Defined Benefit pension scheme member? You have no idea how lucky you are
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- Опубликовано: 15 окт 2024
- Most people have no idea what a defined benefit pension scheme is. But if you're in one, you know how lucky you are! In this video, we explain why final salary pensions are in terminal decline and what makes them so valuable for those who are still accruing benefits.
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Martin Bamford is an award-winning Chartered Financial Planner, Fellow of the Personal Finance Society and Director of Client Education at Informed Choice. He’s author of three bestselling personal finance books and co-author of Harriman’s New Book of Investing Rules.
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Is this the end for Defined Benefit (Final Salary) pensions?
Hope not - I retire at the end of September!
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
@rachealhubert74 That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well
@rachealhubert74 I will give this a look, thanks a bunch for sharing.
I worked for myself in the 1980s and then i got a new post with Local Govt I transfered my SIPP pension into the Council Pension I was allowed to buy back years It was the best thing i ever did I worked for the Council for 7 years and i purchased another 7 years from my Sipp I had an accident at work and I was allowed to take my pension early but The Pension was enhanced I left the Council with a 25 year pension for life fully indexed so for me it was a great deal and I was only 40 years old I am now 64 when i see local govt and Civil services and NHS complaining about there wages they never mention the DB pension they have and how lucky they are plus dont forget they also have death in service I know how lucky i am and i thank the council for giveing me what i was given
Jeff they often state low wages as a downside but these days you see many well paid jobs offered by councils etc. in hard times it’s often private companies that make no increase in salaries each year where council and government employees get something even if only 1-2%.
Sadly DB schemes just became far too expensive to support especially with the 25% tax free option, hence private companies went down the DC scheme route.
Thanks for increasing my knowledge in personal finance and investment, I recently subscribed to your channel. I want to give a big shout-out to all those working tirelessly to earn a living and build wealth during this recession. My husband and I are both retired and debt-free, and we're living smart and frugal with our money. Despite the recession, we're still earning passive income thanks to our savings and investments in the financial market. Investing lifestyle has enabled us to earn a steady monthly income through passive means, and we're grateful for it"
Congratulations on your early retirement, Interesting indeed! Currently, I am in dire need of investment advice or tips. Earlier this year, I hesitated and failed to take any action until now. However, I am determined to try something new, as I am very receptive to various investment ideas. I want to be retired in my forties or fifties.
No problem at all! If you're seeking to earn substantial profits from your investment, I would suggest determining your investment horizon and implementing a long-term plan. I worked with Lewis James Godfrey to create a long-term investment strategy, and he assisted us in managing our investments while we focused on my jobs without any concerns.
Thank you for your advice. It's challenging to find a reliable investment advisor here, and I appreciate your input. Seeing the success you've achieved through investing, I would love to have access to your investment advisor's information if you wouldn't mind sharing it.
I work with *LEWIS JAMES GODFREY,* who is based in the United States. If you would like more information about him, you can conduct a search online. He even got featured on CNN recently.
Working with a skilled financial planner can be compared to having a mentor in the field of finance. I used to struggle to invest on my own and ended up losing money, but things changed once I started working with this same man, Lewis James Godfrey. He played a pivotal role in helping me improve my financial situation. Previously, I relied solely on my job and salary for income, but now I have found ways to generate additional income with ease, which has allowed me to leave traditional employment, thanks to Lewis. Nowadays, I believe that investing is not a choice, but a necessity for anyone who desires financial independence and a good quality of life.
I'm in a DB pension with an LGPS pension. Although my salary is only slightly above average the employer contributions are phenomenal and worth their weight in gold.
You should pay 40 ,% tax on subsided pension Or say Thankyou to all us tax payers for gifting you this
Civil service pension scheme is the main reason I keep working in the public sector. 27% of my salary contributed.
One of the reasons many stay working in the public sector, DB pension schemes that private companies cannot afford.
@@guyr7351, that is hardly anything my company pension scheme has 3 levels of contribution 4, 5 or 6%, the company then contributes either 6, 7,5 or 9% to your contribution. Longer serving employees who were on the DB scheme are allowed to contribute 8% & the company contributes 12%.
This is coupled with a low annual charge of 0.3%.
With those low rates of contribution it would be hard to build up a decent pension pot
@@guyr7351 5.3% contribution and 28.8% from civil services.
I've got 2 x db pensions, and my current job is a dc pension.
I pay 8% and with the employer contributions its 24% total.
Our annual bonus I add as a one off AVC. 50 now, planning to go at 60 if I can 🙏
@@stuartburns8657 if you keep putting in at that level and using your bonus you will be OK. I laugh at the standard reports saying how much you need to survive. I still have a mortgage running and will do for 6-8 years. My income is matching what I was earning in my last job , but have two “wage” rises coming in the next 20 months as a works pension then state pension come into play. Once they are active I’ll certainly be able to treat myself a bit more
I have a Final Salary pension, I am 48 now. I paid into the scheme for approximately 12 - 13 years whilst I worked for a previous company, I have no idea what it is worth now?
I am genX, I have an LGPS (local Gov Pension Scheme), I must be lucky as paid in to it for 26 years so far. It is nice to know that I have a guaranteed yearly salary (plus lump sum), also 3 times salary death in service. I will count my lucky stars
I pay in to a DB pension and read their committee report every year, their latest report states it estimated they will pay £424m in pensions and receive £229m in contributions from employers and employees, and the Fund has a value of £10.4bn at 31 March 2023, so I guess it is in a healthy state.
Big numbers but it depends on the liabilities under the scheme. Many DB schemes are underfunded and I guess that the plan is that employees will die, leave the scheme or when retire die early so removing their liability
@@guyr7351 It needs to average a return of less than 2% on it's investments to stand still. It is clearly not underfunded.
There is a big 79 billion excess in DB pensions now in the UK. Covid sadly helped im sure.
Watch this space for Governments trying to get their inept hands on it soon
I am in a Defined benefit scheme in public sector CARE (Career Average Revalued Earnings) scheme. I envy my colleagues who are in final salary pension scheme which is insane when compared to what my current pension scheme offers.
For example lowest you can expect is retiring with lump sump off about £120k+, with about £1500 month+ after 30 years, can RETIRE BEFORE 50!!!!
Anyhow I feel extremely grateful for the pension scheme I am but considering the job I do it's the least they could offer.
And that level of benefits is exactly why DB / final salary schemes have generally stopped. The liability becomes massive
The CARE pension is not a DB, it's a direct contribution scheme
I discovered that one of my old pensions is DB. I am over the moon about that, because my current workplace pension (DC) would need a vast pot to come close.
Which is exactly why they were dropped by the majority of companies, the funds required to maintain are massive. I have a DB scheme due to mature next Feb, I consolidated pensions schemes way back in the 90’s for my DB schemes. While my pensionable years are not huge in the scheme it would pay me £10K a year maximum.
That would require me to have a DC fund value of approx £200K to provide an annuity of that level, and annuities have risen the last couple of years from the poor levels previously being offered.
My brother receives a full DB scheme pension ( ex British steel) eg 2/3rds of his best average salary in His last 5 years, he did pay AVC’s his pension pot would have to be close to £1m to provide his pension via a DC scheme way in excess of his and his companies contributions.
Really enjoyed this Hannah and Martin! Keep up the pensions chat. I’m 26 and this is really valuable to me even thought I’m quite a while away from retirement. All the best, James
James a long way away you think but the best time to start. The conflict we all typically have when younger is house and family take precedence which is why the Government making pension having to be offered by companies then auto enrollment should mean that in 20 years time most workers will have something extra to their state pension benefits.
The hard part is to maximise your contributions eg if employer offers a match then pay what you need to maximise their contributions.
At current levels of minimum payments 4/1/3 % which is 4% employee, 1% tax relief,3% employer £50 a month savings costs the employee £25.
At 5% growth per annum a rough calculation this grows to £76,000 in 40 years. This is not factoring in any wage increases etc and has cost the employee only £12,000 in contributions.
This is why pension schemes should be pushed and promoted and people educated on.
Even now I would say £25 a month most workers can find, with auto enrollment most workers will be paying more than this it needs the 40 plus years to get the compounded growth, the numbers can get much more attractive if you ensure you increase each year by 5% or so.
Sooner you start to take control of your pension and look at projection based on current saving levels the better. While you have another 40 years working potentially and your salary will increase the longer money is in the better, compound interest is the big benefit.
Defined Benefit pension schemes were terrible unless you were in the public sector all your working life. I moved round regularly in the private sector early in my career, and you weren't even eligible to join such DB schemes for the first year you were in the job. And when you left they were effectively frozen. Projections on my collection of frozen ones was going to pay me an absolute pittance in retirement. One of them was projected to pay £65 per month! So when the rules changed I moved them all into a Defined Contribution SIPP. Which has done way better, by investing in equities rather than DB-style low risk, low reward govt bonds. I wish I was entering work now, as the DC opportunities & investing info have never been better.
What a crazy thing to do they are not frozen they rise between 3%to 5% a year and are inflation proof. Far better than DC schemes
"I have a pension from the USS which is a defined benefit scheme. I have accumulated a total of £12,000 in my pension pot, which will provide me with an annual income of £1,030 when I retire. I left the USS after switching jobs. I am unsure if I should keep my USS pension, transfer it to my current pension provider L&G, or move it to a SIPP with Vanguard. Can you advise me on what would be the best option?"
Do not take it out.I made mistake of closing a DB scheme twenty years ago and still regret it.Fortunately,On changing jobs I have a new DB scheme but only have a small amount in the pension pot and only an annual income of 4500 pounds when I retire so I just keep working part time and have just opened a SIPP with 1000 pounds recently . State pension age is in ten years time so I hope to continue working as part time and look for ways to add more money into SIPP and also open an ISA account. I am looking to how I could also do aditional pensin contributions with my employer .
For younger people not paying into their pension at all, it would kind of make sense if they were saving up for buying a home/apartment to cut their costs. Then again it’s not very realistic in the uk unless ur working remotely or already have most of ur deposit ready.
I love the way no one mentions that DB pension contributions had to be made by the employee as well as the employer and more often than not were expensive. I recall paying around 12% in my last year although I do accept that it was still a great deal for me. Also not sure that an annuity of £16000 (plus state pension = £25k) would cost circa £262k as referenced by Hannah. According to one provider, a 65 yr old, seeking 3% annual increase and 50% joint life (replicating a normal DB pension) would get £2,784 for every £100k which I think is significantly more than £260k.
As always an interesting show and much appreciated
I will swap you my pensions after contributing 14percent for your defined benefit pension you paid 12 percent for. Deal!!!
Thanks Kelvin. That's a great point about the cost of DB pensions to the employee/member. As you say though, still a great deal in most cases! Not sure where Hannah got the £16k/£262k figure from, although we're still seeing some guaranteed annuity rates in high single figures.
@@themartinbamford on the open market (rather than guaranteed annuity rate old product) and assuming normal healthy life rather than impaired, then for 65 year old, single life, no inflation protection or escalation of any kind, then looking at this weekends newspaper, best you could get is £5k per annum for every £100k spent. That would be a lot less per annum benefit if add other lives and escalation of any kind.
Yes - it is worth remembering that the contributions paid by people in DB schemes has crept up over the years. The best example is the UK police: yes, they do get a good pension, but they cough-up about 15% of their gross pay into the scheme!
@@maltesetony9030 looks like employer is paying 21% on top of that 15% from police-person. Nice. Deserved.
I put in 20% of my salary into my DC pension, and have been doing so for many years now. My employer puts in 3% which is terrible, but is all they need to put in legally. My predicted pension pot is no where near what I am going to need when I retire, so I am super jealous of people with DB pensions.
Not all of us are boomers! ‘Some gen x have sneaked in.’ Sorry but I was born in 1981. I joined mine at 23 and had to retire due to ill health at 36. Thankfully I got a full pension as if I had retired at npa. Immediate membership was a no brainer and I stayed in my career path due to the pension. Mine is the largest private pension scheme in the country and is a good example of stewardship. Actuarial valuations are a complete joke. Our scheme has jumped between deficits and surpluses over long periods. Attempts to stop accrual were fiercely fought thanks only to strong union work. Incidentally I bought my first house at 22, so it was never a fight between investing in one or the other. But I made sacrifices. I don’t live where I grew up. I didn’t live in a great area initially. We all have different priorities.
If it was true that the reduction of DB schemes was a loss in practice we should expect two things; 1) average pensions should drop 2) the rate of growth in pension payments should fall off - neither is true for the last 10 years (probably longer, only checked ten years back). Indeed there is a very steady general upward trend in average pension payouts from £14,000 in 2014 to £16,200 in 2023. And everything points to that trend continuing in the coming years.
I have been given a CTV of 286k from my DP. I was made redundant from the company. I have a long term health condition so I'm thinking of taking the CTV . Would you agree
Probably not. A long-term health condition doesn't necessarily mean a shorter life expectancy. And, in any case, what's the cost of putting life assurance in place to cover that benefit, versus the cost of transferring the pension? Make sure you consider all of the options first.
Hope you getting on great.
If your renting in retirement and you have only got state pension you can get assistance with your rent in retirement you have to be very careful you could pay into a pension and lose all the top up benefits I know of over 65s who have shot themseves in the foot because they have a private pension I think the figs of around 200k pension pot will only replace the benifts you could have got free for not saveing into a SIPP stop and think for me the safer bet is a ISA as you approach your 60s you can spend the lot and bring down the fund so you can claim the top ups in old age Good video well done
I have an old defined benefit pension for a company I worked for 20+ years ago, I only paid something like £8k into it in my time there but was offered 20 times that recently so I’m giving it serious thought to transfer to my current works pension, any advice would be helpful please?
Get a quote on the projected annual income at retirement, if it's more than £8k per year then keep it. It's for life and inflation adjusted.
Don't put it in other than a DB scheme
@@davechapman5815 I have 4500 pounds per year guaranteed under my DB scheme and have been invited to buy additional pension contibutions since I missed out due to a number of extenuating factors and circumstances but it does not have employer matching and the 1.5 percent that is normally added to the CPI of my main pension contribution with the same employer. Instead,I just open a SIPP account and do plan to open an ISA account since I don't know if they are much better than purchasing additional pensions savings from my workplace employer.I reach state pension age in ten years.There are no youtube videos on these kind of scenarios..I am still working but part time so no death in service benefit. Also,no inheritance factor .Any advice would be helpful please?
I’m 53 and have 2 DB pensions and one current contribution pension . I get that a DB pays for life but my forecast for retirement at 55 or even 65 still looks poor imo.
Mine is not inflation proof, its limited to 4% rise, its not looking good now
Thanks. But do you take the DB tax free lump sum if offered one?
You can take the tax free if you need it paying off mortgage or debts, but you will lose money if you live longer,it is something you will have to choose.
I will be getting my DB pension next year, full benefit is £10K taking £50K TF reduces it to £7K a year. So just short of 17 years worth of the annual decrease.
With a full state pension due this will almost take up all personal tax allowance so DB scheme will all be taxable. So I will
Lose £3K gross = £2.4 net @ 20% meaning I would need to live over 20 years to get the £50K back I’m taking tax free. I will be investing that lump sum so it’s a no brainer, plus factor in if I die my wife only gets 50% as a pension payment. My wife and kids will get all
My cash when I die.
I have a very small defined fined benefits pension which I have not paid into since 2006 as I left the company I worked for. I can not longer pay into it, the the cash pot has still been growing. My ex employer gives in option to cash in the pension on retirement, but I don't think this will be a good idea.
Hi Niel, the regulator (the FCA) agrees with your conclusion; the starting point for advice on defined benefit pension transfers is they are not usually a good idea.
Neil, I left the company I have a DB scheme with in 98, this has continued to be enhanced over the years and will be paying me £10K max from Feb next year. I’ll take a 25% lump sum and a reduced pension.
I did look at taking the pot but decided it would be putting all
My eggs into the stock market effectively other than my state pension.
As it is I have a healthy split of DC schemes and a DB plus full state pension to come.
My ex wife took her CETV and stock market crash ( Liz Truss period) saw 30% be wiped off its value overnight
@@guyr7351Your wife was given terrible advice
I have chosen jobs by pension scheme even when it means dropping in come significantly, you need to look long term.
My pension on retirement will be very good due to this, I have tried to talk to my kids about it but they don’t get it.
The uk is facing a pension apartheid.
Between the
Rich public sector and the poverty stricken private sector.
Just look at NHS Consultants a few years ago whining about paying tax on £1M pension pots and trying to hold country to ransom as they didn’t think they should pay tax on it like everyone else.
Great video, thanks. What about if retirement awaits 21 to 23 years ahead? Would it not make sense to Opt Out from a frozen DB and invest it so that the markets make the pot grow? I understand that short term is quite a gamble, but long term "should" the markets not provide the rentability normally associated with long term investment? In my case I've been offered 270 KGBP to transfer out of a DB Plan that guarantees around 9000 GBP/year. Thanks again.
Thanks Alvaro. The longer the time horizon, the less certainty you have about the future cost of securing that guaranteed level of pension income. You would be giving up a known quantity for an opportunity to do better in the future, but a significant risk you would be (a lot) worse off. Your investment returns would need to beat not only the inflation guarantees offered within the scheme, but also the charges for managing those investments. It rarely makes sense.
Martin, do DB schemes guarantee to match inflation? My scheme has a maximum % increase I think of 5% only, which recently of course has not matched inflation.
One factor that many look at is that if you convert your DB into a DC scheme you can leave the funds to beneficiaries, typically a DB scheme provides a reduced pension to a spouse.
While there is the risk of the financial Markets typically pension funds aim at 5% growth pa as an average figure, that £270K would grow nicely over 20 years and he would typically be adding to it as well.
Of course you do need to factor in what £9K a year indicated now would be in 20 years.
Currently 270K would get you a much bigger annuity than £9K a year
I've read that the DB to DC valuation is considered x20 it's annual worth.
Rising to x25 is death in service / spouse benefits are present etc
@@stuartburns8657 hi Stuart if you mean the CETV value there have been some very big amounts offered to effectively get people off the books in my view, so that they are no longer a liability for the DB pension scheme.
My offer was only about 16 times what the max pension annually could be. I felt this was far too low and also meant all my pension was then in DC schemes and a lot more exposed to the stock markets. So in my case leaving myself with two DB schemes one a company the other the state pension meant I could plan around flexible draw down on my two DC schemes
Why do you say they are protected against inflation?
The degree of inflation protection varies between schemes, but defined benefit pensions are 'index linked', so the guaranteed annual income is revalued each year in line with a fixed percentage or agreed measure of inflation. This index linking is one of the features that makes a defined benefit pension so valuable - and it's also why it is rarely a good idea to transfer to a private pension (pot of money), unless you have a compelling reason.
@@themartinbamford I’m in a DB scheme and I don’t think it has such criteria. Mine is final salary so I assume that the salary is classed as linked to inflation
@@ronaldbear1 I have never heard of a DB scheme (often referred to as a final salary scheme) that does not an index linked pay adjustment.
My deferred pension increases with cpi, and when in payment, the guaranteed minimum pension element does too. The rest increases at the employer's discretion. Despite promises during a takeover, they have not maintained rises to cpi or rpi. It has fallen behind by 14%.
I'm considering taking it at 55, and putting it in my sipp, while still working.
I'll take the lump sum too, and put it in an ISA.
@@themartinbamford Should one not be concerned that additional pensions contributions purchased under the DB Scheme will only be revalued with added CPI without the 1.5 percent added compared to the indiviidual's main pension contribution.?
My company closed the DB pension scheme in 2019. The fund had already been bailed out a number of times by their admission then. If my company an oil and gas dependant goes bust as it probably will in the next 20 years how is this gold plated? It is a UK overseas pension so is not protected. Even if it was it would still be a huge drop in pension for me on this allegedly bottomless protection fund! The reason the government wants you to keep DB pensions is because it is a guaranteed tax income for them, pure and simple!
My wife has a defined benefit scheme, however it is capped at 2.5% increase, which in the last 2 years does not match inflation. The other negative which you don't seem to mention is that a defined benefit pension 'pot' is lost. So if you were unfortunate enough to lose your life early into retirement there is nothing to pass on! Whereas a personal pension fund remains part of your estate, but also offers more flexibility in how you drawn down on that fund to balance your needs, a defined scheme is normally a fixed amount with very little if any flexibility.
Yes all very true, a lot of what you describe is the lifestyle investment that many sign up for when they start the pension on joining a company. Typically when you have loads of other forms to fill and are not really giving this the attention it requires.
The issue with this pre set investment is as you say as you get older they invest more of your funds into more stable ( lower risk lower return funds) when we had the 15 years of low interest rates and low inflation this was ok but the last 2 years has seen these funds perform poorly although there was a bit of a spike.
I was seeing my pension funds almost static for growth and the only growth being my regular contributions.
Moving the funds back into growth type funds has seen the pots recover.
@KevinOLoughlin-ys5ef
Ups and downs, DB funds offer a guaranteed income and the opportunity of a smaller pension to the spouse, and this is paid for your lifetime which could be 40 years with growth guaranteed every year.
DC schemes allow the pot to pass into beneficiaries however there are no guarantees on the pot value, stock market crashes can see drastic reductions in the pot value as well as very good growth in the good years. Ideal situation is to have both, but for many a DB will never be offered
How can a dB fund be gold plated when a scheme can sell it to a insurance company buy out and then the annuity can be changed to suit the insurance companies and just a ordinary annuity is inherited by client it's not right
Yes that’s not good, and I’ve seen recently a few companies have sold their DB pension schemes off.
I think the term of gold plated refers to the fact that the benefits are known being salary dependant, there is guaranteed growth typically to combat inflation. Non of these apply to funds under DC schemes that can crash if the stock market crashes.
I have a db pension and I'm desperately trying to cash it out because i could get a much better return on my money, so i consider myself extremely unlucky.
Imagine thinking the staff that made the company profits for the shareholders shouldn’t be getting a perk like a decent pension.
Under DC scheme rules they will do as long as the worker maximises his and the companies contribution and work/save long enough
@@guyr7351 most people will get a very poor pension under DC, that’s why companies stopped DB. I have both, and the DC one is poor, even though I’ll have been in it longer.
My DB pension as it stands now the transfer value is 324000 or around that figure with 5or 6 years left before i retire do i transfer or do i stick
Get some good independent advice before you make any decision. I doubt that there's any benefit to transferring it.
@@kw8757 i intend to
Hey Paul, it's not usually the right thing to do to transfer out of a defined benefit pension into a private pension arrangement. That CETV is a lot of money, in cash terms, but it's a big figure because it costs that much to secure the promised level of annual pension. Moving to a private pension means you lose that guaranteed income; is that a price worth paying to have the capital in a different pension arrangement? Definitely seek professional independent financial advice before making a decision. And be prepared to pay a fee (likely to be several thousand pounds) that isn't contingent on a recommendation to transfer the money away - remove the financial incentive for the adviser to recommend a transfer! Look for an adviser who will make a recommendation within the context of a Financial Plan, including a lifetime cash flow forecast demonstrating the possible outcome of the different options.
@@themartinbamford I intend to
But its my family history of short lifespan that is turning my head
As far as am aware none of my family have gone past the age of 77
@@MrJune1964 I am in a very similar situation. I want to transfer out of a DB scheme which I left in 1991 and have had a CETV of about £200000. If I cant transfer out it will only pay me £4400 PA. It will take me 45 years to get that back meaning I would be 106 by then ! Considering that I have three other pension pots that will maintain my modest lifestyle transferring out and paying off my mortgage seems a no brainer to me. With my health problems I think it very unlikely I will last to 106 but having it could transform my life while I still have one !!
DB is not that is expensive it is more that companies do not know how to manage them in cost efficient manner and they offload this to employees to mnanage
Hannah, there will only be a small % of people with mortgages once retired, and lenders need to be satisfied you have provision to maintain payments when retired. I moved in 2017, with a 17 year mortgage taking me 8 years into retirement, so we needed to show we would be able to manage.
Anyone who is 50-55 thinking the state pension will see them OK is a fool and has ignored all the messages about pensions. DB schemes are effectively stopped except for the lucky few in the public sector, few private companies can bear the cost of maintaining a DB scheme. If you are lucky a private company will match extra contributions you make into a DC scheme.
DB schemes do not match extra pension contributions purchased by the employee and also the added pension contributions do not get any 1.5 percent addition to the CPI.
@@TaiwoOmotosho-m9v may comment ref employer match was for DC schemes and extra contributions.
For those in DB schemes extra contributions were called AVC and could buy you extra years of service. My brother used this to his advantage with his British Steel pension so he gained the maximum 2/3 final salary pension
@@TaiwoOmotosho-m9vI did say DC scheme, it is possible within DB schemes to make AVC’s that increase your level of pension eg if you see you will fall a few years short of a maximum pension. As you say though employer does not increase their payment
@@guyr7351 DB is a scam
Im very lucky to be in a Defined Benefit pension, my employer pays in 3 times what i pay in which is 6.5%
These public service DP's will end up collapsing the UK economy. Currently, these pensions cost the taxpayer an astronomical £3 Trillion.
It’s not all that good, my colleague worked for the same company for 43 years, his DB scheme ran for the 1st 29 years the company was sold & the new owners started a DC scheme for the employees for his last 14 years.
So his pension was a very generous amount, retired at 66 & passed away at 70, those 29 years of pension just gone! At least his widow now has the cash that was in his DC scheme.
These schemes are basically an annuity which have given quite bad payouts unless you live to be 105!
Social Security is like a Defined Benefit Plan.
Gen X need to pay attention.
In all honesty, it feels extremely unfair that public sector continue to get these old school grandoise pensions, whilst everyone in private sector can't have one.
There's a big shift in the public sector away from pensions calculated on 'final salary' (typically average earnings in the final 3 years of service) to Career Average Revalued Earnings (CARE), which tends to lower the pension income paid. Yes, it's still a defined benefits pension, and I agree it's unfair that these are now only available in the public sector, but I don't see them remaining available for too much longer.
@@themartinbamford i appreciate that they will be unhappy and complain and ask for support to fight against a move to defined contribution...but where were they when the private sector final salary or career average pensions were pulled from under the private sector feet? Nowhere, no support whatsoever. So they wont get any support from the private sector to protect their defined benefit schemes being closed, should that come to pass. On the other hand, great way to recruit people is to have proper pension schemes in place.
@@echoecho5244 Don't forget that, traditionally, pay in the public sector has always been lower than in the private sector, so a Defined Benefit pension was an important element in attracting anyone to work in the public sector.
@@maltesetony9030 yeah, days gone by! Was an important element to private sector also. Gone gone gone
@@maltesetony9030 That's not the case now!
I really do think these pensions are too good to be true. Youre effectively expecting the UK to be just as competitive as it is today all the way into 2070. These pensions plans are all priced in £'s which could be worthless in 2070. Plus governments are known to change rules to suit them. Dont forget about the lifetime allowances, which is approximately 1 mil right now. All Id probably do, (not saying I know best...) is invest the minimum to reach that cap and dont put a dime more. you get taxed at 55% above a certain limit making it worthless. youre getting best of both worlds in the sense that youre getting the most out of it if its truly good, but if not youre not really losing a whole lot.
It seems pretty easy to reach the cap, then youd have to ask yourself that is it super easy to become a millionaire hmm.
My advice, if you can get in a DB pension scheme, DON'T. Pay in for 40 years, die at say, age 65, your patrner gets a reduced pension> Why?. In a way they have paid in to the scheme too. Then they die 1 year later, your kids get nothing. The pension scheme swallows it. You could have paid in tens of thousands and die before taking anything. A DB scheme is like paying a life insurance premium, it is in the trustees best interest if their clients die early. At least you can now transfer to draw down so you have control, can't you? VERY LITTLE CHANCE. You MUST pay for advice if it has a CETV value over £40,000. The 'advice' can cost thousands, and, no matter that you are an adult of sound mind, unless you are very lucky, the advise is very likely not to transfer. Then you are pretty much stuck. The system needs changing. If you want to transfer, after taking advice, there shouldn't be hurdles put in the way.
Stop painting a rosy picture. Point out the cons too.
Top tip. Don’t die at 65. Or get a SIPP as well.