To ask what a 'good' pension is?

[2birdsonawire]

What is considered 'good' as a pension contribution from you and your employer percentage wise?

I know this will be pro rata on a salary basis, just want to see if what I get is good or if I should look at other saving schemes.

Thanks

I contribute myself, ontop of the 3%

If you're public sector is that a defined benefit pension scheme? If so you're comparing apples with pears by going off the contribution rates people are posting above which are largely for defined contribution scheme

Civil service pension contributions and private are not comparable. I'm the CS the employer contributes more but the pot does not get invested so there is no growth.

Ofgs. You don't have an issue.

To work out if you want extra savings you need to work backwards from retirement.

How much would be a ‘good’ amount for you to live on annually in retirement?

Is your current pension and contribution going to get you there?

If not what is the gap?

My public sector scheme, while generous, may have myself paying in 5.45% and my employer somewhere between 27.1%, but that doesn't mean all those contributions go into my pension pot.

The pot is filled by 2.3% of annual pensionable earnings (on a career average basis). I can only assume the other 30.23% contributed goes on scheme administration and ensuring funds for all members?

@BELLAARA

My public sector scheme, while generous, may have myself paying in 5.45% and my employer somewhere between 27.1%, but that doesn't mean all those contributions go into my pension pot.

The pot is filled by 2.3% of annual pensionable earnings (on a career average basis). I can only assume the other 30.23% contributed goes on scheme administration and ensuring funds for all members?

If you have a defined contribution scheme then it will all be going into your pot

If you have a defined benefits scheme you have a guaranteed pension based on years of service and final salary (usually) and the employer has to contribute whatever it costs them to provide this

There’s no scenario where they pay 27% but your pot only sees 2%.

I think anything above about 4% from your employer is good so 27% is fantastic! The half your age rule of thumb is quite good as well. I recently read that it’s good to get have 2x your salary in your pot by your mid-30s but that seems very high. It is better to contribute more earlier though so you can maximise the benefit of compounding.

I think what you’re referring to is that for every year you work here you “earn” an annual pension equivalent to 2% of your salary

Let’s say as an example you earn 50k
You work there 1 year, you retire with a pension of 1k per year
2 years and your pension is 2k per year
30 years and it’s 30k per year

That 1k is an annual pension for the rest of your life so let’s say you live 25th ads after tutoring. That 1k is worth 25k to you and costs the employer 25k to provide for you, hence te big employer cost

If you’ve been there 30 years your pension is “worth” £750k ish, so very valuable and very expensivr

@BillMasen TY for response.

It is a defined benefit scheme, but career average rather than final salary. And the pot in built up with a % (2.32) of annual pensionable earnings.

But myself and my employer do contribute 5-odd and 27-odd %, each month.

I am booked to see a financial adviser as I can't quite get my head around it.

[quote BELLAARA]@BillMasen TY for response.

It is a defined benefit scheme, but career average rather than final salary. And the pot in built up with a % (2.32) of annual pensionable earnings.

But myself and my employer do contribute 5-odd and 27-odd %, each month.

I am booked to see a financial adviser as I can't quite get my head around it.[/quote]
Don’t think of it as the pot building up, but your right to an annual pension building up. Your annual pension goes up by 2% of your salary each year but you get that every single year for the rest of your life.

27%

Ok now it’s defined benefit it’s completely different, the amount contributed is irrelevant.

You won’t get a pot but a right to an annual payment each year which is based on your salary and how long you’ve worked there. If you contribute more you will in effect be increasing the annual amount you’re entitled to.

DW employer contributes a 6%, plus another 6% if you match it, which you obviously should. So at a minimum, she has sacrificed 6% of her salary and gets 18% total pension contributions.

@Biker47

I get it matched upto 10% which for majority of people now is probably standard practice.

Ha ha!

That's a DC pension, and for may years DW contributed closer to 50%.

I was always under the impression with civil service pensions (not so much Local Authority) that there was no pot as such that pensioners were paid out of general taxation. The employer and employee contributions are also going straight into taxation. That might have changed now.

Pensionable age of Alpha - the 2.32% of salary a year one described above - is state pension age. The old scheme was 60. Can be taken earlier with reductions.

Wow 27%!

My total is 8% and that is 5% from me and a measly 3% from my employer... I had a period of anxiety about money recently and this is one of the things I was worrying about one night. I shouldn't have opened this thread

@Mia85

I assume that you're on a defined benefit pension scheme? If that's the case the percentages aren't really comparable to people contributing to a defined contribution scheme. What matters for you is the level of benefit that you get from the scheme.

This. Rather than gloat about your contributions maybe take the time to understand the basis your pension will be worked out on.

So whether you should look at other savings schemes will rather depend on your salary and how many full time equivalent years of service you'll have.

@ThreeLittleDots

Oh, so this was a boast

Not at all to boast, I'm sorry I'm new to the public sector and was never taught about pensions before, I got a document from my employer to choose one of 2 pensions and to be honest none of it makes sense. And never having a pension before I thought that was the going rate. I don't mean to hurt your feelings at all, I have never had a pension before so I'm very new to this, I'm sorry hope you're okay

Sorry to offend anyone, I wasn't here to gloat or anything. I was trying to weigh up wether I should be putting more in to my pension or to set up an ISA to save for when I am at retirement age.

I'm in my very early 20's, never had a pension, never been taught about pensions, I don't even really know what a pension is cause I have never been taught. The only thing I have heard about pensions is that you can have a final salary pension but that's a very uncommon thing nowadays.

Sorry to offend I really didn't mean to

@2birdsonawire

Sorry to offend anyone, I wasn't here to gloat or anything. I was trying to weigh up wether I should be putting more in to my pension or to set up an ISA to save for when I am at retirement age.

I'm in my very early 20's, never had a pension, never been taught about pensions, I don't even really know what a pension is cause I have never been taught. The only thing I have heard about pensions is that you can have a final salary pension but that's a very uncommon thing nowadays.

Sorry to offend I really didn't mean to

Learn about the one you have. The contributions you/your employer make are irrelevant to what you'll get.

What's the scheme OP? We can point you to things to help you to understand it but you should talk to your pensions administrator at work if you aren't sure.

If you're just trying to choose between whether a pension or an ISA is better, bear in mind the following two things:

1. You get tax relief on your contributions to a pension, not on an ISA
2. Your employer won't pay 27% of your salary into an ISA