Re: pension - should I purchase additional years from my employer's final salary scheme?


"Tom B" <tom.b@xxxxxxxxxxxxxxx> wrote in message news:8Q9i+gAWaC6HFwRs@xxxxxxxxxxxxxxxxxxx
My local government employer will allow me to purchase additional years
in the final salary scheme. I'm trying to work out if the deal is worth
it. I've tried a number of pension calculators on the Internet, but get
contradictory answers. As I'd be purchasing additional years, my
employer would not be making a contribution.

I have 15 years left to retirement. Every year that I purchase would
cost me 1.32% of my salary (for the 15 years) and result in me getting
1/80 of my final salary as additional annual pension plus 3/80 of my
final salary as a lump sum.

My salary is 22500 (UK pounds). The additional annual pension would be
281, the lump sum would be 843.

Would I be better off putting the money into a stakeholder pension (or
similar) or should I take up the offer from my employer?

I realise that my employer's offer is a guaranteed payment.

Correct me if I am wrong, but if you leave purchase of AVC's until after 6th April 2008 does your scheme not change to an enhanced 60ths scheme?.... for all service accrued or purchased after 6th?....it would therefore be worth 2/3rds of final salary for every year of service.
You dont say how many years of service you already have and your age. There is no Inland Revenue limit anymore since A day of 40/60's of gross salary (pre 2006), so if your service will add up to more than 40 years under the old scheme rules you would have been overfunded (and penalised accordingly) but not anymore....it has been replaced by a lifetime benefits system which would effect anyone over £100k per year salary.

In my scheme (British Steel) when I am 60 I will have 49 years pensionable service, which according to their latest pension benefit forecast is all allowable.

But to answer your question....its all dependent on when they will let you retire (65 is the scheme age but early retirement at 60 without loss of benefits still takes place), and whether you have payback or not depends on the age you live to. In my scheme I worked out that if I lived 10 years after my retirement I was in payback in terms of payments put into the scheme compared with benefits drawn out.
Look at your fathers age...and his fathers. Look at your health now and any genetic health problems and make a educated guestimate of how long youare likely to live (failing getting run over by a bus).

.

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