Thanks mate...ive always wondered how it's calculated. I take it my total pension pot would be the above added to my own monthly contributions then? Is that right? Don't suppose you could put a rough figure on what to expect after 25 years with NR for example with a flat salary of say £32000? I want to compare it with my current forecast for my current job.
It depends what you mean by your own monthly contributions, you'll have to pay a set percentage of your salary for the pension say 7% (RPS65 2012). This doesn't build a 'pot' it buys a promise of retirement income, hence the name for this type of scheme defined benefit. If you pay in anything above the minimum it's generally known as Additional Voluntary Contributions or AVC's, this is what goes toward building a 'pot' in the traditional sense.
Pension schemes differ however as some have an automatic lump some in addition to the annual pension, some make you think they have a lump sum by commuting income in exchange for a lump sum. Generally you want to take the maximum annual income as this is index linked, if it's a 12:1 ratio then all you have to do for the annual income choice to be better is live more than 12 years and your quids in. The only major caveat to this is if you have a pressing need for the cash when you retire e.g. paying off high interest debts etc.
As for a ballpark calculation £32000/60 = £533.33 * 25 = ~£13333
Thats in todays money, everything will increase by inflation but it's the equivalent buying power of the money.
However you will likely spend 5 years in the NRDC Scheme so it'll look something like:-
£32000/60 = £533.33 * 20 = £10666
You'll also have a 'pot' of however much money you put into the NRDC and AVC's.
Both of these will have a Normal Pension Age generally in-line with your state pension age, so this could be as high as 68.
Thanks again mate...i'm not reading my replies in order! Those figures are what I would receive after commutation and the fire service pension is currently not taxed. Can't see that lasting though! It seems to me that my current offering is way better on retirement..i'll have to speak to an advisor as suggested. I appreciate your time and knowledge.
If your current offering has a protected retirement age of 60, as in the pension is payable in full from age 60 with no reduction, then yes it's the far better offer. The only way another scheme could beat it is if your earning substantially more basic salary and are willing to wait a few years longer to get it.
Your fire service pension won't be taxed in payment as long as your total income is under the personal allowance at the time (£11,850 in the
2018-19 tax year).
Generally pensions are only worth what people are willing and able to put into them and the earlier they do so the better, due to the magic of compound growth. One of the rules of thumb is to take the age you start contributing to a pension and divide by two, so if someone starts contributing at the age of 30 they should contribute about 15% of their gross salary. Yes it might sound high but pension contributions are paid in from your income before tax and can also be paid in before National Insurance, depending on how the scheme is set up, therefore there are huge tax advanatges especially for those who are willing to plan.
It's not often you'll hear someone complain about putting too much money away for retirement...