Final salary pension

[madasamarchhare]

This may seem like a strange question but it has been asked if me and now I am curious to know the answer. What would happen if you pay into a final salary pension earning for example 50,000 pa and have earned this and paid in for 20 years. Your job then becomes no more so you take on a different role saw employer but only on 20,000 pa. What do they base your final salary pension on?
Many thanks in advance

If you left the role due to a redundant position you would negotiate protection for your pension. Different rules in different scheme make a definitive answer impossible -- check with the trustees.

Our scheme you'd be paid pension based on the 20k (2/3 of the 20k).
But if you work PT they work it out based on your avg hours over the preceding X amount of time. So like 2/3 of 60% of 20k.

Will depend on scheme. You could get 20 years at £50k which might equate to £12.5k pension plus the next 20 years at £20k which might be £5k pension (assuming each year accrues an eightieth and you're FT).

I think mine uses the highest salary from final three years as reference. You'd really need to look at scheme terms to know, they are all different.

Ok that's all v interesting and what I suspected. It's purely hypothetical we are not in this situation but just wondered - what if? Person questioning it thought that as they had accrued a pot worth x based on the higher salary then this wouldn't be taken away from them but I don't think its a straight forward as that as it!

It would depend on it the pension is based on final salary (typical of older pension schemes), or career averaged salary - which is becoming more common. If the former then it would be based on the the full time equivalent (if part time) of the salary you are earning.

Final salary - you get the most return if you retire at the peak of your career in the highest paid position.
Career averaged - you don't loose out be scaling down in the last years of employment to a less well paid position.

Lots of places have moved from final salary, to career averages, (both defined benefits -ie you know what you will get), and are now shifting to a defined contribution (ie you build up a pot and get whatever it builds up to).
Employers would rather have defined contribution rather than defined benefit because the costs to the employer are paid now rather than some distant point in the future.

You might well have a situation were a long term employee has a compound pension - part final salary, part career averaged, and part defined contribution - or a combination of 2 or the 3. Totally and utterly confusing for average person.

people are making assumptions due to what they know. FS schemes vary. I deal with one that takes the highest average earnings over 3 years, looking back over the previous 13, then uses the best 3 year average to calculate the final salary.

Not all schemes do this, some trap people in a higher paying job as it is a measure on the last years earnings, end of.

You need to talk to the trustees