Pension employer contribution %

[happygertie]

Hi all,

I am rubbish with all things financial especially pensions. I am currently looking at a job which pays £40,000 per annum and the employers pension contribution is 26% - so my question is .. is that a decent pension?

Employer contribution rates are meaningless for defined benefit / public sector pensions. Their rate (and, your own rate), has no bearing on what your pension will actually be.

The numbers you need are your salary and your accrual rate (e.g. 1/52). Then all you need to know is, for every year you work, you will receive a pension of your annual salary divided by your accrual rate.

For example, if your salary is £26,000 with an accrual rate of 1/52. If you work there for three years, you will receive an annual pension of £1,500. (I have ignored pay rises for simplicity.)

The % of salary is really just for guidance purposes. This is a DB pension so you are guaranteed a set amount per year, adjusted for inflation.
What is the accrual rate? It will be stated as something like 1/43 or 1/49
So eg if you earn 40k per year, and it is 1/49, for each year you work there you will get 40,000 x 1/49 in your annual pension. So one year of working there would give a pension of £816 per year. Which doesn't sound much - but if you work there for 10 years that would be an annual pension of £8160 or for 20 years that will be a pension of £16320 per year for the whole of your retirement.

This is not how defined benefit pensions work.

That's very good indeed.

Most employers I've had pay 4%. Current one pays 8% (private sector) which I thought was very good.

Thats a very low employee contribution for public sector. Certainly in the nhs st that salary you’d be looking contributions of around 10%.

@Pippippipi CS does have lower contributions than other public sector pensions. The reasons are historic.