Average salary pension scheme

[RiskManagement]

I have a frozen pension from 23 years earning decent money. That was a final salary scheme, currently increasing by RPI. Very nice arrangement by today's standards.

For the last 3 years I've been working very p-t for the LA and and in the LA scheme, average salary. I'm now looking at doing a "proper job" f-t with the same organisation and wonder how the average salary is calculated. i.e does 3 years on £5k pa, then say, 5 years on £30k bring my average down, so I might have been better off not to be in the scheme for the first 3 years? That doesn't seem right, but I can't work out what does happen.

Contact the pensions dept and ask. They will have their own way of calculating average salary. Once you have that it's easier to work out how to contribute for maximum effect.

Yes, I think so but it sounds fair to me.

You would have three years pension worked out on your p/t salary and 5 years worked out on your full time, higher salary. Which would be fair when you look at the contributions you've made in those years.

Ask them! Don't forget though that your salary isn't £5000 pa, it's whatever the full time equivalent is, but you won't have three years pensionable service, you'll have three years times your hours as a portion of a full timers - so 3 x 0.25 (if you work a quarter of a full time persons hours) = 0.75 pensionable years at £20k for example.

Titchy, does that mean that when they say I get 1/60 of my salary for every year worked if I work 10 years but half time then I won't get 1/6 of my salary? But 1/12?

Viva - that's exactly right.

The way most schemes work is that each year a pension figure is recorded. So, if you get 1/60ths and have a full time salary of £20K, the pension figure recorded that year would be:

1 x 1/60 x 20,000 = £333

This would then increase with inflation until you retire, with a new pension amount being added each year. (So maybe next year's amount would be based on a salary of £22K, say.)

If you worked half hours, the pension would be:

0.5 x 1/60 x 20,000 = £167

Does that make sense?

But, viva - it would be 1/12 of your full time equivalent salary, not your part time salary. Just to clarify.

What stokes said you'll get a twelfth of your equivalent full time salary, rather than a sixth of your half time salary. Which works out the same of course, but that's how pensions are worked out.

Ah ok, as long as its the same that's fine.

I'm currently in an nhs average scheme and to me it seems fair.

Previously I worked in the private sector and had a final salary scheme. I worked part time for years. Was planning to leave and went full time for 20 months before leaving which would have boosted my pension up a lot. I'm not complaining as its in my favour but it seems crazy I could do that!

Those mentioning full time equivalent salary are absolutely right in relation to "final salary" schemes but it's not always that complicated IME in career average salary schemes - you can actually do it in the simpler way Viva explained at 17:04 yesterday because CARE schemes typically give you a percentage (say 1.5%) of the salary you were paid in each year, which is then increased to protect against inflation. Then you retire you add the inflated blocks from each year together.

So year 1 you are PT and get paid £10k × 0.015 = £150.

Year 2 you are FT and get paid £20k × 0.015 = £300.

If you then retired you'd get a pension of £450 plus a little bit extra which would be the inflation protection on the £150.

The confusing bit is that "average salary" schemes don't actually average your salary, although the calculation achieves the same result...