Pensions

[PeteH]

I'm about to start, on what I hope will be a long career, as a train driver with FGW.

Although it certainly wasn't a 'unique selling point' I noted that the job spec mentioned it had a 'final salary pension'. After much Googling, and looking at this forum, I can't find any information as to how a fsp is calculated. Obviously I suppose it's based on final salary(!), but I'm assuming it must take account of length of service and perhaps other factors?

Is there a rough and ready way of calculating what one might expect in the form of remuneration on retirement? Or is it down to the individual to decide how much of his or her wages to contribute over the course of their career? If one changes TOCs, or indeed if the TOC changes whilst one is working there, do pensions transfer automatically?

Sorry, lots of questions, I'm hoping for a relatively straightforward answer if possible. Something along the lines of accruing 1/xx per year served, multiplied by salary to give a final figure.

EDIT: Apologies if talking about money on these forums is considered 'poor taste'!

 

[Smudger105e]

I am on a final salary pension scheme, but it it not actually based on final salary, but on average salary and the length of service...

 

[PeteH]

I am on a final salary pension scheme, but it it not actually based on final salary, but on average salary and the length of service...

OK, fair enough re. average salary. Any chance you could let me know the accrual rate?

 

[Lanc688]

OK, fair enough re. average salary. Any chance you could let me know the accrual rate?

Pete...I am led to believe that FTPE are 1/60 th accrual rate for pension income and therefore also believe that as an example, if you were earning 40,000 then 15 years would give you approx 10,000 income.

I am using a simple calc for this of course and there is no doubt a far more complex method that takes other factors into account. You and I of course will have similar situations I would imagine.

I have looked into this massively and one thing that was worrying me was the lower tax relief allowance threshold coming into play soon. Given that we jump salary by quite a large amount in the initial years, we will in fact not be far off a large bite into the allowance in those years, but given also this will be at the start of a final salary scheme....we will miss the threshold by a comfortable amount.

I would imagine that FGW are pretty much the same as FTPE !

I for one will be denying the tax man his 40% once on the full wage, as I will use BRASS 2 to top up and anything else that I can utilise such as BAYE etc.

Hope this helps !

Jc

 

[Nym]

The average salary schemes I've seen kicking about take each full year in service's salary, divide it by the number of full years service, that gleams your average salary. Final salary is what it says it is, it's the final salary.

Then your pention is calculated by the number of years service, multiplied by this final/average salary then multiplied by a 'multiplier' percentage. This usually has early retirement factors applied to it as well.

For example, if your pentionable 'final' salary is £60,000, you have 40 years service, do not retire early, and have a divisor of 1/60th.

£60,000 * 40 * 1/60 = £40,000 / year Pention.

If you retire 10 years early, you would loose five ten years on the years service, but the company would also likely apply a penalty or divisor for early retirement. So if you retire at 55, there's say an 18% reduction.

So that would be (assuming the same pentionable final salary);

£60,000 * 1/60 * 30 * 0.82 = £24,600 pa. Pention.

 

[Lanc688]

The average salary schemes I've seen kicking about take each full year in service's salary, divide it by the number of full years service, that gleams your average salary. Final salary is what it says it is, it's the final salary.

Then your pention is calculated by the number of years service, multiplied by this final/average salary then multiplied by a 'multiplier' percentage. This usually has early retirement factors applied to it as well.

For example, if your pentionable 'final' salary is £60,000, you have 40 years service, do not retire early, and have a divisor of 1/60th.

£60,000 * 40 * 1/60 = £40,000 / year Pention.

If you retire 10 years early, you would loose five years on the years service, but the company would also likely apply a penalty or divisor for early retirement. So if you retire at 55, there's say an 18% reduction.

So that would be (assuming the same pentionable final salary);

£60,000 * 1/60 * 30 * 0.82 = £24,600 pa. Pention.

Wasn't aware of the penalty divisor...thanks for the gen, as it would make a big difference to someone like me who only intends to do 15-20 years !

Lanc

 

[Nym]

Wasn't aware of the penalty divisor...thanks for the gen, as it would make a big difference to someone like me who only intends to do 15-20 years !

Lanc

That is applied to when you start drawing your pention though, if you retire / resign at 55 and don't draw your pention until 65, then the 18% I applied wouldn't go on. But the service years will drop.

It's there because you'll be drawing the pention for longer and it will acrrue less intrest under the provider...

 

[Nuttytoffee]

I am currently in a final salary pension scheme and mine is worked out thus: final wage timesed by years in the job, divided by 60. The sum you get is your yearly income. Times that by 3 to get your lump sum total on set retirement age. Hope this helps.

 

[PeteH]

All good info, looks like 1/60 accrual is a good ballpark figure. Hoping to find out the full details in ~3 weeks of course!

As I mentioned, it wasn't a deciding factor in choosing train driving as a career; useful for thinking about what might happen in a couple decades time though. Not sure I can afford to deny the taxman 'his' 40% for a while yet Lanc, I'll be needing the 60% above the threshold to pay the mortgage.

Times that by 3 to get your lump sum total on set retirement age. Hope this helps.

That'll help too!

 

[Lanc688]

Pete....Noted and maybe I'm being just a little ambitious myself!. The Railway Pension Scheme seems to be a very good scheme though and certainly better than most out there !

Regards
Jc

 

[1018509]

Believe me if you can get a job in this day and age offering a final salary pension scheme then grab it with both hands.

The usual schemes offered these days involve third party bankers/investment companies buying a bond with your pension deductions and investing them in the hope of making enough to live on in your old age - not a hope.

I was on a final salary scheme from TfL - 41 years service - my pension now is about two thirds of my salary when I retired and is index linked.

Don't let the chance of a final salary pension pass you by they are rare beast because they are so good.