Pension advice

[fossyant]

Yup, it's a lot from the employer - we're finding many youngsters not opting into the scheme as they'd rather have a few more bob in their pockets. It's a big part of your overall benefit's package !

 

[DCLane]

@vickster - I'm in a similar position; I contribute 11.7%, my employer contributes 23%. Contributions vary on both sides depending upon salary.

SWMBO has recently gone full-time for the first time since she graduated - bits of NHS work part-time, freelance, then bits of part-time for various employers. Her contribution's about 9-8-10.7% as she's on the boundaries, with the NHS contributing 14.3%.

Overall academia has much better pensions, particularly in the newer universities which are on the Teacher's Pension scheme, although the older universities are on the Universities pension which isn't doing as well.

 

[rogerzilla]

I have 3 I regularly check, and all have taken a hit by varying degrees though fortunately none that badly, and I have time on my side for them to recover (hopefully). Knowing what, if anything, to do about it is another matter! You'd kinda hope the pension companies might re-evaluate their default... but to what?

Tbh, it angers me that people's retirement savings are being handled in this manner, requiring financial advisors to understand. If your retirement pot is decimated, wtf are you supposed to do? Just accept 'the price of stocks can go down as well as up' and smile your way through old age poverty?

Employers call it derisking. They have thrown the problem over the wall to the employee, and it's no longer anything they need to worry about. The surplus/deficit in DB schemes used to be swept under the carpet until FRS17, which made companies put it on their balance sheet. The closure of schemes started shortly afterwards.

The real scandal is that most of these companies took long pension holidays in the good times (1980s), then ran away as soon as the schemes tipped into deficit.

 

[midlife]

Looking at it like that yes I agree.

But a young 20 something - perhaps earning around £20k - is a bit reluctant to shell out £200pm for scheme that will most likely change its terms and conditions - IE retirement age - % contribution - I have to say they have a point -if was 20 right now -i wouldn't join.

NHS pension contribution would be about £108, I think about 6.5% of gross salary £20k

 

[sevenfourate]

Yes £200 or so is better fun to blow when you are 20. Ive been paying in since I was 16.

Impressive !!

Since 18 here. Fair to say I’ve therefore never missed it…..

 

[kingrollo]

Yup, it's a lot from the employer - we're finding many youngsters not opting into the scheme as they'd rather have a few more bob in their pockets. It's a big part of your overall benefit's package !

Yup - and when said youngsters retire the state will have to support them - one way or the other.
So making the NHS pension scheme less attractive and more expensive will cost the taxpayer in the long run.

 

[rogerzilla]

Nasty discovery today - I want to take approx. 11% of my total pension savings as tax-free cash, and was hoping to clean out the crappy DC pot (annuities being rubbish) and leave the DB pension alone to provide income. The DC pot, which my employer dumped us in when they closed the DB scheme 2 years ago, is a fraction of the size.

But you can't aggregate pots like that, for no good reason. I would have to take 25% from the DC, the rest from the DB scheme, and buy a small annuity with what's left in the DC pot, but that represents a loss in income of about £150/month because the DB scheme gives far better VFM for a given fund value. Annuities from a DC pot are nowhere near.

Is there any way around this? The DC scheme is well above the small pots rules, so I can't use that loophole. Also the DB scheme doesn't allow transfers in, obviously.

 

[figbat]

How about take 25% from the DC, then take the rest as drawdown until it’s gone and defer the DB until the DC is empty?

Your situation mirrors mine but 3 years offset. I have a workplace DB that closed a couple of years ago with a DC offered in its place. The DC has, so far, underperformed and the fund is worth less than the sum of my payments into it. I haven’t looked at annuities yet. Luckily I have a fixed DB (plus indexed growth) from nearly 30 years’ contributions so the DC is pin money really. I was thinking I could draw it down or buy a shortish term annuity until the state pension kicks in.

 

[T4tomo]

Nasty discovery today - I want to take approx. 11% of my total pension savings as tax-free cash, and was hoping to clean out the crappy DC pot (annuities being rubbish) and leave the DB pension alone to provide income. The DC pot, which my employer dumped us in when they closed the DB scheme 2 years ago, is a fraction of the size.

But you can't aggregate pots like that, for no good reason. I would have to take 25% from the DC, the rest from the DB scheme, and buy a small annuity with what's left in the DC pot, but that represents a loss in income of about £150/month because the DB scheme gives far better VFM for a given fund value. Annuities from a DC pot are nowhere near.

Is there any way around this? The DC scheme is well above the small pots rules, so I can't use that loophole. Also the DB scheme doesn't allow transfers in, obviously.

How much do you need the tax free cash? Can you dribble tha in over next3 or 4 years or do you need it now?

@figbat's solution is about the best way to do it I think. You might end up paying some tax on the drawdowns from the DC pot post the tax free 25%, depending on how much other income you have towards your annual tax allowance, but i'd be tempted to draw that down in 2, 3 or 4 lumps (cognoscente of the income tax limits) and leave the DB pot well alone to take as it defined annuity value. Its probably better to pay a bit of tax on the DC pot than lose the value on the DB pot by drawing out a lump sum.

 

[lazybloke]

23% is stunning.
My last employer gave very significantly less.

But am now contracting (within ir35), so really don't get ANY perks

 

[rogerzilla]

My employer pays up to 16% but there is a little-known bonus of 6% of any employee contribution over 7%. So I've got them on the hook for 18%