Career based pension

MABLE

A male friend of mine is having to change from a FS with benefits preserved to a Career based pension from the 1/4. He is paying 6% into the FS scheme with a further 9% to buy added years. He has been advised that he can continue with these percentages into the new scheme. However he will only be working then 11 hours a week from the 1/4 which would gross £5720 per annum.

My question is he has another 7 years before he is 65 and could someone give me an idea based on the above information what amounts he would get at his retirement age.

With thanks,

Retired_I.F.A.

I've never heard of a career based pension but I presume its a personal pension in which case he should ask the employer who in turn will ask for an illustration for him from the provider.

bigturnip

I presume he means a career average salary pension. Some companies have introduced them to cut the costs of Final Salary schemes, they are just what they say instead of being based on your final salary they are based on your average salary over your career (or in this case future service as Final Salary service already built up is unaffected) often revalued by RPI.

As for what happens because of his reduced hours and salary I don't know, I guess it depends on the scheme rules.

Retired_I.F.A.

!!!!!!! hell thats about as attractive as my backside after 10 pints and a vindaloo!!

bigturnip

My company have just moved us all over from FS to CAS (we're not too happy about it, but seems there's little we can do about it.) Fortunately the average salary is revalued by RPI (capped at 5%), so after a few calculations it doesn't make as big a difference to me as I first thought it would. As long as there's not a sustained period of high inflation, I can live with the changes.

The real problems comes once the UK bring in EU laws on pensions comprising part of an employees salary, then all employees will have to have equivalent pay. Are they going to increase the pay of DC members to level it out or reduce the pensions of DB members? I know which one my money is on.

EdInvestor

Career average is a darn sight better that defined contribution.

Why don't you do some catchup reading, Retired IFA?

Many many things have changed in the last 7 years!

Retired_I.F.A.

EdInvestor. wrote:

Career average is a darn sight better that defined contribution.

Here we go again, thats your opinion not fact.

Why don't you do some catchup reading, Retired IFA?

Oooooh getting sarky now I see. I have done some reading thanks. When are you going to sit a few exams and get authorised so that the readers can apply to some of your posts a little bit of credibility, as many of your posts are currently biased, illegal, unauthorized, and misleading?

Many many things have changed in the last 7 years!

Nothing new here though except the terminology. A career based pension has been around for donkeys years. It's just another defined benefit scheme with a new name some joker dreamed up. We saw the end of these almost entirely when employers schemes were allowed to contract out of SERPS in '78 as they used some of the rebates to switch to a final salary basis and in some cases for directors perks such as them big yachts you still see floating around Monte Carlo harbor.

Retired_I.F.A.

bigturnip wrote:

My company have just moved us all over from FS to CAS (we're not too happy about it, but seems there's little we can do about it.) Fortunately the average salary is revalued by RPI (capped at 5%), so after a few calculations it doesn't make as big a difference to me as I first thought it would. As long as there's not a sustained period of high inflation, I can live with the changes.

It's bad news if your up for a promotion and a hefty payrise in your latter woking life though, but there again maybe not the trustees might tell the employer he can actually afford to give you the job now with CAS instead of FS.

The real problems comes once the UK bring in EU laws on pensions comprising part of an employees salary, then all employees will have to have equivalent pay. Are they going to increase the pay of DC members to level it out or reduce the pensions of DB members? I know which one my money is on.

Nah,my money is on DB becoming a part of history by then. The Euro courts deemed pensions as a part of pay a few yeas ago. About time we had equality come from it as the current method is akin to employers own coinage spendable in only his shop. lol and they say that faded out 200 years ago !

MABLE

EdInvestor wrote: »

Career average is a darn sight better that defined contribution.

Why don't you do some catchup reading, Retired IFA?

Many many things have changed in the last 7 years!

Edinvestor,
Based on the my original post I have found out from my friend that it would increase in line with the RPI. Basically he is asking whether it is worth paying into for the 7 years and some kind of guide what he may receive.

You were very helpful with mine about 18 months ago and hoping you may be able to advise.

With thanks,
Mable.

EdInvestor

MABLE wrote: »

Edinvestor,
Based on the my original post I have found out from my friend that it would increase in line with the RPI. Basically he is asking whether it is worth paying into for the 7 years and some kind of guide what he may receive.

You need to get a couple of forecasts:

1) If he stops paying in now, will the old F/Spension be revalued up to retirement by 5% or inflation? Then you can work out roughly what he will get at retirement age based on his final salary now.

2)Given his smaller hours and lower salary and switch to CAS, what will this pension likely be worth in 7 years time.

Then compare the two forecasts.It seems possible that even if he keeps paying in, the new pension could be worth less than the old one with no further conts because of the switch to CAS as his change in work pattern will bring his average salary down.