To ask you what annual pension you've built up aged 43 ish?

[Boredbumhead]

Just that really. I chose my career in academia as a lecturer because if the final salary pension scheme, but in 2016 it changed. After 16 years in the profession my pension is so far only 9k per year and a small lump sum. AIBU to be disappointed by this? I feel like I chose the job based on the pension benefits, as well as other aspects about not wanting a corporate job, but now that has all changed. Academia is now like a (badly run) business and the pension scheme has been badly eroded.

How much do you have in your pension pot, aged 40ish?

I chose my career in academia as a lecturer because if the final salary pension

I feel like I chose the job based on the pension benefits, as well as other aspects about not wanting a corporate job, but now that has all changed

(Both from the OP’s first post)

I’m surprised that anyone would choose a profession - not an employer, a profession - on the basis of the pension scheme. It doesn’t augur well for long term happiness in your chosen field. Do you like anything about your career?

I concur with other posters who have told you that you have a very sweet deal, pension wise. Career average is almost as good as final salary. The FS schemes were too expensive. If we want to keep defined benefit schemes for the public sector, the schemes have to evolve. They are paid for by general taxation; as other posters have noted, the employee contributions barely touch the sides.

I spent, in total, nine years working in the public sector. I’m back in private now but that entitlement I built up in the public sector would cost a fortune to replicate with my own savings. I know how lucky I am to have it. It kicks in at state pension age.

In order to give myself options, I am stuffing as much as possible into a SIPP. I might want to retire before 67/68 (I’m 48 now). I won’t be buying an annuity: they are terrible value in my opinion.

(BTW, really good to hear the opinions of pension experts on this thread).

I have a small private pension pot from a previous role which is currently worth £44,000, so I’d get about £1k pa. Last year it was worth £58,000 so it’s decreased msssively.
I don’t understand why people say invest in your pension as it’s subject to market fluctuations, I’d rather invest in my house which I could enjoy and hopefully the asset will appreciate. Am I missing something?

Yes, tax relief is what you are missing.

@DollyDally - all investments are subject to market fluctuations including your house. As pp notes though you get tax relief on pension contributions.

@DollyDally what are you going to do with the nice house though? You can’t buy food with it. So if you only invest in a single house, you’ll have to downsize / down-area to fund retirement.

As @Iamthewombat says, there are tax benefits - though these are far more significant if you pay higher rate tax.

I also believe that over long periods of time, stock market has been shown to give as good returns as property.

If we want to keep defined benefit schemes for the public sector, the schemes have to evolve. They are paid for by general taxation; as other posters have noted, the employee contributions barely touch the sides.

The main academic pension (USS) is a private pension and thus not funded out of general taxation at all, Iamthewombat.

@DollyDally

I have a small private pension pot from a previous role which is currently worth £44,000, so I’d get about £1k pa. Last year it was worth £58,000 so it’s decreased msssively. I don’t understand why people say invest in your pension as it’s subject to market fluctuations, I’d rather invest in my house which I could enjoy and hopefully the asset will appreciate. Am I missing something?

As well as tax relief - diversification and different asset classes.

Invest in your house, but also keep some cash, and also have some bonds and stocks in an ISA and also put some money in a pension. Just work out what proportion of each works for you.

As much as you might love your marble bathroom, you won't be able to eat it when you're 70.

@intheningnangnong I’m confused why you think this is rubbish:

If you want to know the value of your “pot” for a final salary scheme you can request a transfer value

This is very much the process a member of a defined benefit pension would follow in order to obtain the current market value of their “pot”.

I’m also a pensions actuary and we do this calc for members all the time. I did 4 last week!

@AgileLass

If we want to keep defined benefit schemes for the public sector, the schemes have to evolve. They are paid for by general taxation; as other posters have noted, the employee contributions barely touch the sides.

The main academic pension (USS) is a private pension and thus not funded out of general taxation at all, Iamthewombat.

It's also badly underfunded and pretty likely to be changed again before long.

I had 9 months in it a few years ago and decided to transfer the money out at the end (not recommended for the vast majority of people of course!).

@TimeToParty I can’t speak for @intheningnangnong but I do think there should be caution on a thread like this one, about casually suggesting that a CETV for a DB pension will give you an idea of the value of the “pot”.

We can see here a lack of understanding from people of even their own schemes - and that’s people who have pensions and are interested enough to open a thread like this!

I requested a CETV during divorce, so I’m familiar with the process. But unless you’re actually close to retirement age and making decisions about annuities and possibly other factors (like wanting your CETV to be available for inheritance) then I think it would be easy for people to be misled by a CETV.

Some DB schemes don’t allow transfers. Many people don’t understand that with DB they don’t have a single pot of their own. Most people will have no idea how a CETV can fluctuate and why - I remember a couple of years ago they were really high, something to do with gilts but I didn’t understand 🙂

I think there’s a danger that people see a CETV that looks really high, and think, “oh I’m set, that’s more than I’ve ever dreamed of” and stop paying in - having no understanding of just how much their scheme with pay out, or how different that CETV could look in a year’s time.

I hope that doesn’t sound too patronising towards my fellow MNers... but on this site I frequently see a real lack of pensions understanding.

So whilst “a CETV will tell you the value of your pot” is correct, I don’t think it’s helpful, without guidance from a pensions adviser or a good bit of own reading.

Btw: it wasn’t you that was casually suggesting it!

I don't think I'd even qualify for the full State Pension, as I seem to remember being asked to top up my NI at some point and I couldn't afford it at the time. Still, I'm 46 and have incurable cancer, so I think I've had the last laugh 😂.

(I'm not trying to downer the thread, it's just my favourite dark joke when anyone mentions pensions.)

DH and I have only ever run one pension/pot.

The final salary at the moment is worth £36 k a year.RPI applies.

We cashed in a few tiddly ones (from around the time he was being head hunted over a five year period)(they paid off the remainder of the mortgage a few years ago)

Plus his state pension, we will have an income post tax of about £3,200.

We also have a savings pot (new style pension) which will in the next few years be worth about £170,000 (before any relevant tax) this is purely for investment purposes.

We pay in 12% into the savings pot and his employer pays in 10%

We haven't taken a pay rise in about ten years, we just kept churning it back into the pension until we reached maximum.

We are about 18 months from his retirement, we are halfway to our goal of having a £24k slush fund for boilers, cars etc.

If he died tomorrow in service I would be minted.... I know the bugger won't. #contrary

However whenever he dies I will get a survivors pension of £25k plus my state pension in about eight years time.

The house is paid for and worth in excess of £500,000, so if we had to downsize we could.

We both came from homes we never felt financially secure, there were no debt problems, but his parents split up messily when he was in his in twenties, and my mother just loved spending money.

So we both feel the need to know that all will be well.

I used to apologise for our drive for financial freedom, I don't anymore.

Reading this thread has slammed home to me the fact that I have no blooming idea! I need to pull my finger out to check current situation.

I know I definitely have a pot somewhere from a previous company I was with. And current pot is basically 10% of salary paid every month by employer (15 years so far). But I’ve never paid anything in myself (various reasons, please don’t judge!)

I’m going to spend the next week really trying to nail down what the situation is. Although, TBH, all the terminology on this post has bamboozled me and made me realise how I’ve really not been planning.

@DoorstoManual how have you cashed in some pensions but are still contributing 22% to a DC now? Aren’t you over the MPAA? Or were they all covered by small pots rules?

I don’t understand why you say you only ever had one pension, then go on to describe 2 “live” (DB & DC) and several cashed in.

@Furries think of the terminology as being just like all the acronyms and in jokes on Mumsnet!

DD, CF, LTB... looks impenetrable at first, but you just need an explanation are you’re away 🙂

There are lots of online guides, and it really isn’t as complicated as people think. MoneySavingExpert is a good place to start 👍🏻

The main academic pension (USS) is a private pension and thus not funded out of general taxation at all, Iamthewombat.

It might be privately managed and not government backed, but make no mistake, USS is partially supported by general taxation. The employer - the university - contributes around 20% of the employee’s salary to the scheme. The employee contributes less than half of that.

How are universities funded? By fees, by research, by endowment/investment income if they are lucky like some of the Oxford and Cambridge colleges, but more than anything, by the government, which raises funds through general taxation.

40 and have zero pension pot. I got my state pension forecast in recently and I will be getting a grand £140 per week, which I was thrilled about. I can't see what I will be needing vast sums of money for anyway, I'm totally wrecked now, can't imagine I'll acquire any expensive hobbies in the next 20-30 years.

A pot of about £200,000 which might give me £9k p.a.

That’s private sector starting at 22, so twenty years contributions.

Absolutely nil.

I haven't worked for 20 years - first I was a SAHM then about 10 years ago was diagnosed with various health conditions which meant working was not possible. I'm mid 40s. DH is mid 30s and has nothing either - we could never afford to pay anything into a pension scheme.

The future scares the shit out of me.

40, nearly 41.

Public sector career average. Most recent estimate was cash lump sum of £250k plus £44k pension. This would be based on working till 67 or 68 (can't remember), no further promotions and an annual pay rise of 2%.

I work in financial services and it's horribly obvious that most people with defined contribution (personal) pensions have no clue how much they would need in their pot to retire comfortably, and that many people with even watered-down defined benefit schemes have no idea how valuable an asset this is.

If I was retiring today at age 65, with £100,000 in my pension fund, I'd be lucky to get £4,500 per annum, and that wouldn't rise with inflation or have any spouse's benefits. If I wanted to inflation proof my pension, the initial annuity would drop to around £3,000 per annum. And none of that factors in the volatility of an invested pot of money, the effect of charges, and how plans can be forced to change due to stock market conditions. Private pensions (unless older style ones i.e. some pre-1988) just don't have guarantees.

So OP, you have a very valuable asset on your hands - currently £9k a year but it would increase in deferment if you left service, then continue to increase during retirement. A pension like yours is like finding hen's teeth in the private sector because the cost to the employer is astronomical.

I think that given you haven’t finished you working life yet that you are in track for a fairly modest pension op. Quite a bit more than most people in my experience....

Would some definitions help?

DB = defined benefit. This means that the benefit you receive on retirement is defined in the scheme rules and you will get paid that. The amount members pay is defined in the scheme rules (eg 5% of salary) and the employer suffers the risk of pensions becoming costly and having to pay more contributions for active (current working) members and paying lump sums to close any shortfall between assets and liabilities. The assets are one large pot for all members and the Trustee of the scheme chooses how to invest them.

Types of DB scheme = final salary and CARE.

When you get updates from your pension provider they will tell you what pension and lump sum they expect you to receive at retirement. It will be based on expected salary increases or if not still working for that company then expected increases in line with inflation up to your retirement date.

These schemes generally give a very very good pension for the level of contributions members pay. There is a risk that the employer falls insolvent/can’t afford to keep the pension scheme going, at which point it enters the government’s protection scheme (the Pension Protection Fund).

A CETV (Cash Equivalent Transfer Value) is the current equivalent value of your pension. It is an actuarial calculation and basically uses current estimates of interest rates and inflation and mortality to convert your pension and lump sum into one large hypothetical “pot” value. It will fluctuate with changes in the above assumptions, however most transfer values are guaranteed for 3 months to introduce some stability if you do choose to transfer.

If you don’t intend to transfer I guess the CETV is meaningless. When in a DB scheme focus more on the pension they tell you you will receive. They have to give you that even if the market goes haywire.

DC = defined contribution. The contributions payable are defined in the rules and are paid into a pot with a pension provider. At retirement your pot with have grown from contributions and returns in the market and you can choose to do various things with it. So buy an annuity to receive a monthly income, or pull it all as a lump sum, and so on.

It is the more common type of pension nowadays as DB is so costly to employers.

Your pension provider will send you statements that tell you the current pot value and an estimate of the size of pension it would buy you at retirement. Again this will be based on various estimates: the contributions that will be paid in, market performance, mortality rates, and the cost of an annuity at retirement (so also expectations of inflation, interest rates and again, mortality).

A transfer value for a DC scheme is simply your current fund value.

Unlike a DB scheme all the risks in a DC fall to the members of the scheme. So if the market does poorly, your pot shrinks but your employer doesn’t have to do anything about that. If average longevity increases so annuity providers put higher prices on annuity products just as you want to go and buy one, you suffer that higher cost and buy less pension.