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MyCompanyPension.co.uk - Helping members of occupational pension schemes to better understand their benefits.
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:: Blog | June 2009 (15 blogs) | DB vs DC pension: No contest?
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DB vs DC pension: No contest?
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Comparing defined benefit pension schemes with defined contribution schemes is a bit like comparing apples with pears. Nevertheless, highlighting potential outcomes of contributing to either can be useful, if not startling.
Prudential has just released figures which show:
A 25-year-old worker who joins a defined contribution scheme this year, into which they pay 2.7% of their salary and their employer contributes 6.5%, could expect to receive an annual pension of £16,023 if they retired at 65.
But this income is just 28% of the pension of £57,714 a year that a 25-year-old who joined a final salary scheme could expect to receive in 40 years' time, according to insurer Prudential.
Now I know that there are more assumptions in that small statement than most ordinary readers would be aware of, but it’s still a powerful set of figures. I’m not too sure however, that it’s what I’d want to see if I were 25 and thinking of starting my pension, but I suppose the truth often hurts. See:
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Mike Jones, MyCompanyPension.co.uk Ltd, June 24th 2009
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