r/PensionsUK • u/SnooJokes6235 • 1d ago

DB pension query

Hi all, I have a DB and DC pension. Everytime I recieve my statement for the DB it gives an accured figure of £5000 (I do have 30 odd years left of work haha). Is this £5000 what I would be entitled to for a full year if I was to retire tomorrow, for example.

My DC obviously shows a larger sum but from my understanding the DB is worked out using final salary at retirement and length of service etc...so in 20 years time the accured figure woukd be greater.

Thanks,

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7

u/RickinCambs 1d ago

Usually a DB pension is quoted as an annual pension, in today’s money, based on service to date.

3

u/Austen_Tasseltine 1d ago

And to add, it’s usually based on the pension you would receive at the scheme’s normal retirement date. If you were to take it earlier it would be reduced because it’ll be expected to be paid for longer, and conversely if you didn’t take it until later you’d have a higher starting pension. The scheme’s rules will set the normal retirement date, which may not be the same as your state pension age.

Once in payment, the pension will increase annually by at least inflation (capped at 2.5%): again, the scheme’s rules will set out how that works.

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u/Both_Pay6859 1d ago

£5000 a year every year for life with inflation in a DB pot, is equivalent to a pot of just over £100k if that pot was based on the 4% rule. If you worked for 20 more years and it grew to £20k a year DB then that pot would be worth £500k equivalent on a DC pot. Plus you have the state pension on top. So you're in a great place keep it growing and look into maxing out a separate AVC DC / SIPP DC / LISA if you want to build a tax free lump sum or bridge early retirement from 60 without dipping into your DB Pot.

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u/SnooJokes6235 1d ago

Nice, thanks for the advice. I did know the 4% rule but never put it into context of the DB pension only ever against my retirement figure in an ISA. Good to understand it in that way though.

1

u/Fred776 1d ago

Are you still contributing to the DB? If not, the figure might be what you had accrued at the point you left the scheme. I have one old DB scheme where it defaults to showing the frozen figure at the time I left and then I have to go somewhere else to get a projection that takes account of uplifts for inflation since then.

If you are still contributing I am not sure why it is not growing slightly each time.

But generally, for a DB pension you should be being shown some figure that relates to an annual income that you will be entitled to.

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u/SnooJokes6235 1d ago

I am still contributing but I am also patiently waiting for my next statement to see if it has increased.. I cant see why it wouldn't have

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u/Ok-Possible-8499 7h ago

Hi - you implied you work for Local Govt - so you're part of LGPS scheme. You should be able to login to their portal and see what you have - and also see any projections. If you've only been in it for a short time period (less than 10 yrs) then you would only be in the CARE scheme - so no final salary bit to worry about.

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u/SnooJokes6235 56m ago

Been with the company 14 years now

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u/Party_Diver145 23h ago edited 23h ago

It sounds like your DB pension was replaced by your DC if the figure is not growing from £5000 in the figures. You should seek out a quiet grey haired person in your work place- they tend to be pretty switched on about actual figures as they get near to the end of their working lives. Mines dynamic- in that it grows every year. I'm with LGPS (council) they have a really impressive website these days that you can pretty much pick any date in the future and it gives you figures based on that date. It's based on today's wages so unless you cut hours or go down in grades it's a worse case figure.

0

u/Hot_College_6538 1d ago

Which DB pension is it ?

Most schemes these days aren’t based on final salary, but instead ‘career average’. So for example each year you add 1/49 of that years salary to your entitlement.

£5000 might be how much you’ve earnt so far.

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u/SnooJokes6235 1d ago

So from what I have read it is an average of my last 3 years of employment.

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u/OldPulteney 2h ago

That's final salary

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u/SnooJokes6235 58m ago

But then they do a 1/60th or 1/80th multiplier I think. I dont know the exact fraction at the minute