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Company pension

The_One

The_One

The_One

Soldato
Joined
27 Dec 2003
Posts
19,518
Can anyone help me understand this company pension scheme please?

You choose one of 5 levels of contributions based on your pensionable pay which are 20%, 25%, 30%, 35% and 40%

depending on your age and which level you choose affects what percentage you pay yourself.

As im 25 and say i chose 20% my contributions would be 3.6%

It says the company make up the difference of what you pay and the cost of providing that pension level.


So does that basically mean the company pay the 16.4% difference??? (20% - 3.6% i pay) So i for example i was on £30k that means the company would pay £4920 Sounds a lot to me!!! :confused:
 
sounds about right to me to be honest

my pension works out like this, company pay 13% of salary into pension, i pay an additional 3% of my salary, and my firm match that so in essence i get get 19% of my salary paid into my pension each year.
 
just have to watch with pensions as some youll end up with a lot less 40 years down the line than if you put all your money into a bank account.
 
lewism said:
just have to watch with pensions as some youll end up with a lot less 40 years down the line than if you put all your money into a bank account.
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You'd have to be pretty damn unfortunate for that to happen over a 40 year period, especially considering the tax benefits of pensions.
 
But if i chose 40% my contribution is 5.6% meaning the company have to pay 34.4%!!

On a £30k salary the company are going to pay £10320 out of their own pocket into my pension on top of the £30k salary they are giving me

Am i missing something or does that sound too good to be true????
 
The_One said:
But if i chose 40% my contribution is 5.6% meaning the company have to pay 34.4%!!

On a £30k salary the company are going to pay £10320 out of their own pocket into my pension on top of the £30k salary they are giving me

Am i missing something or does that sound too good to be true????
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That does sound a bit odd, is this definitely a money purchase scheme?
The percentages above suggest that they may be final salary percentages rather than percentage of salary put into a money purchase pension.
 
Its definately percentage of salary as you can change it year on year.

You could decide to go 40% but then think next year i plan on getting a new car so can change it to 25% for example.
 
From the pension information

The plan is a defined benefit pension arrangement

The benefit level you earn each year is a percentage of your pensionable pay. each year you receive a benefit statement so that you can keep track of how your retirement balance is building up

As the plan is a defined benefit arrangement you do not have to make any decisions about how your contributions are invested and the COMPANY bears the risks that the plans investments do not perform as well as expected

the company makes up the difference between the core contributions you pay and the estimated cost of providing the core benefit level you have chosen to purchase that year

when you retire you can take up to 25% of your retirement balance as a cash sum which is paid free of tax
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That sounds like a final salary scheme.

You put in a set amount of money, which then goes towards you getting a set portion of your final salary upon retirement with the risk on the company if the funds they invest in don't perform that well.
The company don't put in up to 40% of you salary each year, bur from the sounds of what you have posted you will get up to 40% of your final salary as a pension when you retire.

I would speak to your HR department about exactly how the benefits are calculated.
 
How can it be a finaly salary scheme mate

You pay into a pot of money, when you retire that pot of money is your pension. There is no mention of your salary!!

The remainder of your retirement balance will be used to provide a pension. The amount of pension you receive will depend on the retirement balance you have built up
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No mention of your salary
 
The_One said:
How can it be a finaly salary scheme mate

You pay into a pot of money, when you retire that pot of money is your pension. There is no mention of your salary!!

No mention of your salary
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It certainly doesn't sound like money purchase.

the company makes up the difference between the core contributions you pay and the estimated cost of providing the core benefit level you have chosen to purchase that year
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This bit suggests you choose a benefit level and then the company invests an appropriate amount to give you that benefit (alongside what you've put in.)
With a money purchase scheme you put in a set amount and you get whatever it's worth at the end.

It could be that it's not final salary, but that you choose a set percentage of your salary each year and it's all calculated like that.

From what I'm reading above it's definitely not a money purchase scheme.
 
Haircut said:
That sounds like a final salary scheme.
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To me it sounds more like a scheme akin to the Nuvos civil service scheme.

i.e. you pay in x% and your employer puts in y%. You build up a pension that's a percentage of your salary per year, not your final salary.

Can't remember off the top of my head (it's either 2.5 or 3.5% of your salary a year) so if you earn 30k your contributions net you 2.5% of that for that year, £750. If the next year you earn 35k, your pension goes up 2.5% of that. So you had £750 the year before, this year you'd get £875, so after 2 years working there your yearly pension when you retire would be £1625.

So it could be based on your pensionable salary for that year, rather than soley based on your final salary.

Or it could be something totally different :)

*edit*

lol wrote this at the same time as this

Haircut said:
It could be that it's not final salary, but that you choose a set percentage of your salary each year and it's all calculated like that.

From what I'm reading above it's definitely not a money purchase scheme.
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This sounds right, although still no real mention of salary in the description so couldn't be sure. This a British Gas scheme or where you are now?
 
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Its E-ons pension scheme

To me it sounds like you choose a level 40% for example. You pay 5% and E-on have to pay 35% they then invest the money how they see fit (Stock market) and if it does well they will be paying less than 35% wont they???

If it does poorly the company have to foot the bill.

Thats what it sounds like to me???

You take your 25% cash sum at the end and the rest of the money you have accumulated is used to either provide you with a pension from e-on or you can use the money to buy a pension from someone else




As a sidenote i thought final salary pension schemes were being done away with as companies found they couldnt afford them!
 
The_One said:
The plan is a defined benefit pension arrangement

The benefit level you earn each year is a percentage of your pensionable pay. each year you receive a benefit statement so that you can keep track of how your retirement balance is building up
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Just rereading it, that to me sounds a bit like my Nuvos example where what you get is based on a percentage of your salary for that year.

Here you go, info on it here :)

http://www.eon-uk.com/about/news.aspx#Question1employ
 
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Final salary schemes will rarely result in your final salary as they are based on each year you work being 1/60th of your FS.


So work there 30 years and you get 1/2 your final salary as a pension.
 
Jonnycoupe said:
Final salary schemes will rarely result in your final salary as they are based on each year you work being 1/60th of your FS.


So work there 30 years and you get 1/2 your final salary as a pension.
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A final salary scheme doesn't mean you get your final salary it means it is based on your final salary.

I'm in a final salary scheme, 1/60th for the first 20 years then 2/60th for the final 10 meaning I end up with 40/60th.

Someone on 30k who retires today at my spot gets a tax free lump sum of just over 90 grand and about £1300 per month.
 
Did you quote to disagree with me or agree :confused:

Some you can play tunes with the annuity so you give up monthly take home for a larger lump sum.
 
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