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've got NHS pension and struggling to get my head around that. My parents were not financially savvy and never had savings or talked about pensions, my step father has a workplace one but it pays a few hundred a month as he was only there about 10 years. Mum died before pension age, but she never really worked and my biological father doesn't have a pension, he has premium bonds instead 🙄

My NHS one sounds similar to yours, @2birdsonawire in that it's based on earnings and not contribution. I spent some time recently reading the information and trying to work out how it works. Mine says I build up 1/54th of my salary each year. 9.3% of my salary goes towards my pension. I don't really understand that as 9.3% is a lot more than 1/54th, but I'm assuming from posts on here that I'll still end up with a better pension at the end than if I contributed the same amount of money into a private one. I may be wrong.

So if I earned 30k a year for 30 years, my pension would be 1/54th of 30k, x30? £16k a year?

I get 3% the minimum, most people do

I would advise anyone in a defined benefit scheme to take the time to understand how it works and the massive advantages over pretty much any defined contribution scheme.

So if I earned 30k a year for 30 years, my pension would be 1/54th of 30k, x30? £16k a year?

Yes! Plus state pension of £9k takes your pension to not far off your salary.

(The 10% that you contribute and ?20% your employer contributes are invested to give you that defined pension. That's a total of around £300k. You'd be hard pushed to be able to buy an annuity that gives you £16k a year index linked for that.)

I put in 10 percent, they put in 20 percent.

@RagzReturnedUnwrapped yes pretty much. And as @titchy says it's a bloody good return because it's guaranteed and index linked. For context current annuity rates would give you about £5k per £100k but not guaranteed. Or you could draw down the money each year - in which case £16k per year would last you until you're almost 84 (assuming retirement at 65) but again this figure would not be index linked, so you need to consider the purchasing power of your money. Again for context, something costing £1000 in 2000 would have cost £1721.35 in the year 2020.

Public sector pensions are defined benefit and index linked. That costs money. I read an article recently that broke
Down what someone in defined contribution would have to save to match a teacher or nurse pension. A nurse may contribute £256 a month for 40 years to get a pension of £24728. In private sector you’d have to contribute £620 a month for 40 years and generate of a pot of £900k to get the same benefit.

Public sector pensions are hugely valuable.

If you download the Civil Service Pensions App and log in (your employer should provide log in details) there is a retirement modeller that projects an indication of future pension (provided the scheme rules don't change etc...) loads of info on the CS Pensions website and the Pension Power webinars are great. Also remember for the future if you go part time or take a career break, its worth buying added pension to compensate for not having FT contributions.

@Biker47

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

@Biker47 🤣 Why do you say that’s standard practice?!

@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

You can’t be taught everything. The civil service’s own documentation is very clear, and the Internet (god love it!) is awash with easy to use and very sites that explain pensions in the UK in general, and your specific scheme. Knowledge is power, get reading!

@fufulina

Public sector pensions are defined benefit and index linked. That costs money. I read an article recently that broke Down what someone in defined contribution would have to save to match a teacher or nurse pension. A nurse may contribute £256 a month for 40 years to get a pension of £24728. In private sector you’d have to contribute £620 a month for 40 years and generate of a pot of £900k to get the same benefit.

Public sector pensions are hugely valuable.

That’s just not true as a blanket statement for all public sector jobs. Teachers and nurses are on different schemes. Even in the civil service you have a choice between defined benefit and defined contribution (and it’s probably worth getting advice on which best suits a person’s particular circumstances.)

I get 21.6% employer and I contribute 6%

I am on a final salary pension. Didn't start the job until I was 38, but I will still get a very decent lump sum and a decent monthly income.

My employer put in 8%.
I put in 25% (2% minimum contribution plus 23% AVC). I will increase this to 28% AVC in April, when I move to the next age tax-bracket.

I'm a high earner, but don't have a great pension, so trying to build it up quickly.

@titchy

Basically the alpha is the defined benefit civil service scheme. Your pension will NOT be based on contributions, it will be based on your average salary throughout your career whilst at civil service and the number of full time equivalent years you work. Every year of work gets you 2.3% of your salary guaranteed when you retire.

So if you work for 20 years averaging £25,000 a year, your pension will be 2.3% x 25,000 x 20 = £11,500 a year.

This explanation is spot on. The Alpha scheme is really valuable and as others have said, you really should join. The equivalent value of defined benefit scheme would be massive.

And you’re right, no one is taught about pensions and it’s a gap in education. Same for personal finance, loans, taxes etc. they should be taught to kids as there’s a problem with financial literacy in this country (no offence meant, it’s a general statement)

Firstly - stay in your workplace pension no matter what - because of the tax relief and employer contribution it’s the best savings vehicle by far.

Any workplace pension is worth having. A good rate should be around 16 to 20% combining your contribution, the employers and the tax relief. But don’t worry if it’s less, it’s still worth having.

@BillMasen “And you’re right, no one is taught about pensions and it’s a gap in education. Same for personal finance, loans, taxes etc. they should be taught to kids as there’s a problem with financial literacy in this country (no offence meant, it’s a general statement)“

People always say this, but is it true?
You can’t teach every detail -what’s the point in a child learning about tax rates that will have changed by the time they pay them?
So what you need to teach is a sufficient level of maths and literacy that the child - then an adult -can read and understand for themselves.

Take the OP’s Alpha Civil Service pension. If you have a level of literacy, the information is there for the taking.

My 11yo was doing maths questions on % on loans - including compound interest. No gap there.

[quote 2birdsonawire]@titchy thank you, I'm going to have a look in to it, I just took everything at face value so glad I asked.

@Mia85 the scheme is called Alpha but there's also partnership but I didn't go with that one.
[/quote]
OP, it is really worth you researching the Alpha pension scheme. This is a really good pension scheme and the Civil Service Pensions website has loads of easy to read information.
One thing you could consider is EPA www.civilservicepensionscheme.org.uk/media/95181/epafs_v2_310315.pdf
As you are early 20s this is an ideal time to start to learn, not just about Alpha, about all financial matters e.g state pensions, savings, investments, mortgages etc. Take it slowly and use reputable websites e.g. The Money Advice Service