Pensions

[Deleted member 1258]

One for the pension experts on here. I'm 58 and starting a new job and about to join their pension scheme, I have a small deferred pension. The scheme offer two types of pension, a Money Purchase scheme and a Final Salary scheme. My instincts and the people I have talked to say Money purchase, the internet has been inconclusive, most stuff seems to be written from the employers perspective. What would you people go with?

 

[SavageHoutkop]

More info required there Dave!

What are the employer contributions in each case, what are your contributions, and what is the accrual rate in the final salary scheme?
Is the final salary 'contracted out' or not, and is the money purchase contracted out [this is ending soon]

One for the pension experts on here. I'm 58 and starting a new job and about to join their pension scheme, I have a small deferred pension. The scheme offer two types of pension, a Money Purchase scheme and a Final Salary scheme. My instincts and the people I have talked to say Money purchase, the internet has been inconclusive, most stuff seems to be written from the employers perspective. What would you people go with?

 

[accountantpete]

At 58 I wouldn't get your hopes up about either producing a really worthwhile pension.

I'd ask for a projected pension for both types given your likely earnings/contributions.

 

[Deleted member 1258]

More info required there Dave!

What are the employer contributions in each case, what are your contributions, and what is the accrual rate in the final salary scheme?
Is the final salary 'contracted out' or not, and is the money purchase contracted out [this is ending soon]

Employee money purchase 4% of salary Employer 8% Employee Final Salary 7% of pensionable salary minus the tax relief. The booklet says the amount the company pay is not fixed, yes the final salary is contracted out, it doesn't say whether the money purchase is contracted out or not but I think its not. The booklet doesn't give the accrual rate.

 

[Deleted member 1258]

At 58 I wouldn't get your hopes up about either producing a really worthwhile pension.

I'd ask for a projected pension for both types given your likely earnings/contributions.

Its not a worthwhile pension I'm looking for, just trying to give myself a bit more money coming in after I retire. I am well aware that, like a lot of people, I started thinking about a pension far to late to get a worthwhile pension.

 

[SavageHoutkop]

Employee money purchase 4% of salary Employer 8% Employee Final Salary 7% of pensionable salary minus the tax relief. The booklet says the amount the company pay is not fixed, yes the final salary is contracted out, it doesn't say whether the money purchase is contracted out or not but I think its not. The booklet doesn't give the accrual rate.

The booklet should say somewhere what benefit you can expect to get when you retire, normally of the form
1/60 * final earnings * years' service
the 1/60th would be your accrual rate...

Anything like that anywhere?

 

[Alien8]

Presumably they'll provide illustrations for both schemes to help you make an informed decision?

 

[wafflycat]

Sorry to be a party-pooper here, but what makes you think you're going to get detailed, accurate financial advice, on something that is *vital* to your old age from a cycling forum? Surely you'd be better off getting said advice from someone suitably qualified who can sit with you and look at the nitty-gritty in a lot of detail and work with you to find out what really is best for you in your circumstances? I'm sure folks here can act as a sounding board but for proper advice, you should see a specialist.

Financial Services Authority Register

Consumer Financial Education Body


Hope the above links help.

 

[Alien8]

Sorry to be a party-pooper here, but what makes you think you're going to get detailed, accurate financial advice, on something that is *vital* to your old age from a cycling forum?

Although it makes my skin crawl at the thought - presumably some financial advisers ride bikes?

 

[wafflycat]

Although it makes my skin crawl at the thought - presumably some financial advisers ride bikes?

I know they do.

But certainly a bike forum wouldn't be my first port of call in trying to find one that could advise me properly. Nor would I use a bike forum as first port of call to find a brain surgeon, or a car mechanic, but YMMV.

The above sounds harsh - it's not meant to be - so I apologise for that. But as much as CC is filled with lovely people, with all sorts of skills, I wouldn't use it as my main way of finding out something so personal and non-cycling, where *getting it right* is of vital importance. If I want serious bike information, I'll use here. If I want a good natter, I'll do it here, but when it comes to serious financial stuff, I'll use serious financial sources.

 

[Deleted member 1258]

The booklet should say somewhere what benefit you can expect to get when you retire, normally of the form
1/60 * final earnings * years' service
the 1/60th would be your accrual rate...

Anything like that anywhere?

Yes its 1/60 of Final Pensionable Salary

 

[Deleted member 1258]

Sorry to be a party-pooper here, but what makes you think you're going to get detailed, accurate financial advice, on something that is *vital* to your old age from a cycling forum? Surely you'd be better off getting said advice from someone suitably qualified who can sit with you and look at the nitty-gritty in a lot of detail and work with you to find out what really is best for you in your circumstances? I'm sure folks here can act as a sounding board but for proper advice, you should see a specialist.

Financial Services Authority Register

Consumer Financial Education Body


Hope the above links help.

Its not detailed financial advice I'm looking for its peoples ideas opinions and experience I'm interested in. I've been a regular on this Forum for several years now and I know there are people on here with all sorts of different skills, and often a different way of looking at things. This makes this Forum a good place to chuck a question into, providing people don't go to far of topic, or start arguing amongst themselves, and find some sensible and interesting answers.

 

[SavageHoutkop]

some general points:

paying 7% towards 1/60th of final salary is, based on the limited information you've given - but taking your age into account - a good deal.
If I were you (clearly I'm not though!) I'd take the FS option. You should keep an eye out for how your 'final pensionable salary' is defined though - is it your actual pay, or is there a deduction?

I'm interested to know why your friends have recommended the money purchase over the final salary (aside from the obvious 'it's cheaper'!).
Final salary schemes mean you aren't as exposed to stock/bond market fluctuations as you are in money purchase schemes; where your investment will go up and down, and so will the final pension you get out the other end as it depends on bond yields at the date you retire.

You do need to check what the impact is on your second state pension if you join the FS scheme; because you 'contract out' of the second state pension, you'll lose out on that pension.
S2P (as commonly abbreviated) is not the easiest of things to work out, but you can find out more info here:
http://www.moneymade...racting_out.pdf

It might be worth - if you don't have one already - getting a state pension projection for your own information.
http://www.direct.go...ast/DG_10014008

 

[Deleted member 1258]

some general points:

paying 7% towards 1/60th of final salary is, based on the limited information you've given - but taking your age into account - a good deal.
If I were you (clearly I'm not though!) I'd take the FS option. You should keep an eye out for how your 'final pensionable salary' is defined though - is it your actual pay, or is there a deduction?

I'm interested to know why your friends have recommended the money purchase over the final salary (aside from the obvious 'it's cheaper'!).
Final salary schemes mean you aren't as exposed to stock/bond market fluctuations as you are in money purchase schemes; where your investment will go up and down, and so will the final pension you get out the other end as it depends on bond yields at the date you retire.

You do need to check what the impact is on your second state pension if you join the FS scheme; because you 'contract out' of the second state pension, you'll lose out on that pension.
S2P (as commonly abbreviated) is not the easiest of things to work out, but you can find out more info here:
http://www.moneymade...racting_out.pdf

It might be worth - if you don't have one already - getting a state pension projection for your own information.
http://www.direct.go...ast/DG_10014008

Thanks for that, something else to think about, my friends seem to think I'll get more out of the money purchase scheme.