Network Rail Pensions any good?

Discussion in 'Railway Jobs & Careers' started by Richie P, 2 Jan 2018.

  1. Richie P

    Richie P Member

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    Hi all. I appreciate this is a complex subject but it is one that is important to me, and everyone else I would imagine. I am considering leaving the fire service where I have a half decent pension and would like to know how the pensions stack up from Network Rail as I am aware there are maybe 3 different ones available. My current pension after 35 years service at retirement age of 60 would provide me with around £77000 lump sum and approximately £750 per month pension.

    Could people give me there thoughts on which is the best NR pension and why and maybe there prospective figures on retirement.

    Also...does anyone know if I could transfer my fire service pension to NR and if it's a like for like equal transfer..eg, would 17 years fire service equate to 17 years in NR or more or less.

    It's a big decision to leave and I want to be as informed as possible. Thanks in advance for your replies.
     
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  3. Llanigraham

    Llanigraham On Moderation

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    I would suggest you speak to a Pensions expert, instead of asking on an internet forum.
     
  4. The One

    The One Member

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    Hi.

    I believe if you start with Network rail for the first five years you will be on the Defined Contribution Scheme.After five years service you will get the chance to join the railway final salary scheme.This is what I am lead to believe.Not sure if you can transfer your pension but you can always contact them and ask them for your piece of mind as it sounds a big decision.
    All the best
     
  5. Highlandspring

    Highlandspring Established Member

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    The NR final salary scheme closed to new entrants a number of years ago, around 2011/12.
     
  6. nom de guerre

    nom de guerre Member

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    The 'after five years' option is now based on Final Average Pay, rather than final salary.
     
  7. ewaste

    ewaste New Member

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    The only person who can give you advice worth the paper it's written on is an independant financial adviser, specifically one who carries the relevant certifications for dealing with defined benefit pension schemes. I'd also suggest you ask on the Money Saving Expert forum in the pension section for advice in finding a suitable IFA.

    As you would be a new employee within the rail industry, NR specific, you would be required to spend 5 years in the NRDC (Network Rail Defined Contribution) before getting an oppurtunity (if it still exists by the time you get to the decision point) to join the Railways Pension Scheme NR Section where you would accrue 1/60th of your basic salary before overtime for every year of service. This would be payable at the scheme pension age of, more than likely, 68 with penalities for earlier payment.


    As for transferring your Fire Service pension into NR it would likely be a non-starter as it is an un-funded defined benefit public pension scheme and you would likely initially be joining a defined contribution scheme to start with. You would also lose the protections of the Fire Service pension scheme e.g. if you have a protected retirement age.

    I would run your own numbers but lets say you are a Grade 3 Signaller on £30,000 your pension after 5 years in NRDC would start accruing at £500 a year payable at NPA (probably 68) if you spent 25 years as a Grade 3 you would accrue a pension of £10,000 a year from NPA. As far as I understand it there is no automatic lump sump other than the value of your NRDC although you can create one by commuting annual pension at the rate of £12 for every one £1 of annual income lost, generally a bad deal considering how long people may live. All the figures and calculations are widely availabe online and you can download the NRDC and RPS65 scheme booklets as well, it's easy math.

    Is the £750 a month, £9k per annum, before or after any applicable income tax and have you commuted any income to lump sum?

    TLDR, The fire service pension is by far the better deal both financially and risk wise.
     
    Last edited: 3 Jan 2018
  8. TRain87

    TRain87 Member

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    Can someone explain final average pay?
     
  9. ewaste

    ewaste New Member

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    Simple really, for each year you work you bank 1/60th of that years salary.
    Year 1:- £30,000 Salary / 60 = £500 pension per year payable from NPA
    Year 2:- £30,250 Salary / 60 = £504.16 pension per year payable from NPA

    The calculation is done every year until retirement and previous 'chunks' are revalued in line with inflation, so if CPI inflation was 2.5% in year 2 then then Year 1 will be revalued at £500+2.5% = £512.50.

    Therefore by the end of year 2 you have a pension of £512.50+£504.16 = £1016.66

    Your pension at retirement is the sum of all these 'chunks' added together.
     
  10. TRain87

    TRain87 Member

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    Thank you ewaste
     
  11. Richie P

    Richie P Member

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    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.
     
  12. Richie P

    Richie P Member

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    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.
     
  13. ewaste

    ewaste New Member

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    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.

    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...
     
  14. Richie P

    Richie P Member

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    Thank you very much for all your info! I have lots to consider. Your time is much appreciated.
     
  15. Southernsig

    Southernsig Member

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    Final salery pension ( the railway pension) is still availiable as a one time offer after 5 yrs service. Until then the NRDC scheme (worst of the 3) and CARE (average salery) are available from the start.

    Worth talki g to an expert but when joining certainly worth starting on the CARE scheme over NRDC

    CARE also uses RPI for when calculating interest not CPI as someone earlier stated
     
  16. tiptoptaff

    tiptoptaff Established Member

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    As someone who works for a TOC already in the RPS, could I go straight on to it as a continuance of my current pension?
     
  17. Elecman

    Elecman Established Member

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    Yes as long as there is no break in service and the NR Trustees approve your application to transfer but you may lose some built up entitlement
     
  18. tiptoptaff

    tiptoptaff Established Member

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    I've only been in two years, so there's not much, I just don't want to come out of it for 5 years (if of course I even got the job!) It's a factor for me in any decision I'd make to leave my TOC
     
  19. Tom Quinne

    Tom Quinne Member

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    Yes, I did although it took a few months for GWR to send RPS my file and then for them to get it all sorted. I had six months in the basic NR scheme which I then mined over to my RPS NWR section scheme.
     
  20. Tom Quinne

    Tom Quinne Member

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    Have you heard anything from SWCC Grade 4 Taff?
     
  21. tiptoptaff

    tiptoptaff Established Member

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    Ideal. This would be an identical situation.

    Not yet, still on "Tests Completed"
     

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