CDC Pension calculations

[mr hil.]

I am a little confused as to how the new CDC pension will be calculated. The target of 1/80th of pensionable pay for each qualifying year has been mentioned but I have been unable to ascertain whether this will be either based on your final years salary or calculated annually.

The annual pot approach would then be revalued each year in line with how the overall investment funds have performed and so could result in a much higher pension from the time you begin to take your pension.

The 1/80th target of your final years pensionable salary times by the number of years would result in a totally different figure e.g. £25K salary this year with average of 2% increase would give a final salary of £30500 in 10 years which would provide a a higher annual pension of about £700 extra per year

I have been unable to find out which way this new CDC will be run does anybody else have any more information at this time?

[stephen500]

cdc.jpg

Proposed scheme

[RobertT]

I am a little confused as to how the new CDC pension will be calculated. The target of 1/80th of pensionable pay for each qualifying year has been mentioned but I have been unable to ascertain whether this will be either based on your final years salary or calculated annually.

The annual pot approach would then be revalued each year in line with how the overall investment funds have performed and so could result in a much higher pension from the time you begin to take your pension.

The 1/80th target of your final years pensionable salary times by the number of years would result in a totally different figure e.g. £25K salary this year with average of 2% increase would give a final salary of £30500 in 10 years which would provide a a higher annual pension of about £700 extra per year

I have been unable to find out which way this new CDC will be run does anybody else have any more information at this time?

CDC will basically be the same as the old CSDB scheme, so we'll accrue an amount of pension equivalent to 1/80th of our pensionable pay each year. plus a lump sum of 3/80ths.

So if your pensionable pay is £25,000 in year 1, you'll accrue pension of £312.50. if it goes up to £25,500 in year 2, you'll accrue £318.75.

But how much pension we actually get will depend on investment returns. The aim is that it'll increase each year by at least inflation, but it could also go down.

CDC is NOT a final salary scheme!

[mr hil.]

Thanks for the clarifications, I had read the table Stephen500 posted but was unsure as to whether it was 1/80th of your final salary. RoberT's answer assures me that it is NOT a final salary scheme so a new "pot" of money each year based on that years salary hopefully increasing above RPI if the other forecasts I have read online are accurate and a CDC scheme will outperform the old DB schemes by investing in higher return funds etc.

I will now be able to at least make some educated calculations when I do my own forecasts whilst planning how soon I will be able to retire.
Thanks once again.

[stephen500]

Thanks for the clarifications, I had read the table Stephen500 posted but was unsure as to whether it was 1/80th of your final salary. RoberT's answer assures me that it is NOT a final salary scheme so a new "pot" of money each year based on that years salary hopefully increasing above RPI if the other forecasts I have read online are accurate and a CDC scheme will outperform the old DB schemes by investing in higher return funds etc.

I will now be able to at least make some educated calculations when I do my own forecasts whilst planning how soon I will be able to retire.
Thanks once again.

Remember as Robert T said. CDC pension can go down in payment. Although it is unlikely ever to be zero!

[fly-catchers]

Remember as Robert T said. CDC pension can go down in payment. Although it is unlikely ever to be zero!

This is RM don't forget!