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?

[quote Ellisandra]@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.[/quote]
He left a job where he had been for twenty years and paid into the final salary one from day one for about eighteen of the twenty years.

Before he left they then stopped that, and he moved to the alternative, we cashed that in and it netted about £20k and was then subject to tax, there was also a small one with Royal London and one that would not buy tea and cake once a year. We cashed them in, and used them to pay off the balance of the mortgage (which we had been overpaying) we gave ourselves six months breathing space and then borrowed to do the kitchen and bathroom, we are overpaying this and could afford to get rid of it, but the product has another two years to run, so we need to keep something owing until then.

I guess when I say one, what I mean is we serviced one between us at all times.

Apologies for any confusion.

Happy to explain anything about pensions as it know it really is confusing!

If I’ve still been too technical in the above comments then let me know. I’m very used to using this language at work all the time and it’s easy to forget that not everyone understands the jargon!

This is all incredibly helpful thank you.
One question @Winecrispschocolatecats. Is there any to stop USS changing its goalposts again, or are it's terms truly guaranteed?

The Irish state pension is far more generous than the UK. How anyone lives on the UK one god knows.

I've just looked up the UK state pension - wow, how does anyone live on that?

We'll have to live on it 🥺

Sorry to hear that @PineappleUpsideDownCake. I will be living mostly on my state pension too, but at least I'll get a little more.

41, about 3.5k total across 3 different schemes (wish I had the time and energy to try and combine them into one!). I'm also assuming retirement age will be around 70 by the time I get there so not too panic stricken about it yet.

@Boredbumhead the USS rules changed in 1974, 2011 and 2018. In my opinion - based on changes to other schemes too - I would say your scheme is actually certain to change again.

Things that are commonly done:

• existing best conditions are closed to anyone newly joining the scheme
• moving from a final salary calculation (FS) to a Career Average Related Earnings (CARE) one. This means that instead of your pension being based on your salary when you retire, it’s a theoretical salary, and average of your earnings over the scheme contributions period
• a cap being put in for that CARE salary - your USS scheme for example, has a cap of almost £60K. So if you earn £80K, that’s irrelevant to your pension calculation
• not changing your scheme rules or benefits but making you pay a greater % of your salary to get the same thing (that’s happened to me 3 times in 10 years)
• changing the age at which you can start your pension - mine went from 60 to 65 (with 20 years notice)

What tends to happen is that what you’ve contributed to so far is “locked away” so you still get that. So if USS rules changed tomorrow, you personally would still have £9K per year (often with an agreement to add x% each year to keep it roughly protected from inflation) then whatever else you earned after on top.

In the massively changing world of pensions - this is why I previously posted that YABU to be disappointed with yours!!!

How do you work out what your pension p.a. Will be, based on your pot?

@Miljea there isn’t a simple calculation that will tell you a guaranteed amount, unless you have a “defined benefit” pension, which I think you’d probably know if you did.

More likely you have a “definite contribution” pension - if you’re on auto-enrolment it will be this. It just means that your contribution is defined - that is, you know what you’re paying in, not what you get out.

In that case, what you’re building is a pot of money - your contributions, possibly some from your employer, tax relief on those, and hopefully investment growth.

That gives you two things:

• your actual amount in the pension now: this is a real amount, in your name, but can go up and down if it is invested in shares on your behalf by the pension provider, which is common
• a theoretical projection of how much you will have at age X (maybe 67). That would be assuming you carried on paying in the same, and an assumption of how much it would increase by through investment gains (e.g. shares doing well)

When you access your pension (for a DC type pension you can from 55, though there are some things to be aware of around that, but too detailed for this post) you have choices:

• flexible draw down: you take what you want from the pot, when you want it. Just like drawing money out of your regular bank account today - except that you pay tax on it. It’s treated as income, so same income tax rates apply as if it were your employer paying you a salary. If that seems unfair - that is why the government gave tax relief on your contributions. You don’t pay tax on that part of your salary now, but you do pay tax when you withdraw it much later.

If you have a large pot, you can withdraw what you need - and leave the rest to continue growing (assuming investments do well) No-one can tell you how much it will grow, and it will change year to year. But a common figure used is a 3% withdrawal rate. So if you have £100K, you could take £3K pa, and during that year your £97K would grow - taking you back to £100K.

Another option is called an annuity. These are guaranteed payments, from a company. You take your £100K, and buy an annuity, and the company promises to pay you an amount per year. So - they take the investment risk, and you know what you’ll receive. I can’t say what £100K (as an example) buys, because there are options - and all cost a different amount. For example, some people want their annuity to pay out to their spouse, if they die. In that case, it costs more. You can find annuity calculators online, just like mortgage calculators. Bear in mind that’s today’s purchase price - no-one can predict them if you retire in 40 years time. But it gives you an idea.

Pensions have undergone a lot of change - it’s only this century that “flexible draw down” has been allowed. So no-one can tell you what the future holds (which is why I think OP was unreasonable to be disappointed with her guaranteed pension!) but you can at least get a better idea by looking at the options today.

@Miljea you should receive an annual statement from your pension provider - do you? That also will give you a projection, as described in my post above - but they calculate it for you. Have you ever looked at an annual statement?

Private personal pension here. DH just lost £50k off his total value due to recent market devaluation. That's the reality for those of us who don't have defined benefit pensions. OP, you are blessed.

One thing I haven’t seen mentioned here is I’ll health retirement benefit.

I was public sector and worked part time. At 46 I suffered an injury and was unable to work. I was eventually awarded I’ll health retirement and receive a sum that almost replicates my take home salary pre retirement. I had paid AVCs for several years prior to this to make up some gaps I had from maternity leave.

I’m not sure if private pensions even award these payments but it’s been a life saver for me.

I’m 41 and have about £2.5k per year pension from civil service - joined civil service 4.5 years ago.
I have about £1k per year from a private pension as I stupidly only started paying into one when I was about 33. I was self employed so no employer contribution. Before self employed I didn’t have one at all as was in small private sector

I am 44 and have been saving since I was 22. I will now get around £2500/ annum if I work until I am nearly dead. Wowzers! I don't know why I bothered. I have every intention of taking out as much as possible at 55 and blowing the lot.

@MatildaTheCat no, a private pension (DC) does not have illness benefits. The OP’s USS DB scheme does - I mentioned it in my first reply where I included it in my list of reasons why OP is unreasonable

40 and I have a public sector DB of £8k per year on retirement, although I'm now working abroad for a few years to pay off debt, build up a cash lump sum, see the world etc. Probably go back to the UK in another 4 years and will go back to my public sector role.

DH has always worked in hospitality though and his pension is worth sweet FA. He is retraining now but it will likely be a while before he earns a salary and can contribute to a pension. However we are both on track for a full state pension.

We won't be rich, but we'll be ok. I'm fairly low maintenance anyway so don't need a massive pension - I want to spend my retirement on long countryside walks and keeping bees!

@TimeToParty you may be able to help me understand, if that's ok?
I'm 39, have paid into my NHS pension for 19 years. Started off on the 1995 scheme then got moved onto the 2015 scheme (without permission!). I have absolutely no idea what my pension is worth, my statement only shows a hypothetical annuity cost. My current contribution is 4.5% (I think?) as I have worked my way through the bandings in those years (continued pension contributions during university as I was sponsored so was able to). I have a feeling I'm going to be ok but I don't have a clue where it leaves me in real terms right now?

I'm in Scotland with NHS. 3 years from retirement. Mine is 26k pa (value from 17/18 figures) my pot is £660k
As GPs we pay 34.9% of our income into the pot as our income is quoted including the employer contribution. It's a huge amount but it's still a fabulous scheme...I'm on the old scheme apart from the last 4 years so mostly final salary and can retire at 60.
All my colleagues moan about the amount because so much money goes into it but it just shows how much you need to put into a pension.

I'm in my 40s and have £7500 in a pension from a prior workplace.

I want to resume putting money away for retirement, but I don't know whether to carry on with the existing one, or start a new one and transfer the funds. The existing pension lost money last year - it was £8300 in May 2019 and only £7500 in May 2020. I know they can go down as well as up, but that's a hell if a chunk off an already very small pot. I have a savings account with 1.5% interest, so I'm tempted to just pile as much as I can into that. I really don't know what to do for the best.

I've worked for generous employers for most of my working life, putting who put in loads on top of what I put in.

It still comes to hopeless fuck all.

Of course the stock markets have crashed, my recent statement was 20% less than last year. That's the other problem with money purchase. Assumption is over years, the pot will increase. That's not a given, though.

I worry about what will happen as the post final salary generations start to retire. There will be way more pensioners in poverty plus the government tax pension so their take will be way less as well, meaning less money to address the poverty.

I hope govt are thinking about this but bet they aren't.

@NewDOOFUSfor20

I can try to help. Tell me if I confuse you though!

So as you’re NHS I assume your pension is DB? On your statement it should mention Final Salary or CARE. The following assumes you are in a DB scheme so if that’s not the case then it won’t necessarily be correct.

Being in a DB scheme means that when they write to you they will tell you “at retirement we estimate you will receive a pension of £xxk a year”.

In terms of the current “worth” of the pension I think you need to think about why you need to know that. I don’t mean that in a “it’s secret” way or to be rude, more that they’ve told you what your pension it is, and really that is the part you need to know! The current market value is meaningless if you know they’re going to pay you £20k a year at retirement no matter what.

The small print on your statement will tell you what the pension they’ve told you represents and what assumptions they have made.

So for example:

• it may assume you continue working until your retirement age or it may be just what you have accrued so far, so 19 years worth of service
• they may make a salary increase assumption (eg 2% a year for the next 25 or so years until you are expected to retire)
• they may be showing it in today’s money terms, so although you won’t necessarily get the amount they tell you when you eventually retire, it will have the same purchasing power.

If you can’t see any of that on the statement you can always ring the administrators and ask them to talk you through it.

To an extent your contribution is irrelevant. It has no impact on the pension you get at retirement. The way a DB scheme works is that both employees and employer pay in contributions to ensure pension payments are able to made. The employee rate is usually set in the rules so cannot change (unless eg you move job roles or get a promotion etc) whereas the employer rate can fluctuate as the cost of the scheme as a whole changes. This is why DB schemes are so good for members, the impact of poor market conditions and increasing life expectancy means employers have to increase their contributions, whilst employees carry on at the fixed rate agrees in the scheme rules.

Does that help?

[quote TimeToParty]@NewDOOFUSfor20

I can try to help. Tell me if I confuse you though!

So as you’re NHS I assume your pension is DB? On your statement it should mention Final Salary or CARE. The following assumes you are in a DB scheme so if that’s not the case then it won’t necessarily be correct.

Being in a DB scheme means that when they write to you they will tell you “at retirement we estimate you will receive a pension of £xxk a year”.

In terms of the current “worth” of the pension I think you need to think about why you need to know that. I don’t mean that in a “it’s secret” way or to be rude, more that they’ve told you what your pension it is, and really that is the part you need to know! The current market value is meaningless if you know they’re going to pay you £20k a year at retirement no matter what.

The small print on your statement will tell you what the pension they’ve told you represents and what assumptions they have made.

So for example:

• it may assume you continue working until your retirement age or it may be just what you have accrued so far, so 19 years worth of service
• they may make a salary increase assumption (eg 2% a year for the next 25 or so years until you are expected to retire)
• they may be showing it in today’s money terms, so although you won’t necessarily get the amount they tell you when you eventually retire, it will have the same purchasing power.

If you can’t see any of that on the statement you can always ring the administrators and ask them to talk you through it.

To an extent your contribution is irrelevant. It has no impact on the pension you get at retirement. The way a DB scheme works is that both employees and employer pay in contributions to ensure pension payments are able to made. The employee rate is usually set in the rules so cannot change (unless eg you move job roles or get a promotion etc) whereas the employer rate can fluctuate as the cost of the scheme as a whole changes. This is why DB schemes are so good for members, the impact of poor market conditions and increasing life expectancy means employers have to increase their contributions, whilst employees carry on at the fixed rate agrees in the scheme rules.

Does that help?[/quote]
It does and it doesn't 😂 I have no shame in saying that this stuff baffles me! I started paying into the pension because I was told it was a good idea, not because I had any understanding.
In all honesty I have never seen an annual statement, I log in to my TRS (total rewards scheme) and there's a very small breakdown for each scheme I've paid in to but it doesn't make any sense to me and hasn't been updated since 2017!
I wouldn't even know who to ask for an actual statement 😆

@TimeToParty I guess in answer to your question, I want to know it's worth because it's been brought to my attention and I realised that I have absolutely no idea what state I'm going to be in in 28 years when I retire 🤦

@NewDOOFUSfor20 4.5% contribution rate seems unlikely. The lowest tier of contributions in NHS pensions is 5% and for those earning between approx £26K and £48K (after 19 years I’m guessing you’re in that tier) is 9.3%

You could start with your own employer’s helpline (number in link) to get some help to understand it.
www.nhsbsa.nhs.uk/member-hub/contact-nhs-pensions-members

The change from the 1995 to 2015 scheme (or 2008) wasn’t done “without permission” as you say... at least, I know you didn’t give your permission - but it wasn’t your choice to make. Various options were negotiated and presented (like Choice 2, trying to move people from 1995 scheme to 2008) but ultimately the scheme had to change. So I think you just mean that you didn’t want to change - but had to as the old scheme was closed. But if you mean that you made one choice correctly and they applied another, without your permission, then you need to appeal that if it is detrimental to you.