Best private pension?

[KingOfTheDaves]

Great, thanks! So which is better in your opinion? Unfunded public where you're guaranteed to get what you're owed? Or a funded scheme which, through investments, could earn you more pension at the risk of going belly up?

Like muon said the best is final salary.

It makes no difference to you whether the scheme is funded or not you get exactly the same pension (assuming similar rules).

The only difference funding makes is how much extra it costs your pension provider. The government or the company you work for are the ones who have to makes up the difference (and without investment returns in an unfunded scheme, it is a massive difference).

In a final salary scheme the benefits are defined in that you know at the end what you are going to end up with (e.g. for 40 years service, you get 2/3rds of your salary or whatever). You don't care how well the money is invested or if it is even invested, because you know what you are getting and it is up to the provider to make sure it's paid.

In a money purchase scheme, only the amount you pay in is known and what you get out at the end is entirely dependant on investment returns. As a result the investment returns are hugely important to you and if you have one of these schemes (I do) you need to be much more active in making sure your money is in right place.

That being said, even with great investments money purchase schemes are rarely as valuable as final salary. If I had a choice I'd choose final salary every time.

I know there has been many numbers flying around in this thread regarding contribution percentages but if you look at averages:
Final salary - combined employee + employer conts are around 20-30+% of salary
Money purchase - combined employee + employer conts are around 8-15% of salary

No matter how well your money purchase scheme invests the money, all those extra final salary conts add up.

 

[josh_sheffield]

Where i work the permanent staff pay 2.5%, company puts 22.5%.

As agency I put 1% max and they generously match it

May I ask where you work? That's insane. I thought I was doing well with paying 6% and employer 12%.

 

[muon]

In a final salary scheme you also aren't at the mercy of the annuity rates available at the time of retirement.

 

[ninjabib]

May I ask where you work? That's insane. I thought I was doing well with paying 6% and employer 12%.

I can't say but a car manufacturer in the Midlands. If I get a permanent contract I will be on a far worse pension though. These pensions are for those who started 20+ years ago.

 

[The Mad Rapper]

Not anymore.

This. Even Military pensions (which were frankly unbeatable) are crap now.

 

[josh_sheffield]

If I get a permanent contract I will be on a far worse pension though.

At least it will be better than what you are getting through the agency. Hope you get one, it's demoralising to work as an agency worker when contracted staff are doing the same or similar jobs for better money and perks.

These pensions are for those who started 20+ years ago.

Ah, makes sense. I've not seen anything like that offered for new starters at the moment.

 

[rexehuk]

Wow, crazy good!

Obviously public sector are like £££££££333£££££££££3 'for 9-5' pensions though.

My pension is pay 3%, they add 10% not public sector

 

[ninjabib]

At least it will be better than what you are getting through the agency. Hope you get one, it's demoralising to work as an agency worker when contracted staff are doing the same or similar jobs for better money and perks.



Ah, makes sense. I've not seen anything like that offered for new starters at the moment.

Been there 18 months, never late, no sick days =still no contract.

Looking to leave. Currently doing online CeMap course so i can get out of there. 5 years they want us to work as agency now before considering us for a contract. Not good enough.

 

[Nitefly]

Many good pensions on here it seems. I contribute 3% and get 5%... I get rewarded in other ways though.

 

[muon]

Many good pensions on here it seems. I contribute 3% and get 5%... I get rewarded in other ways though.

Hookers?

I assume your pay packet is what makes up for it.

 

[Salsa]

My company will match my contributions up to 7.5% - I currently put away 12%. They closed our DB scheme earlier this year

/Salsa

 

[Nitefly]

Hookers?

I assume your pay packet is what makes up for it.

Yes. And hookers.

 

[helpimcrap]

Perhaps putting up a post over on MSE might help you out.

http://forums.moneysavingexpert.com/forumdisplay.php?f=19

Thanks. no one actually answered my question but instead stated what their employer contributed. I'm guessing a private pension means the employer won't contribute as why should they?

 

[The_Abyss]

We've just set up a new staff pension for our employees, and we're a pension business ourselves. Managing a staff pension is far simpler for an employer - one payment to the pension company each month, accompanied by a schedule detailing how much should go into each employee's individual pension.

If we paid into individuals own private pensions instead, the payroll operation suddenly becomes more complex. We could instead be forced to make hundreds of individual payments to different pension schemes. So that's why employers would prefer not to pay into individual private pensions, although a few do offer it.

Personally, I just sweep money out of my work pension every year and transfer it to a SIPP where I can do something more productive with the cash. There's no reason why anyone with a defined contribution / money purchase pension can't do the same if they want to.

 

[Destination]

Thanks. no one actually answered my question but instead stated what their employer contributed. I'm guessing a private pension means the employer won't contribute as why should they?

Yes to actually talk regarding your OP.
If you put money into a private sceheme then you can claim tax relief on the amount you place into the scheme.
This is beacuse any i come you gain from the eventaul annuity or withdrawals will be taxed.

There are a host of scheme at all sorts of levels.
It is up to you to pick and manage your fund, or have an IFA do this for you.
I have a private scheme in addition to the nhs scheme, it isn't making much progress, given the 2008/2009 mess, and the stumbling forward, and now into Brexit it may lose more.

Private schemes attract various fees.
Your ifa should discuss this.
As for what it good, i cannot comment, just to say if i wasnt getting tax relief, i would have my money elsewhere.

 

[Vern1961]

They nail you for 5% a year?
Or is their standard age now 65?

If referring to my post above, Scheme retirement age for myself is 60 (those who joined later now have to wait longer) but with the option to retire early from 55 onwards, so it's 75% of scheme pay (2/3 of pensionable salary) at 55 rising to 100% at 60. Any enhancements from AVC on top of that and of course calculations to be made regarding how much in lump sum and how much to leave for the actual income.

So in my case just approaching my 55th birthday, going with 75% on 95% scheme pay it is better to wait another three years and go on 90% of the full scheme pay. It is very much flexible over the forthcoming years, mostly dependent on how quickly we can pay down the mortgage, general health (as I've noted in previous threads I work a fairly gruelling 24/7 roster including night shifts), whether there is any voluntary redundancy going in a year or two with a decent payout that could maybe make up the difference, etc.

One thing worth mentioning in a wider context for those looking at their income on retirement is to bear the following in mind:
You won't (hopefully) be paying a mortgage.
You won't (hopefully) be making extra payments off the mortgage.
You won't be paying pension contributions off your pension.
You won't be paying AVC off your pension.
And (AFAIK) you don't pay NI on your pension - just income tax.

In our case that mounts up to quite a saving on current outgoings, ergo I want to go at 58 while there's still a bit of life in the old dog (so to speak!).

 

[R.O.S.S.I]

Just moved jobs to somewhere that only contributes the statutory 1%. Was previously somewhere that contributed 6% so neither really great but the move to the new company i'm at should hopefully offer up some opportunities further down the line careerwise and stand me in good stead in the future for progression.

 

[dsb]

I will be 44 years old with a 44k payout and at least £12k a year for the rest of my life. Its a perk of being in the army and not doing to bad, but i also need to find a career at 44 which might not be to easy.

 

[muon]

I will be 44 years old with a 44k payout and at least £12k a year for the rest of my life. Its a perk of being in the army and not doing to bad, but i also need to find a career at 44 which might not be to easy.

That's a final salary scheme I assume? Does that number increase with inflation until you actually retire?

Do you need to still need to add the state pension onto that?

 

[dsb]

That's a final salary scheme I assume? Does that number increase with inflation until you actually retire?

Do you need to still need to add the state pension onto that?

I'm not really 100% sure how it works and those joining now have a much worse pension than i do. Its easy to work out on the armed forces pension calculator, i also know when i hit 55 i get another 3k a year as it then becomes index linked.