount is also likely to be increased with inflation or similar.

If you contribute the same next year, you will add another £101 to your future pension, and the figures will be uplifted to keep the same value as when first accrued.

Thank you so much. Do you think this is a good return? I'm not the best with maths. 
I now over pay 150 and have a minimum of 12 years left so hope to have added in total at least another £1300 per year 

Dazed_and_C0nfused

Don't forget the £125/150 is before any tax saving.

So in reality the real cost in reduced take home pay might only be £100 or £120.

happymum37

Dazed_and_C0nfused said:

Don't forget the £125/150 is before any tax saving.

So in reality the real cost in reduced take home pay might only be £100 or £120.

Thank you. 

Do you still think that is still worth it though? I have the option of taking a lump sum but as long as my health is OK I won't take a lump sum as the commutation is 12:1

Yorkie1

I am not familiar with the police scheme specifically, but as mentioned above, it seems as though your overpayments are buying you added pension. In the civil service (where I am), that has to be taken at the same time as taking your main pension - it may or may not be the same for you.

Your contributions are giving you a guaranteed income, for life, and have advantageous tax benefits. I agree that the commutation is poor. That is worth a lot, particularly when you consider that it will be uplifted by inflation before you claim it.

PropertyGuru_Wannabe

I have said this before, the additional pension contribution is probably worth it if you retire in the police at the stipulated age of 60. If you retire at 55, your pension will be reduced as you are retiring early and therefore your additional pension will also be reduced. 

For someone who has no knowledge of financial investment, this additional pension contribution isn’t bad as it is protected by inflation but if you leave the police for whatever reason before 55, then you won’t be able to access your pensions until state pension age.

Do ask for an AVC additional contributions calculator from your organisation and see if you are happy with the amounts over the years you plan to contribute. But be warned, a lot of people do get put off by the figures given how much they are sacrificing now.

happymum37

PropertyGuru_Wannabe said:

I have said this before, the additional pension contribution is probably worth it if you retire in the police at the stipulated age of 60. If you retire at 55, your pension will be reduced as you are retiring early and therefore your additional pension will also be reduced. 

For someone who has no knowledge of financial investment, this additional pension contribution isn’t bad as it is protected by inflation but if you leave the police for whatever reason before 55, then you won’t be able to access your pensions until state pension age.

Do ask for an AVC additional contributions calculator from your organisation and see if you are happy with the amounts over the years you plan to contribute. But be warned, a lot of people do get put off by the figures given how much they are sacrificing now.

Thanks so much
Unless it's down to ill health or a lotto win i won't leave. 
I'm aiming to stay till 57... every year after will be a bonus if it can make it. 

The additional contributions calculator doesn't work at our place.  Hasn't for years.  I will chase it up. 

I agree - seeing the return doesn't seem like much at all . 

Thank you

Linton

happymum37 said:

PropertyGuru_Wannabe said:

I have said this before, the additional pension contribution is probably worth it if you retire in the police at the stipulated age of 60. If you retire at 55, your pension will be reduced as you are retiring early and therefore your additional pension will also be reduced. 

For someone who has no knowledge of financial investment, this additional pension contribution isn’t bad as it is protected by inflation but if you leave the police for whatever reason before 55, then you won’t be able to access your pensions until state pension age.

Do ask for an AVC additional contributions calculator from your organisation and see if you are happy with the amounts over the years you plan to contribute. But be warned, a lot of people do get put off by the figures given how much they are sacrificing now.

Thanks so much
Unless it's down to ill health or a lotto win i won't leave. 
I'm aiming to stay till 57... every year after will be a bonus if it can make it. 

The additional contributions calculator doesn't work at our place.  Hasn't for years.  I will chase it up. 

I agree - seeing the return doesn't seem like much at all . 

Thank you

The inflation matching is very valuable.

happymum37

Linton said:

happymum37 said:

PropertyGuru_Wannabe said:

I have said this before, the additional pension contribution is probably worth it if you retire in the police at the stipulated age of 60. If you retire at 55, your pension will be reduced as you are retiring early and therefore your additional pension will also be reduced. 

For someone who has no knowledge of financial investment, this additional pension contribution isn’t bad as it is protected by inflation but if you leave the police for whatever reason before 55, then you won’t be able to access your pensions until state pension age.

Do ask for an AVC additional contributions calculator from your organisation and see if you are happy with the amounts over the years you plan to contribute. But be warned, a lot of people do get put off by the figures given how much they are sacrificing now.

Thanks so much
Unless it's down to ill health or a lotto win i won't leave. 
I'm aiming to stay till 57... every year after will be a bonus if it can make it. 

The additional contributions calculator doesn't work at our place.  Hasn't for years.  I will chase it up. 

I agree - seeing the return doesn't seem like much at all . 

Thank you

The inflation matching is very valuable.

Thank you for the reply.  I'm going to keep saving and over paying.. but I understand why my colleagues don't as it does look like a low return at first glance x