A well respected name in the Financial Services Industry, Steve Bee, commented recently in “Money Marketing” about Final Salary Pension Schemes (also known as DB Schemes).
He wrote the following:
“It is not unusual for someone who has been in a defined benefit scheme for a large part of their career to have pension assets worth more than the house they are living in.
“The value of deferred pension benefits is something very few of us really understand, even those of us who work in the financial services industry.
“The fact someone’s pension could be worth more than a home they have spent their life scrimping to pay for seems too counter-intuitive for many clients to comprehend.
“How can something you get as a perk from work be worth more? It is not that painful to pay for; most people do not even notice the money going out. Surely it is just financial mumbo-jumbo to say they are worth that much? But, of course, it is not. It is just that, for many in workplace DB schemes, the value of the contribution made by their employer is grossly underrated.
“A “good” DB scheme provides a pension of a 60th of an employee’s salary at or near retirement for every year of pensionable employment completed. A 40-year career could thus provide a pension of around two thirds of the income the employee was used to receiving while at work. Such schemes are regarded as the gold standard in the world of workplace pensions.”
To be continued…