Typical Employer Pension Contribution

Premos said:
A colleague of my husband spoke to a financial about his scheme. The advisor didn't believe it was not taxed. (Except for cgt)
I must say these schemes are not always clearly explained to employees.
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I'm not talking about an untaxed scheme. The ESPP in question (and any that I participated in previously) is subject to tax - income tax etc. on the share price discount, CGT on subsequent gains if the shares are not liquidated immediately. The staff in this case (and every scheme that I participated in) were given regular presentations on his the scheme works. Even after tax it's a no brainer (the at least 15% gross discount/return becomes c. 7% net after tax for high rate taxpayers) unless someone is living paycheck to paycheck. But some people still don't get it.
 
Once Pension AE is rolled out, the next stage is to AE employees who's company schemes are less than the AE contribution rates. The AE rates will rise to 6% long term. So employers will have to raise their rates to match or the DSP will do it for them!
 
ClubMan said:
The ESPP in question (and any that I participated in previously) is subject to tax
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Sorry. I confused this with a ESPS. Also advantageous as no income tax if shares are kept for 3 years. As noted, in one company, ver little information was provided while in another one, there is yearly communication.
 
Towger said:
Once Pension AE is rolled out, the next stage is to AE employees who's company schemes are less than the AE contribution rates. The AE rates will rise to 6% long term. So employers will have to raise their rates to match or the DSP will do it for them!
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My employer contributes 5%. Presuming AE actually starts next year it goes as high as 6% after 10 years so my employer will have to increase from 5 to 6% in about 11 years. Yipee!
 
Hello,

In my experience:

* I.T. Firms are very poor pension contributors, often maxing out at 5% - 8%.
* MNCs are often a bit better but rarely give much more than 10% - 12%
* Financial Services Co.'s are more generous giving up to 20%, or even 24% for some roles
* No one beats the civil service !

All that said you'll often get a far better basic salary from a private entity, then the junior to mid level grades in the civil service, so you do really need to look at the overall package.
 
MrEarl said:
No one beats the civil service !
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Do you mean a defined benefit pension is still better than a DC scheme with 24% employer contributions? And they don't count toward your age related limit for AVCs. Maybe older DB schemes. I'd be surprised if the single Pension Scheme is better than 24% employer contributions.
 
CharlieMac said:
Do you mean a defined benefit pension is still better than a DC scheme with 24% employer contributions? And they don't count toward your age related limit for AVCs. Maybe older DB schemes. I'd be surprised if the single Pension Scheme is better than 24% employer contributions.
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Hard to do a direct comparison, since a DB scheme insulates you against risks that no DC arrangement, however generously funded, can possibly insulate you against. Hard to put a price on that, and how much you value it depends on your attitude to the risks concerned.

Another complicating factor is that, in the DC scheme, contributions paid at early on in your career contribute far more you your eventual accumulated retirement savings than contributions paid at the other end. So if someone is offered a position with a 24% contribution rate, what that means to his eventual retirement income depends on whether his is now 30 or now 60. (I'm guessing, though, that the positions that carry a 24% contribution rate are fairly senior positions that you reach towards the end of your career, rather than at the beginning.)

The third factor that you have to consider is your own objectives and priorities. As providers of retirement income, DB schemes are very efficient — as in, pretty much all the money that goes in, and of the income and gains earned, is used to provide income for you/your spouse. In DC arrangements, a largish chunk isn't used to for that at all, and ends up being inherited by the next generation. Which is great, if your objective is to benefit your 55-year old children when you die. But if your priority objective for your pension scheme is to maximise retirment income, then you want to be in a DB arrangement.
 
TomEdison said:
since a DB scheme insulates you against risks that no DC arrangement, however generously funded, can possibly insulate you against. Hard to put a price on that, and how much you value it depends on your attitude to the risks concerned.
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It also gives complete inflexibility on drawdown and risk appetite. Pensions were also cut between 2009 and 2015!

I’m a public servant and would take anything over a 10% employer contribution instead of the post-2013 service regime I’m in.
 
Dr Strangelove said:
It also gives complete inflexibility on drawdown and risk appetite.
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By "risk appetite" you mean risk on investment return? The whole point of a DB scheme is that you don't carry any investment risk; the employer carries it all.

Obviously, if you want to carry investment risk, and don't value the guaranteed outcome offered by a DB scheme, then this is not a feature that will attract you. But not everybody will share your preferences which, again, underlines that a comparison between the two arrangements is not a straightforward matter.
Dr Strangelove said:
Pensions were also cut between 2009 and 2015!
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I'll give you that point. But in the circumstances in which that happened, if public sector pensions had been administered on a DC basis I am reasonably sure they would still have been reduced.
 
Dr Strangelove said:
I’m a public servant and would take anything over a 10% employer contribution instead of the post-2013 service regime I’m in.
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With the public sector tax and contribution increases limited to CPI, I would have thought that anything greater than 5% is more attractive.
 
I always thought a DB pension was the gold standard and a big reason why I moved to a public sector job.

But now I understand PS and state pensions are unfunded except from tax receipts I'm not so confident the benefits will pay out all the way to the end of my days as I expect.

Who knows where the corporate tax take will be in 20 years time and if we find anything to replace that tax income with at a time of likely growing demographic imbalances. Better to also have other sources of retirement income if possible.
 
10% has been the norm i have seen in US Banks and consultancy firms. Someone said 24% above?! Thats crazy generous, where is that?
 
I've had 4 different IT jobs, mostly MNCs. And the employer contribution was between 5 and 6 %.
One job with a start-up where there was no pension contribution at all, but I was able to negotiate a higher salary based on that.
 
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