What percentage to pay in ?

bigbloke45

With a career average scheme your pension benefits are based upon an average of ALL of your pensionable earnings since you joined the scheme.

With a 60th Scheme, your pension benefits will give you 1/60th of your “Final Pensionable Salary” for each complete year of service, plus a proportion for extra month’s service at retirement.

“Final Pensionable Salary” can be defined in a number of ways, but usually is taken to be the average of three or more consecutive years salary, including bonuses which must be averaged, in any event, over the period in question, ending not more than 10 years before retirement.

I suggest you ask your employer what definition on “FPS” they use in their calculation of benefits. I suspect it will be the most beneficial to the member in question as this is usually the way things are done.

The BIG benefit of a 60ths scheme vs. a career average is that salaries usually rise over time, so the 60ths scheme is almost always better for the employee.

The actual contribution you must pay depends upon the scheme rules. The actual amount paid by the employer depends upon an actuarial valuation which should take place at least every three years. But the point is that you cannot define what the employer contributes for your individual pension, you can only accept that you must pay a contribution and that the employer, if he remains solvent and funds the scheme enough, will attempt to pay you a pension according to the rules of the scheme.

It would seem to me that a small increase in your personal contribution, provided that your salary will continue to increase in the future, seems a good bet to me.

It looks like you owe to yourself to really research your options and come back to us soon.

Best of luck.

Dick_here

CLAPTON wrote: »

can you add some more detail

are you a 40% tax payer
how old are you
when you say the scheme reverts to 1/60 ..is this just for new money only or for all you existing contributions
if the latter how long have you been in the scheme
do you expect your salary to rise a lot over the next few years (i.e promotions etc )

Thanks.

No.
Nearly 44.
Just for new money only. I was in 1/60ths for 6 years (final salary), and nearly 2 years in 1/65ths (career average). Paying more for 1/60ths again would still be on career average basis moving forward.
No promotions expected.

Advice welcomed !

Dick_here

bigbloke45 wrote: »

With a career average scheme your pension benefits are based upon an average of ALL of your pensionable earnings since you joined the scheme.

With a 60th Scheme, your pension benefits will give you 1/60th of your “Final Pensionable Salary” for each complete year of service, plus a proportion for extra month’s service at retirement.
It would seem to me that a small increase in your personal contribution, provided that your salary will continue to increase in the future, seems a good bet to me.

It looks like you owe to yourself to really research your options and come back to us soon.

Best of luck.

Thanks bb45. I didn't make clear that reverting to 1/60ths would not change the fact that we're career average moving forward now, either way. Does that change your thinking ?

EdInvestor

Have you asked for forecast results from each option from the scheme?

Dick_here

I assume that if my contribution increases, so will my employer's. Therefore common sense says pay as much as possible into the company scheme.

Is there likely to be a big difference in benefits between paying in at 1/60th and 1/65th though ? A £50 monthly increase in contributions feels like a lot for not a great difference, is that right ?

Is there any other advantage in paying into an AVC, e.g. if I was made redundant would I be able to continue with it in another job ? It's currently taken straight from my salary the same as my main pension contribution. Is it better not to have all my pension eggs all in one (employers) basket, or is that not a factor ?

Retired_I.F.A.

!!!!!!_here wrote: »

I assume that if my contribution increases, so will my employer's. Therefore common sense says pay as much as possible into the company scheme.

That's the point I was trying to make. The company makes up the contributions needed to provide the existing benefits but who is paying the full cost of the proposed inceased benefits? If it's solely you tell them to stuff it your better off paying the increased cost to you into a personal pension.

bigbloke45

I thnk edinvestor is right, you need to see what extra pension you might get for the 60ths. scheme before you make a choice. I would get on with it quickly as these offers don't tend to stay open forever.

Just a quick thhought; going from a 65th to a 60th sheme increases benefits by 8.33%. A 7% contribution is 40% higher than a 5% contribution.

I don't know about your AVC, it's anyones' guess as to which will be better, sorry!

Dick_here

Ok, I've found out that I'd be funding the entire increase myself if I switched from 1/65ths to 1/60ths and it would cost me an extra 2% of my salary. In that case, what are the pros and cons of doing it rather than sticking with paying £30pm into my AVC ?

Retired_I.F.A.

edit: figures I posted here were cocked up . Redone them a few posts on.

Dick_here

Thanks, Retired. This is where us normal people struggle, we'd never be able to do calculations like that.