Final Salary Pension.. is it time to move on ?

longie

Hi All,

I am currently in a final salary pension scheme (nearly 10 years) and am looking at my job opportunities. Of course, most of the potential employers are not offering a final salary pension scheme (but more salary money), how can I evaluate my alternatives (packages) with this final salary pension in the picture. As I am being told that I would be stupid to leave my current employer as I am in this type of pension.

Thanks

Longie

elastic_trickery

Speaking from personal experience I started at a company with a final salary pension scheme about 15 years ago. Back then they were contributing 12.5% of salary. When I left after 12 years of employment they were contributing 18% of salary (and the scheme was still underfunded!)

Ask what you employers contribution is and factor it into any decision you make.

bigturnip

elastic_trickery wrote: »

Speaking from personal experience I started at a company with a final salary pension scheme about 15 years ago. Back then they were contributing 12.5% of salary. When I left after 12 years of employment they were contributing 18% of salary (and the scheme was still underfunded!)

Ask what you employers contribution is and factor it into any decision you make.

Maybe it's relevant to know whether the scheme is under/overfunded and a companies ability to fund it in the future, but how much a company contributes is going to vary depending on a lot of factors from year to year, so is completely irrelevant. Besides, since the government set up the PPF in April 2005 you should be pretty well protected should things go wrong.

As for the original post, without knowing how much more you will be earning and the details of your current and potential pension schemes it's hard to tell whether it's worth it.

You should also take into account your future earnings potential at the two jobs, which one has a better prospect of promotion and a pay rise? There are also other benefits to consider, compare the total benefits package on offer from both jobs.

You also have to take into account that your current employer can withdraw your final salary scheme at any time (for future service), so don't bank on it being there until retirement. They may also tweak it to reduce costs/risks by asking you to contribute to keep your current accrual rate, by increasing retirement age or by basing it on career average salary, the chances of your pension being the same when you retire are quite low in the current climate.

Of course there are non financial things to consider, like work/life balance, job satisfaction and colleagues, money is not everything in life.

If you do change jobs you then need to consider what to do with your pension, transfer it or defer it, often with final salary schemes it better just to leave it where it is and defer it, but this isn't always the case.

dunstonh

I really really really rough guide is that a typical 80ths scheme is probably worth around 20% of your income minus your contribution. If you are paying 5% then the worth is around 15%.

So, lets asssume if you had to take out a personal pension instead you would have to pay around 20% gross to match benefits on the final salary scheme.

As bigturnip says, it is hard to tell if its worth it without information so do treat the above as a rough guide.

nobblyned

Hi Dunstonh, that's a useful rule of thumb. I'm looking at some similar options myself, if it's not too onerous to calculate, what's the rough worth of a 45ths scheme where a I'm putting in 5%?

Thanks.

ffacoffipawb

nobblyned wrote: »

Hi Dunstonh, that's a useful rule of thumb. I'm looking at some similar options myself, if it's not too onerous to calculate, what's the rough worth of a 45ths scheme where a I'm putting in 5%?

Thanks.

If an 80th scheme is worth 20% then a 45ths scheme is worth 20 * 80 / 45 = 36% say.

Knock off your 5% leaves 31%.

Depends on retirement age, of course. And current age too.