Quizzes & Puzzles1 min ago
Help with understanding career average pension...
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I know this is a bit similar to another question posted by someone else, but hoping someone (buildersmate!?)) might be able throw some clarity on the muddy water..
I have been with a company for nearly 12 years, in a final salary pension. The rumour is that my company is going to close the FS scheme entirely to future contributions and switch to a career average scheme.
My early years with the company were relatively low paid, and its only in the last 3 years my salary has been bumped up a fair bit. My understanding is that the FS element will be stopped at the point where the scheme changes.
What i dont understand is what the Career Average will mean for me? Say i am now 33, and will be with the company for another 22 years, and the salary at the start of the new scheme was £48k, how would this be worked going forward?
Can anyone tell me how i can work this out?
I have been with a company for nearly 12 years, in a final salary pension. The rumour is that my company is going to close the FS scheme entirely to future contributions and switch to a career average scheme.
My early years with the company were relatively low paid, and its only in the last 3 years my salary has been bumped up a fair bit. My understanding is that the FS element will be stopped at the point where the scheme changes.
What i dont understand is what the Career Average will mean for me? Say i am now 33, and will be with the company for another 22 years, and the salary at the start of the new scheme was £48k, how would this be worked going forward?
Can anyone tell me how i can work this out?
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I'm afraid you are going to have to be guided by what the scheme administrators propose for your company. I believe that different companies are proposing different schemes - there isn't a standard model in the same way that everyone underdstands 'sixty-eths' and the need to accrue 40 years of 60ths to get a full 2/3 rds FS pension (or whatever).
You probably read the other post today where I referred to Career Average Schemes.
I don't think the salary you are on at the date the scheme switches from a FS to a CAS) has any DIRECT bearing on what you might receive in the future. There will be some net losers and some net gainers in the switch - but it is impossible to work out now whether one would be a net loser or gainer in the future.
Here's an example of how the BBC explains it for its employees - the scheme is perhaps typical.
http://www.bbc.co.uk/...e/pages/formula.shtml
The common theme is that one's annual salary is multiplied by a factor declared by the company to produce a pension accrual - then next year that second years salary is subject to a similar declaration and added to the earlier accrual. So the key point is that one does know at any one time how much is in the pension pot - it doesnt depend on some future salary at the point of retirement.
You probably read the other post today where I referred to Career Average Schemes.
I don't think the salary you are on at the date the scheme switches from a FS to a CAS) has any DIRECT bearing on what you might receive in the future. There will be some net losers and some net gainers in the switch - but it is impossible to work out now whether one would be a net loser or gainer in the future.
Here's an example of how the BBC explains it for its employees - the scheme is perhaps typical.
http://www.bbc.co.uk/...e/pages/formula.shtml
The common theme is that one's annual salary is multiplied by a factor declared by the company to produce a pension accrual - then next year that second years salary is subject to a similar declaration and added to the earlier accrual. So the key point is that one does know at any one time how much is in the pension pot - it doesnt depend on some future salary at the point of retirement.
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