DC Contributions to Match a DB

[Risk Reversal]

Hi,

Does anyone know how to calculate roughly the employer contribution rate that is required annually to match a DC pension that would equate to a DB pension.

The DB pension isn't final salary but is inflation adjusted each year. For example 1/3 salary.

Assumptions being average stock market returns and inflation.

Thanks.

 

[Fortune]

It varies, depending on many factors. Impossible for someone to calculate it without intimate access to the scheme and the employer.

This is of no use to anyone, but the last year of the DB scheme I was in, the employers contribution was 29%.

 

[Dave Vanian]

The Pensions Authority have a calculator which enables you to calculate how much you'd need to contribute to arrive at a level of pension at retirement, subject to a whole heap of assumptions which are stated on the website. You could use that as the basis for your estimate. It's here.

 

[Risk Reversal]

Thanks, it is in the context of a career change and to get a sense, not exactly precise, of the value of giving up a DB of 30% of each years salary inflation adjusted for a DC of X% from employer. I know I'll be worse off but it is to get a sense of what that figure would need to be ball park to equate.

 

[Flybytheseat]

Thanks, it is in the context of a career change and to get a sense, not exactly precise, of the value of giving up a DB of 30% of each years salary inflation adjusted for a DC of X% from employer. I know I'll be worse off but it is to get a sense of what that figure would need to be ball park to equate.

Think myself 30% is extremely high. In the past a basic non escalating DB pension without spousal benefits was costing employers in the region of 16% of salary.

 

[Risk Reversal]

Thanks, I was factoring in employer matching on additional AVC's. So let's call it 20%. For a inflation adjusted escalation capped at 5%, is there a rule of thumb calculation that would give an approximation?