Final salary pension/high pension contributions roles?

[SideWinder]

For those in the know, they may have seen my semi-successful thread in GD.

I just wanted to go a bit deeper into my own personal situation as I am starting to look around for a new role.

If my understanding is correct, I should be looking at the civil service/goverment roles for the highest pension contributions perhaps?

Do roles with final salary pensions exist anymore? I am thinking no...

Thank you in advance.

 

[dowie]

Do roles with final salary pensions exist anymore? I am thinking no...

Maybe but likely very rare. My Dad got one with the NHS (and still goes back to help them out as a locum/bank staff when needed) but AFAIK these days an "average salary" scheme is more likely.

Also, if you're mid-career and thinking of just switching to a job to bag a pension do keep in mind you need to build up your entitlement to one via the number of years worked.

So, hypothetically, you might have some situation along the lines of: your pension is 1/70th of your career average salary for every year worked.

That's great if you're joining aged 20 and planning on a full career, perhaps less so if you're starting with only 20 years left until retirement... then you're getting 20/70*average salary. (I presume the calculation of average salary includes inflation, you'll have to check the details for whatever employer/scheme you're considering).

Then again, still not necessarily a bad deal, I guess plenty of private-sector schemes are along the lines of:

"We'll match a contribution of up to 4% of your salary to stick in an account with a fund manager we've chosen, don't expect any great performance lots of them can't beat a tracker fund"

(Asset management firms do sometimes offer some very generous employer matching for their own employees mind, could be worth looking at working for one of them!)

 

[dowie]

Ooh, just to add, if you're joining somewhere late in your career then I understand you can do some salary sacrifice type thing so you can build up a bigger pension... it changes the ratio essentially, rather than say 1/70th * career average for every year worked you might get 1/50th say.

 

[mid_gen]

Pensions are only one aspect of remuneration, to look at that in isolation is daft. Look at the package overall.

If all you care about is putting money into a pension, disregarding all else, then I would look to contract work in fintech (good money) and just use your limited company to funnel cash into your pension.

It does rather depend if you know anything about tech, or finance, though....

 

[HACO]

Pensions are only one aspect of remuneration, to look at that in isolation is daft. Look at the package overall.

If all you care about is putting money into a pension, disregarding all else, then I would look to contract work in fintech (good money) and just use your limited company to funnel cash into your pension.

It does rather depend if you know anything about tech, or finance, though....

That's what I did when I was contracting on the side, a huge chunk of my earnings from the Ltd ended up being salary sacrificed into my pension pot.

 

[HangTime]

Yeah keep in mind you can always 'overpay' your own contributions up to a point. You might find a high paying job with a mediocre pension contribution allows you to build your pension pot quicker than the other way round. There's a £40k/year limit on pension contributions before you pay tax but you can 'offset' some of the payments over £40k against prior years from the past 3 years where you put less than £40k in.

 

[dowie]

I guess if you're contracting then it can be chucked into a SIPP too rather than needing to faff about with whatever scheme your employer has signed up to.

 

[mattx2]

(Asset management firms do sometimes offer some very generous employer matching for their own employees mind, could be worth looking at working for one of them!)

Can confirm Aberdeen or whatever they call themselves now paid 20% with no contribution required while I was there

 

[DanTheMan]

Definitely look at the overall remuneration package, rather than just the pension. I'm in a civil service pension, which is great, but the overall remuneration package is not any better than most private sector jobs. I'd go as far as saying that I could get a better overall package in the private sector, if I hadn't gotten used to the work / life balance that the civil service brings.

With civil service pension, you're also at the mercy of the government regarding how the scheme is managed. It can (and most likely will) get worse as time goes on. At least with a private pension you have more control over where it's invested.

 

[dowie]

Definitely look at the overall remuneration package, rather than just the pension. I'm in a civil service pension, which is great, but the overall remuneration package is not any better than most private sector jobs. I'd go as far as saying that I could get a better overall package in the private sector, if I hadn't gotten used to the work / life balance that the civil service brings.

Yeah, that's a fair point, where it perhaps does come in is in getting a new job private sector -> private sector. For example, it's typical for a new employer to base an offer, in part, on your current comp (if you reveal it), a 20% pension contribution such as the one mentioned above is a very nice addition to that.

With civil service pension, you're also at the mercy of the government regarding how the scheme is managed. It can (and most likely will) get worse as time goes on. At least with a private pension you have more control over where it's invested.

I'm not sure how this works tbh.. I mean if you're on some defined career average or final salary type scheme dependent on years worked etc.. then it doesn't necessarily matter where it's invested (if anything is even invested) your pension is a liability for future tax payers AFAIK. Unlike say a scheme completely dependent on both your personal contributions + employer contributions and the performance of investments in the markets.

 

[Black Noir]

Civil Service is one of the best in terms of employer contributions.

There are two schemes available (partner and alpha - one lets you retire at 55 and the other is 65 iirc). The latter sees an employer contribution of 27.9% if you earn between £45k and £77k and 30% if you earn above that

Depends how long to intend on staying with them though, as stated you'd be able to earn more in the private sector for similar roles and if you're joining aged 45 it's kind of a moot point unless you max your contribution for the next 20 years!

 

[Semple]

I'm not sure how this works tbh.. I mean if you're on some defined career average or final salary type scheme dependent on years worked etc.. then it doesn't necessarily matter where it's invested (if anything is even invested) your pension is a liability for future tax payers AFAIK. Unlike say a scheme completely dependent on both your personal contributions + employer contributions and the performance of investments in the markets.

Just guessing, but if the final salary pot that the company invests in takes a hit due to *ahem* stupid mini budgets, and is now worth less than what needs to paid out, I believe it's on the company then to top up the pot. The problem then arises if the company cannot afford to do that, I don't know if that would suddenly result in them becoming bankrupt? Either then relying on the PPF to step in, I'm not sure if this would cover 100% of your pension fund. I don't recall ex-BHS workers etc getting the entirety of their pension they were originally expected to get - which iirc caused quite a bit of an uproar.

 

[dowie]

@Semple FYI that was in reply to civil service pensions, BHS is a different scenario. I'm not sure there is even a pot to worry about with public sector pensions rather just future liabilities for taxpayers.