New Starter & Pensions

[gtat]

Hello, all. I have received a job offer from SWR for a non-operational role (awaiting contract to be sent), but there is some confusion around the pension. I was told by HR that it is a Defined Benefit scheme, but not Final Salary. My understanding of the scheme guide linked below is that it is Final Salary (average of final 12 months' pay)?

The SWR (Defined Benefit) scheme has a normal retirement age of 62 (for non-protected members), with an employee contribution rate of 8.48%. Note that contributions (and benefits, ultimately) are calculated based your pensionable pay less 1.5× the basic state pension.

See here for the scheme guide which explains it all.

Can anyone confirm? Or is there more than one type of pension for new starters at SWR, depending on your role/ grade etc?

Thank you!

 

[Watershed]

Hello, thank you to everyone for this useful thread. I have received a job offer from SWR for a non-operational role (awaiting contract to be sent), but there is some confusion around the pension

Congratulations!

was told by HR that it is a Defined Benefit scheme, but not Final Salary. My understanding of the scheme guide linked below is that it is Final Salary (average of final three years pay)?

Yes, that's roughly correct. Since a change in the rules a few years ago, it now functions more or less as a Career Average Revalued Earnings scheme. So earning a lot more in your last few years before leaving/retiring will not massively increase your pension.

Can anyone confirm? Or is there more than one type of pension for new starters at SWR, depending on your role/ grade etc?

There's only one DB pension for new entrants to the rail industry. Unless you were employed by British Rail in 1993 (and meet several other criteria) you will have non-protected status and will be on the CARE-type pension.

You can also make voluntary contributions to the BRASS scheme if you join the CARE pension. This is, in many ways, no different to a normal private pension (SIPP). However, upon retirement, there is the option of taking your investments as a quasi-annuity at a very attractive rate (12:1, i.e. 8.3% - as compared to typical rates of 2-4%).

Some TOCs also offer a Defined Contribution (DC) pension option, usually with a (nominally) higher contribution to encourage people to choose this over the DB option.

We can't give pension advice here, so if you need help choosing the right option for you, you should speak to an independent pension or financial adviser.

 

[Red Devil]

I was told by an old hand when I first started on the rail to get into BRASS, which I did.
Best thing I did,won't get anything like the benefits on civvy Street. Soon mounts up and as has been said you won't miss it.

 

[Cavan]

Just a point on BRASS for new starters, be clear on what it currently is. Much of the raving about BRASS from "old hands" comes from the fact that BRASS used to have an element of matching your contribution by the BR/TOC. This is not the case anymore for those new to the scheme.

 

[Watershed]

Just a point on BRASS for new starters, be clear on what it currently is. Much of the raving about BRASS from "old hands" comes from the fact that BRASS used to have an element of matching your contribution by the BR/TOC. This is not the case anymore for those new to the scheme.

Indeed. But even without any matching contributions, it's still a very generous scheme and, with sufficiently large contributions, will often give the DB scheme the edge over any DC alternative.

 

[gtat]

Congratulations!


Yes, that's roughly correct. Since a change in the rules a few years ago, it now functions more or less as a Career Average Revalued Earnings scheme. So earning a lot more in your last few years before leaving/retiring will not massively increase your pension.


There's only one DB pension for new entrants to the rail industry. Unless you were employed by British Rail in 1993 (and meet several other criteria) you will have non-protected status and will be on the CARE-type pension.

You can also make voluntary contributions to the BRASS scheme if you join the CARE pension. This is, in many ways, no different to a normal private pension (SIPP). However, upon retirement, there is the option of taking your investments as a quasi-annuity at a very attractive rate (12:1, i.e. 8.3% - as compared to typical rates of 2-4%).

Some TOCs also offer a Defined Contribution (DC) pension option, usually with a (nominally) higher contribution to encourage people to choose this over the DB option.

We can't give pension advice here, so if you need help choosing the right option for you, you should speak to an independent pension or financial adviser.

Thank you! That's really useful.

Are you able to explain to a pension novice like me how the Final Average Section Pay (As defined on Page 19 of the Scheme guide) differs from a Final Salary Pension?

The scheme guide says 'Final Average Section Pay' is averaged over 12 months prior to leaving.. which I interpreted as Final Salary but it seems I have misunderstood?

 

[Red Devil]

Just a point on BRASS for new starters, be clear on what it currently is. Much of the raving about BRASS from "old hands" comes from the fact that BRASS used to have an element of matching your contribution by the BR/TOC. This is not the case anymore for those new to the scheme.

Yes that's true but they only matched it up to a certain amount. That said and your point taken it is still a very good scheme. It's tax benefits make it a no brainer,really

 

[Watershed]

Thank you! That's really useful.

Are you able to explain to a pension novice like me how the Final Average Section Pay (As defined on Page 19 of the Scheme guide) differs from a Final Salary Pension?

The scheme guide says 'Final Average Section Pay' is averaged over 12 months prior to leaving.. which I interpreted as Final Salary but it seems I have misunderstood?

Even if your pay increases substantially year on year, your Section Pay can now only increase by inflation (can't remember if they use CPI or RPI for this). So, in effect, your starting pay will determine the maximum your Final Average Section Pay can be (which makes it a quasi-CARE scheme).

That's my understanding - however it's a very complex subject, and for a full explanation you'd need to speak to RPMI or a pension adviser.

 

[gtat]

Thank you for your explanation! I still don't really understand the 'Section Pay' bit, as the scheme guide only seems to reference the final 12 months salary rather than starting salary, but I'll try and do a bit more research. Thanks!

 

[Wolfie]

Thank you all so much for all the advice.

I'm gonna be 53 in January and hope I'll be out of the talent pool for commercial guard sometime next year.

I've got 9 years Royal Navy pension, 12 years Royal Mail and the pretty diabolical one I'm on now so with the state pension and hopefully 15 years RPS and BRASS I'm hoping I'll be comfortable enough.

Thank you again for your time and advice.

I'm not sure about the railway pension scheme but l do know that in the broader public sector there is something called the public sector pension transfer club. If you change employers there is a facility to transfer past public sector pensions into the new scheme so you have one decent pension rather than lots of small ones. Might be worth probing.

You might even be able, but you can check the terms on offer, to transfer your extant awful one in too.

 

[Watershed]

Thank you for your explanation! I still don't really understand the 'Section Pay' bit, as the scheme guide only seems to reference the final 12 months salary rather than starting salary, but I'll try and do a bit more research. Thanks!

Yes, unfortunately the scheme guide, despite being relatively detailed, is still somewhat of a summary of the position. The actual Scheme Rules run to hundreds of pages of legalese!