HELP, I dont understand Pensions

24

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  • sandsy
    sandsy Posts: 1,719 Forumite
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    Essentially, your pension scheme provides you with a guaranteed income for life, from the scheme's normal retirement age. The amount of pension income depends on your years of service and your earnings each year.

    The contribution you pay has no direct link to the income you receive which is worth way more than your contribution. You should think of the pension you accrue as a valuable part of your overall remuneration package. People working in the private sector would have to pay considerably more for the same level of pension that you are accruing (essentially your pension is cross subsidised by every taxpayer in the country).

    Don't ever think of opting out as you would regret it, in retirement.
  • Pun
    Pun Posts: 740 Forumite
    I've been Money Tipped!
    Oliver1191 wrote: »

    Logically, if the TP scheme is so great, why don't you join it? There are plenty of jobs available as there is currently a teaching recruitment and retention crisis.

    Not logical at all - presumably the poster isn't a teacher and doesn't want to be. Most of us pick careers we want to follow, not pension schemes we want to join.

    if you are a teacher, the pension scheme is one of the best reward mechanisms going.
  • Pun
    Pun Posts: 740 Forumite
    I've been Money Tipped!
    Brynsam wrote: »
    Wasn't it Freud who talked about pension envy....?!

    Great comment - love it!:rotfl:
  • Oliver1191
    Oliver1191 Posts: 132 Forumite
    First Post First Anniversary
    Well said Sandsy.

    Is it misleading to compare the private sector and teaching in this way, though? You might be working for a company that offers several other financial products and get a generous employer-matched contribution + 40% tax relief. Here's one company that offers other financial incentives: https://www.cgi-group.co.uk/careers/experienced-professionals/company-benefits

    When considering whether or not the TP is a good investment, surely it needs to be evaluated in terms of your goal that you are trying to achieve relative to the risk and opportunity cost that you are willing to undertake. A top cash-ISA might pay 2%, but - depending on your goal - you may well opt for a savings account paying 5% because the returns are greater. Just because the cash-ISA is the best out there, it doesn't mean by default you should get one.
  • Oliver1191
    Oliver1191 Posts: 132 Forumite
    First Post First Anniversary
    Not logical at all - presumably the poster isn't a teacher and doesn't want to be. Most of us pick careers we want to follow, not pension schemes we want to join.

    if you are a teacher, the pension scheme is one of the best reward mechanisms going.

    I agree with you, Pun. I was responding to Dox's comment which said:
    If you're jealous of the other benefits provided in the private sector, get a job in it.

    It's rhetorical - as you say, most people don't choose a job for the pension on offer.
  • John-K_3
    John-K_3 Posts: 681 Forumite
    Oliver1191 wrote: »
    Well said Sandsy.

    Is it misleading to compare the private sector and teaching in this way, though?.
    Indeed it is. If you are bad at your job in the private sector, you’ll lose it. It is virtually impossible in teaching for this to happen. You can be the worst teacher in the world and your union will fight tooth and nail for you to be paid the same as the competent ones who care.
  • ewaste
    ewaste Posts: 279 Forumite
    First Anniversary First Post Name Dropper
    The thread seems to be discussing what is essentially two polar opposites on the risk and culture scale without having actually mentioned it.
    Oliver1191 wrote: »
    Is it misleading to compare the private sector and teaching in this way, though? You might be working for a company that offers several other financial products and get a generous employer-matched contribution + 40% tax relief.

    Tax relief is available to everyone and as has already been alluded to the TPS employers contribution is at a level most in the private sector can only dream of.

    While the teaching profession may lack share save schemes and the like so to do many if not most private employers so you'd be looking at a subset of employers and an even smaller subset who would offer 'generous' employer matched contributions.

    I presume you are playing devils advocate for the purposes of stimulating debate, I would agree that for a lot of people with qualifications and experience, in for example a STEM subject, teaching is not the most attractive profession to consider from a total rewards standpoint.
  • Oliver1191
    Oliver1191 Posts: 132 Forumite
    First Post First Anniversary
    While the teaching profession may lack share save schemes and the like so to do many if not most private employers so you'd be looking at a subset of employers and an even smaller subset who would offer 'generous' employer matched contributions.

    Yes, indeed, ewaste. Teaching is a skilled profession that requires both QTS and at least a degree. It should therefore be compared to jobs with a similar level of skill. There are plenty of jobs which have lower entry requirements in the public sector and as a result the pension contributions are far less.
    I would agree that for a lot of people with qualifications and experience, in for example a STEM subject, teaching is not the most attractive profession to consider from a total rewards standpoint.

    Indeed. Also, that it depends on your investment goal. If your goal is financial independence, then there may be better ways to do that. If you want security, then the TP could be a good option. If you need to buy a house, then the TP isn't of much use.

    It concerns me sometimes on threads like these that they become highly emotionally charged, with people basing decisions on their strongly held emotion, rather than a well-reasoned view. Equally, on some threads, views are dismissed, rather than debated. If a well reasoned argument can be made, we should be prepared to change our views accordingly.
  • mgdavid
    mgdavid Posts: 6,705 Forumite
    First Anniversary Name Dropper First Post
    Oliver1191 wrote: »
    Yes, indeed, ewaste. Teaching is a skilled profession that requires both QTS and at least a degree. It should therefore be compared to jobs with a similar level of skill. There are plenty of jobs which have lower entry requirements in the public sector and as a result the pension contributions are far less.



    Indeed. Also, that it depends on your investment goal. If your goal is financial independence, then there may be better ways to do that. If you want security, then the TP could be a good option. If you need to buy a house, then the TP isn't of much use.

    It concerns me sometimes on threads like these that they become highly emotionally charged, with people basing decisions on their strongly held emotion, rather than a well-reasoned view. Equally, on some threads, views are dismissed, rather than debated. If a well reasoned argument can be made, we should be prepared to change our views accordingly.

    I refer you to post #1 where you wrote the thread title 'HELP, I dont understand Pensions'.
    I agree with you,nothing you've said since counters that admission. Instead of trying to start an argument about private vs public sector employment and overall reward packages I suggest you read and digest the good information and guidance about TPS given so far.
    The questions that get the best answers are the questions that give most detail....
  • hyubh
    hyubh Posts: 3,531 Forumite
    First Anniversary Name Dropper First Post
    Oliver1191 wrote: »
    Is it misleading to compare the private sector and teaching in this way, though? You might be working for a company that offers several other financial products and get a generous employer-matched contribution + 40% tax relief.

    'Employer-matched' DC is not at all 'generous' compared to TPS DB - even on its own terms (which systematically underplay the true cost of the pension promised earned), the employer contribution is far higher than the employee, not merely matched. Moreover, '40% tax relief' is irrelevant, because that isn't in the gift of the employer - if a teacher is a higher rate taxpayer, then then they too will benefit from 40% tax relief
    When considering whether or not the TP is a good investment, surely it needs to be evaluated in terms of your goal that you are trying to achieve relative to the risk and opportunity cost that you are willing to undertake.

    Are you seriously suggesting it is reasonable for a teacher to opt out of the TPS...? If you are, care to elucidate an example scenario where it made sense...?
    It concerns me sometimes on threads like these that they become highly emotionally charged, with people basing decisions on their strongly held emotion, rather than a well-reasoned view. Equally, on some threads, views are dismissed, rather than debated. If a well reasoned argument can be made, we should be prepared to change our views accordingly.

    Go on then...
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