How do I compare pensions as part of my overall benefit package?

[Givemestrengthorvodka]

I've been offered a new job. I'm currently in public sector and new job is private sector. The benefits package is different and I'm not sure how to compare it all so that I know overall if I would be better off or not.

Current package - £57K pa plus a civil service pension where they contribute 27%.

New package - £60K, plus £6K in benefits like private health insurance etc, plus bonus of around 10% pa, but it's a 10% non contributory pension. So gains in some places, but a drop in pension contribution. How do I figure out what deal overall is better? Can any greater minds than mine help me figure this out?

You say current pension they contribute 27%, but is is actually a defined benefit scheme?

@Chasingsquirrels yes it's a defined benefit scheme (the alpha civil service scheme).

I know nothing about the specific scheme (I've always worked in the private sector), but if it is defined benefit then the "27%" isn't really relevant - what you need to consider is your contributions (as that is cash out of your pocket now) and the benefits accrued.

Whereas the new job sounds like it would be defined contribution, so you have a pot of money being invested in your name.

Its like comparing apples and oranges.

Taking the pension out of it then the new job clearly pays more. But I'd imagine the pension will make a fairly big difference.

Thanks @Chasingsquirrels yes I think the new one was described as a 10% non contributory pension, so they contribute 10% regardless of what I pay or not towards it ( not got anything in writing yet though to check). I'll look in to the civil service scheme a bit more. I've just always heard people say "ooh the civil service pension are great") so I've never given it much thought until now that I might have to leave it for something else.

I did just take the %contributions for pension into account when I was considering this as there are so many unknowns for defined contribution pensions that a proper comparison was beyond me. It's an oversimplified way to do it, but it's a way to compare what is going in, even if what you back at the end is uncertain.

The other thing I factored in when I made the reverse move was working hours and working days- I dropped from 40 hours + regular unpaid overtime down to 37 hours + flexi time, and also significantly increased both annual leave entitlement and public holidays (and that's before considering additional paid leave allowances for domestic emergencies and caring duties etc in the civil service).

If you wanted to put a value on the number of hours worked as well as the pension I think the public sector job may well win out in your case. But equally I have seen other people move the other way as the upfront cash in the monthly pay was a priority over pensions and time.

Yep, we did a straight %company contribution when comparing similar.

@Canyousewcushions yup time is really important. I love the flexibility of the civil service, and job security. So long as I do my hours no-one bothers if I take time out etc for achool stuff. And I get flexi time so any overtime I can take back. Both are going to be 35 hr full time weeks which is great and I've heard good things about the flexible working in the new company but guess its a leap of faith until you have started and see it in action.

Im in the LGPS which is also DB. The pension adds almost a third onto my salary, so my actual wage is 68k, but with the pension it’s worth about 92k.

Comparing contributions is not correct. You need to find out what the defined benefit is. It is likely to be far more than what you will be able to accrue in a defined contribution pension with contributions of €6k per annum.

I've done a similar calculation - similar salary, and alpha scheme. I worked out that the private sector employer would need to be offering me about £80k-£90k (dependent on exact package) for it to be worth it, when pension was taken into account.

However, that's not all that matters - is this new job more interesting? More flexible? Better location for you?

I compared the value of the employer contribution when I move from a LGPS job. Its not strictly right but its close enough. £55k + 19% + extra leave vs £85k + 6% felt worth it. But I would not have left for less than about 70k salary given the better pension, holidays and security.

I agree with this ^

£60k plus bonus is nowhere near enough to justify the move financially.

Your current overall financial package is £72k. You will also have life assurance of x 3 your base salary and probably 6 months full, 6 months half sick pay. How does the holiday entitlement compare? If relevant, the Civil Service also has a very generous maternity leave package.

Interesting, and complicated. I think I'll need to try and get some financial advice pretty quick before I commit to a move. My role just now is pretty cushty....work from home most of the time, super flexible, decent pay, good pension. But could work in the private sector with a big organisation offer more money, opportunities etc. I don't know!

@JamMakingWannaBe ooh thanks for this. And does that compare to a benefit package of £66k with new company? I'm not sure if the additional £6k in benefits can be put to pension which might help?

I also don't have annual leave or flexi accrual info yet so will suss that out.

Those two packages sound broadly comparable, if anything you’d possibly lose by moving at least in the short term. You are getting a little bit more cash now (after tax) for a lot less pension later. Health insurance is taxable benefit; I really wouldn’t include the £6K benefits in your calculations unless they are benefits you really want and value. On the numbers alone there is no reason to move.

Looking at it another way - apologies if you already understand this - but think about outcomes as well as the here and now.

A defined benefit scheme, which is what you are in now, means that when you retire you will get a 'defined benefit' ie you will receive an amount of pension every year until you die. If you live a year past retirement then not so great but if you live to 90 (not unachievable) then that is a massive massive luxury. To know that for every year you will get £x into your bank account gives you real security.

A defined contribution scheme is never going to be able to compete with that. Even ignoring the fact that you'd probably need £1m in your pot to be anything near the civil service scheme, a DC pension can be tricky to manage. You'll need to decide whether to take a lump sum, take it all, invest in an annuity, take a bit out each year etc etc. for many people this is hard to understand and manage and many get it wrong and run out of money.

DC is a 'pot' that needs to last. DB pays out forever.

Current package - £57K pa plus a civil service pension where they contribute 27%.
Financial package
£57k + £15k =-£72k
Your employee pension contributions are possibly 7% so a total of 34% of salary going into a defined BENEFIT scheme.

New package - £60K, plus bonus of around 10% pa, but it's a 10% non contributory pension.
Financial package
£60k + £6k + £6k = £72k so 10% of salary procuring a stock market dependant pension.

Are you at the top of your grade now? Is there scope to earn more in the private sector (of which you will need to top up your pension)?
Are there additional commuting costs etc?

How many years have you worked for the CS and how close are you to your planned retirement age?

@JamMakingWannaBe I will be at the top of my pay scale from April next year (this is when I will actually be on £57K but basing the move on that salary as its not far off). There is scope for promotion although they aren't all that frequently available. I've worked for CS for 14 years (including 2 mat leaves). Still got about 20 years of working left (hopefully).

And thanks @jesmonabullets that's a helpful explanation of the difference between the two schemes, I should really be more aware but I've never had to compare my options before.

I was supposed to receive my annual benefit statement a couple of months ago but CSP agency don't appear to be very efficient!

Bear in mind that in the private sector you’re likely to be expected to work more than the standard weekly 35 hours, especially if the role includes a bonus which could be partly based on the number of hours you do.

Are you not registered online? If so, you can check and see if the benefit statement is there.

You need to look at how much it would cost you to get the same amount each year added to your pension as you are accruing at the moment - I think for a salary of £57,000 you will be accruing over £1000 pension each year you work for the civil service but your previous statements should say how much it actually is. Work out how much needs to be put into a contribution based pension to get that much (lots of calculators online) deduct the 10% of your salary (so £6,000) the new job will contribute and work out how much you would then need to pay to get the same.

That should tell you if you are better or worse off.

I can't get into the CSP portal and have been trying to get them to fix it for months. They are a nightmare to deal with. But I'll did check my payslip for this month and it stated that I contributed £187 this month to my pension and the employer contribution was £962 which seems decent!

I've been trying to figure this out too.

I think employer contributions is a very rough guide but because it's defined benefit not DC it doesn't quite paint the full picture.

@Shopgirl1 is right that you need to work out what the defined benefit is and how much it would cost to to buy that.

Also factor in sick pay and ill health retirement on full pension etc.

But also whether you enjoy your job and what it is you want to do next of course

Op would also need to deduct the amount she contributes

Also think about the progression in role and think longer term though. CS progression can be really slow, and depending on the department glacial. Will the private sector give you the ability to do more interesting stuff and build a more dynamic career? That will also build your earning potential later.

I'm a WH CS but have only been one for a relatively short time (also did 7 years in a NDPB). People will often say 'stay for the pension' but I find the thought of staying for the next 26 years for a more comfy retirement a bit depressing tbh and am actively looking to move out again. You obviously applied because you were interested in the job, so have a think about that and what might be different in 10 years financially.