What % Contrib. For DC scheme to replace DB Scheme

E

Enda 1

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Can anyone suggest a suitable method of calculating the % DC contribution required to compensate for the loss of a 40/60 Defined Benefit pension.

I can contribute up to 5%, but what level should my employer be contributing at to compensate me for the loss of the DB Scheme?

Is there a calculation that can be made on this to get a feel for whether or not there will be a shortfall, if say the employer contrib. was 7%?

What information would I need to make a case for a higher level of contribution?
 
I don't think there is an suitable method as it's all down to how the fund performs and what annuity rates are applicable at retirement.

You would just have to assume X % growth and Y % annuity rate.

You should sit really sit down with an advisor, preferably not the one appointed by the employer in this case.

At the end of the day the employer will want to pay as little as possible based on certain assumptions and you are trying to get them to pay more based on more conservative assumptions.
 
You could run some figures using the pension calculator on the PB website...but bear in mind that the true cost may be higher than PB website as it does not seem to reflect current low interest rate environment fully...but it would certainly give you an early idea of figures involved.
 
Enda,

Are you a member of a trade union? DB schemes are being closed down on a regular basis and the trade unions are active in negotiating the terms and conditions around replacement DC schemes?

I know that some banks and finacncial institutions have given generous salary increases to employees giving up their DB scheme.

A few points to bear in mind: What is the financial standing of the company? What is the financial standing of the pension shcheme? Is it adequately funded? Make sure you know all the benefits of the scheme (eg Death in Service Benefit, Spouses Benefit etc). Is the eventual DB pension indexed in any way?

Have a look at the pensions board website.
 
Thanks for the advice.

I had a look at that pensions board calculator. It's telling me that I need to be contributing 23% in total for a 2/3 salary return when I retire! I can't see the boss going for the 18% contribution !!! I am not sure how this calculator works, but I have been involved in my DB scheme since I was 25, have 8 years membership, and it is giving me this figure - does this sound accurate?

Cheers.
 
Sounds pretty accurate - the true figure is probably a bit higher tho (and I am not kidding!!).
 
In that case, how can I possibly seek to negotiate a replacement DC scheme for my DB scheme as it guaranteed this 2/3 salary return?

There is no way any "normal" employer will offer this level of contribution - what is usually on the table is 5%-7%, maybe a little more if you are very lucky. And I have a pretty fair employer.

Thanks.
 
Now you know why FAIR(???!!!) employers are closing DB schemes!
 
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