Final Salary Pension

PGM

I've heard these are the best type of pension, but don't know much about them. My other half has the option to sign up to one;

final salary X 1/60 X years worked

ie
15,000 X 1/60 X 20 = £5,000 annual pension

I guess its the 1/60 part that I wonder whether is a good deal?

oakley

1/60th is a farily common ratio in the private sector, if you look at the NHS for example they tend to use 1/80th, therefore to get half your salary as a pension in you would have to work 30 yrs in private as opposed to 40 yrs in NHS.

payrollpro

Don't forget that a 1/60th arrangement usually comes with a flexible lump sum withdrawal option whereas the 1/80th option, as with the NHS and local government the lump sum is fixed.

The 1/80th might not seem a good deal but a 20 year pension based on £20k a year will give a pension of £5k a year plus a lump sum of £15k. If the 1/60th basis is used the pension is £6.6k which sounds better but no lump sum. you choose your lump sum to a maximum of £15k and then get a pension on the balance.

As a rough guide a 60th pension with maximum lump sum is exactly the same as an 80ths scheme with the mandatory lummp sum.

Payrollpro