If you're paying 6% for a sixtieth scheme then you're in line with teachers who pay the same. You're lucky still to have a final salary scheme to be in. Most of them have been wound up because employers can't afford them.
If you tried to fund a pension for yourself with 6% of your salary then you'll retire poor, unless your pension fund performs fantastically.
Rob Graham
I ought to add to my last post and make the point that whatever you pay there's no guarantee that you'll get anything at all, as has been shown over the past few years. This is not a normal scenario, however. Stockmarkets have been extraordinarily difficult over the past few years. But then again, accounting rules have changed and this is also partly what has caused the problems for f/s pension schemes.
Rob
In message , Robin Graham wrote
I'm currently paying around 4% for the same kind for final salary scheme although I expect the percentage contribution to rise significantly once an ongoing review has been completed.
In a FAQ about the pension scheme it was implied that the projected shortfalls in the scheme were not due to the employer taking a pensions holiday for a number of years :)
OT. Today (24/12/04) I've just received a letter, about mistakes in a statement, from the Pension Scheme which is dated 8th October 2004 (postmarked 22/12/04). How much faith should I have in the administrators of a scheme who require 10 weeks to pop a letter that they have written into a post box?
"anon" wrote
Yes, extremely good value.
The overall cost of a sixtieths scheme is probably more like double that (or more), even for such a young member as yourself (for older members the effective overall cost is even higher). Of course, depends on other factors of the scheme too - such as increases in payment (& deferment) & death benefits etc.
Universities scheme was 6.35% for an eightieths scheme.
That's an unfair comparison, because with final salary schemes the employer also contributes, and usually much more than the employee. IIRC in the Uni scheme they were paying around 18.5%, so altogether the fund was being fed by about 25%.
I take your point entirely. However, unless you know just why the letter was delayed (e.g. was the secretary who should have posted it was away, or got it lost in her handbag) you might be ill-advised to make too harsh a judgment!
Rob
"Ronald Raygun" wrote
That's 80ths pension *plus* 3/80ths lump sum, commonly held to be roughly equivalent to a 60ths (no LS) scheme.
I was trying to make the point that if anyone thinks they are hard done by when asked to contribute 6% to a final salary scheme like this they should compare the benefits with trying to do it themselves on 6%.
Rob
I know that's the point you were trying to make. My point was that that is an invalid point because if they tried to do it themselves they'd have to compare the benefits they could achieve that way, not with N 60ths of final salary but with 6/(6+M) of that amount, where the employer contributes M% of salary into the pension scheme.
There aren't any final salary schemes to which the employer does not contribute, are there? And certainly not when the employee puts in as little as 6%, because it couldn't possibly support an N 60ths scheme unless they employed hit-men to ensure a tight lid is kept on pension outflow.
Another possible reason to feel hard done by is that there exist (or used to exist, I suppose there won't be so many now) non-contributory schemes, where all the contributions come from the employer.
In the case of the OP, his share went up from 4% to 6%. It would be interesting to learn whether the employer's share also went up by
50%.
not now I guess, though I was in one where the company was on an extended contributions holiday for years after some high(ish) risk pension fund investment strategies paid off.
Phil
My point is valid in the context of 'should the employee leave the scheme and do it himself more cheaply' - which I accept was not the OP's point.
AFAIK in the large national schemes such as teachers and civil service the employers do not contribute anything. The scheme is funded by the contributions of those that pay on behalf of those who have retired. But if you know different I would be interested.
It doesn't have to. It's up to the employer what he puts in. All he's got to do is to provide the stated benefits. The scheme actuaries should say what the employer's contributions would need to be.
A further point is that I'm surprised that the scheme rules allow a demand for an increase in employees' contributions. Usually the rules are fixed for an individual employee at the time of joining the scheme. Changes like this, or even scheme wind-ups, are done by negotiation with the employees, probably via their union, where the employer says, 'look, unless we change things we'll go broke and then nobody will have any jobs or anything else'.
Fresh employees joining the scheme will, of course, have the rules that are set for them, which may be different.
Rob
I'm in a teachers scheme and we pay 6% for an 80th plus 3/80ths lump sum. The change to 60ths is still at the consultation stage.
Your scheme is really a 60ths scheme with enforced commutation of some of the pension to a lump sum. Most other schemes allow you the option.
Rob
"Robin Graham" wrote
The "sponsoring employers" will make up the cost of the scheme, whatever it costs over and above the members contributions.
"Robin Graham" wrote
The members contributions alone are unlikely to be sufficient; even though the scheme may not be funded (ie a fund is not built up), the benefits are paid from a combination of member and (sponsoring) employer's contributions.
"Robin Graham" wrote
Why? Isn't it better for the members that they pay an extra 2% and continue to get the benefit of the final salary scheme, when the alternative may be winding it up?
"Robin Graham" wrote
That's not true, now is it!
"Robin Graham" wrote
the employees, ...
Of course the sponsoring employers would always prefer the members to be happy with any changes - but ultimately they (the employer) are paying for the 'balance of cost' of the scheme. Therefore the scheme rules are set up so that they don't *need* the agreement of the members (nor the trustees even) if they wish to discontinue the scheme. This means they don't usually need to "negotiate" in order to introduce changes!
"Robin Graham" wrote
I have seen the historic changes (over the last couple of decades) of hundreds of different schemes. In my experience, when contributions are changed they are generally done so for all members (old & new).
"Robin Graham" wrote
You could just as easily say that it is a 50ths scheme with a different (enforced) commutation factor - or a 70ths scheme with yet another different (enforced) commutation factor...
Why pick on the accrual rate 60ths?
Are you saying that a 1/80th pension plus a lump sum of 3 times the pension would be obtained from an accrual rate that's different to 1/60th?
Rob
OK.
Yes. I don't have a problem with that. And that's what I inferred in my answer.
No?
I'm surprised that this is universal, in the absence of negotiation. It's breaking a contract of employment if it's done unilaterally.
Rob
The employer's share is usually whatever the actuaries say is needed to keep the fund going.
"john boyle" wrote
Not necessarily - they may pay more or less than that! [Although this would of course only be temporarily!]
"Robin Graham" wrote
Where does it say in most people's employment contract, what the rate of contribution to the company pension scheme will be in (say) 20 years' time?
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