DC vs DB

C

Clinique

Guest
I am currently on a DC pension contributing 5% with employer paying 10%. We are now being offered the chance to change to a DB/DC hybrid scheme where earnings under 45k (reviewed annually) are on DB using 1/60 x pensionable sal x years as the formula. All above 45k is DC.

I am currently earning circa 32k and would have 38 years service at 65.

I am in two minds about which plan to choose, stay on the DC with 15% contributions or change to the hybrid scheme where I would be paying 5% of salary less state benefit.

Any advise on which would be more beneficial would be greatly appreciated.
 
The DB is a guaranteed pension at retirementent, versus the DC scheme which is completely open to the market monements/Investment return, Id advise the DB option myself as very few companies are actually offering this due to the reason it can be very costly for companies if certain returns are not met, quite surprising to be honest..
 
There are a lot of ifs and buts on this. Based on your age and salary and assuming the deductible is 1x state pension, the DC should be more beneficial to you, based on the current assumptions for projections, but as the previous poster says you will take all the risk on the investment side, whereas with DB the employer takes the risk.

You will be paying much less in employee conts for the DB, so if you decide to go that route then the extra shoudl be set aside as an AVC.

What is the deductable on the DB scheme? Is it one times state pension or 1.5 times state pension?

Is this a current DB scheme or a brand new one. If it is a current one, what is the current funding level? And how secure is the employer?

DB may be seen as guaranteed, but the big problem is that if the employer goes belly up or winds up the scheme there is a chance you could be left with very little or nothing. Any pensions currently being paid would have first call on the money.

With DC, the pot of money is yours no matter what happens. Of course currently with markets at a low, the pot of money may be worth less than put in but pensions are a longterm investment, and you still have 38 years to go.

Also - is this a one-off choice you have, or can you join up at some stage in the future?
 
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