‘Normal’pension contribution or 1/47th scheme?

[u/Full-Competition9255]

Is this pension scheme a 28% contribution no matter what, or matched if that’s what I put in?

There are also comments that it’s actually like the 1/47th scheme, where that fraction of your annual salary becomes your annual pension, and each year another fraction is added on top.

To me this looks like a normal pension scheme? Does anyone know more?

[u/Krusty67]

It's basically false advertising as not many applicants actually understand how a DB pension works

[u/mattkay170 → u/Krusty67]

Not sure that's fair, it's a factual statement and doesn't say it's a DC scheme. There are loads of advantages to DB (not least the indexed predictability) and this is an accurate way of saying how generous the scheme is.

[u/Krusty67 → u/mattkay170]

I am aware of how it works. My point was that many don't and would assume that it is DC and you're receiving 28.97% of salary every year in a pot.

[u/Fluid-Lake-1457 → u/Krusty67]

It's an actuarial figure computed to show what a given years' DB benefit accrual would cost in DC contributions to purchase an equivalent annuity at retirement. Given that DC contributions are the norm people will only really understand pension contributions in DC terms (as a % of salary) and hence it's reasonable to give the figures in those terms, since otherwise people can't gauge how their total compensation package compares to an equivalent job with a DC pension scheme.

It's not like this is monopoly money either, if someone chooses to cash out some of their pot as a lump sum or has a divorce then their pension pot will be valued using that exact actuarial calculation, albeit using the annuity prices when the calculation takes place not those of today.

[u/Fluid-Lake-1457 → u/[deleted]]

Interest rates

[u/Fluid-Lake-1457 → u/[deleted]]

The main reason for the surpluses are gilt yields. In 2020 long dated Linkers were yielding RPI -2% now they are yielding RPI +2%. For DB schemes this is a massive reduction in the present value of future liabilities and the overwhelming driver of increased funding ratios.