Defined Pension?

Not sure if this is the right place to post this question, but can anyone shed some light on the key differences between a defined pension and the final salary pension.

While final salary is still offered some tocs/focs are now only offering a defined benefit.

A brief outline is what I’m after as my head spins faster then VTWC down the mainline.

Thanks

Final salary basically linked to your salary at retirement and guarantees a set income.

Defined contribution, you and employee pay in amount of salary to build a pot you then have available to use at retirement, can draw down cash, reinvest, or buy an annuity.

See
https://www.moneyadviceservice.org.uk/en/categories/types-of-pensions

For fuller advice.

Thanks matey. Appreciate the link

wanabedriver said:

Not sure if this is the right place to post this question, but can anyone shed some light on the key differences between a defined pension and the final salary pension.

While final salary is still offered some tocs/focs are now only offering a defined benefit.

A brief outline is what I’m after as my head spins faster then VTWC down the mainline.

Thanks

Click to expand...

There are no final salary pensions on the railway now.

The term 'final salary' is from years ago under BR when there was a system in place where by the person would move into a high paying job just before retirement to boost thier pension disproportionatly to the amount of contributions they had actually paid. They were scrapped over 20 yrs ago but the term 'final salary' is still used for some reason.

As regards the term 'defined benefit' that means you have a defined benefit (you know what benefit you will receive at retierment age). Hens the word 'defined'

A defined benefit scheme is different from a defined contribution scheme. The reason is again the word defined. In the case of defined contribution scheme it is the contribution that is defined (you know how much you pay(contribute) BUT not what you will receive).

Most pensions on the railway are now in fact a defined benefit career average earnings scheme.

That means you get what you put in in contributions for the grades you have worked in. IE 20yrs guard then 20 yrs driver gets pension equal to 20yrs contributions as guard and 20yrs contributions as driver. No final salary as the pension scheme would go bust paying out pensions that it had never received contributions for.

I did hear that some companies were trying to introduce a defined contribution scheme.

Thanks falcon and puppet, between the last post and link I should be able to work out the key differences.

Thanks

When I first joined my TOC I had to spend 2 years in the defined contribution scheme before I could move into the defined benefit scheme.

In our section our pension is based on my average pay over the 12 months before I retire, rather than my career average - so I guess it's more generous than others have mentioned above. (And I only joined the defined salary scheme earlier this year).

Network Rail have a final Salary pension scheme, I’m in it according to RPS.

The rps final salary scheme does not allow a reduction in pensionable pay. Basically if you earned and paid contributions on say 40k, if you then moved a job paying 25k you would continue to pay contributions based on your old higher salary. This definitely applies if staying in same section I'm not sure if you move sections. It is also slightly different if you go part time but on same salary.

Also if anyone has any questions on their pension and implications due to changes to pay etc speak to the rps direct. Random blokes on the internet do not count as good advice!

I still have a deferred Final Salary BR Pension, due in 2020

Defiantly speak to RPS direct, very helpful indeed.

Tom Quinne said:

Network Rail have a final Salary pension scheme, I’m in it according to RPS.

Click to expand...

The NR final salary pension scheme closed to new entrants a few years ago.

I transferred in from another section which was started back in the nougthies.