Basic maths help please!
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Before I start, I should say that this isn't for my homework! I know how that would go down... :) My workplace is looking to "harmonise" some of the benefits that it offers its staff. Definitely not cost-cutting - please try to remember this! Currently, if I pay 4 pounds into my work pension, the company pay in 26, which is nice. Under the new arrangements, if I pay in 8 pounds, they'll pay in 18. This might be good too, so I don't want to sound too ungrateful - I just want to work out how much worse off I'll be with the new arrangement. [ I edited the above to try to make it a bit clearer. Really this is using percentages, but I figured it was easier to explain it this way, then got it wrong... :doh: ] I can see two ways to calculate this; they come up with different numbers, and I can't figure out what I've done wrong. It all seems so simple, and I don't like feeling stupid! Option 1: I will have to pay 4 pounds more, and they'll pay me 8 pounds less. Therefore I'm 12 pounds worse off. Option 2: My total pension will fall from 30 to 26 pounds, and this will cost me 4 pounds more. Therefore I'm 8 pounds worse off. Please could someone tell me which of these is correct, and why? It's driving me mad! Thanks for your time, and thanks very much in advance for any help. Rich.
Whatever the basic calculation you work out, there will be a much much greater difference by the time you take this money at retirement. See Discount Rate[^] Or, to put it simply, £100 invested today might be worth £200 by the time you retire. However if you only put £70 today, it might be worth £150 by retirement. Therefore the £30 difference today becomes £50 difference by retirement. Compound this over every year you pay in, and it makes a HUGE difference.
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Whatever the basic calculation you work out, there will be a much much greater difference by the time you take this money at retirement. See Discount Rate[^] Or, to put it simply, £100 invested today might be worth £200 by the time you retire. However if you only put £70 today, it might be worth £150 by retirement. Therefore the £30 difference today becomes £50 difference by retirement. Compound this over every year you pay in, and it makes a HUGE difference.
Thanks - something else to look forward to! Plus there was the stuff I didn't mention - like that the existing scheme is a final salary one, and the new one isn't. I know it's all going to hurt - I was just trying to put a base figure on how much. I figure that I can't really beat anyone up over potential future performance of bonds/stocks/etc, but I can complain about an 8% (or 12% or 16%) pay cut and ask for appropriate compensation in my salary. Rich.
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Thanks - something else to look forward to! Plus there was the stuff I didn't mention - like that the existing scheme is a final salary one, and the new one isn't. I know it's all going to hurt - I was just trying to put a base figure on how much. I figure that I can't really beat anyone up over potential future performance of bonds/stocks/etc, but I can complain about an 8% (or 12% or 16%) pay cut and ask for appropriate compensation in my salary. Rich.
Do you have a union? If so, get them involved - they can fight the employer for a fairer deal. The company has to give 60 days notice of closure, so now is the time to organize your workforce.
*pre-emptive celebratory nipple tassle jiggle* - Sean Ewington
"Mind bleach! Send me mind bleach!" - Nagy Vilmos
CodeStash - Online Snippet Management | My blog | MoXAML PowerToys | Mole 2010 - debugging made easier
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Before I start, I should say that this isn't for my homework! I know how that would go down... :) My workplace is looking to "harmonise" some of the benefits that it offers its staff. Definitely not cost-cutting - please try to remember this! Currently, if I pay 4 pounds into my work pension, the company pay in 26, which is nice. Under the new arrangements, if I pay in 8 pounds, they'll pay in 18. This might be good too, so I don't want to sound too ungrateful - I just want to work out how much worse off I'll be with the new arrangement. [ I edited the above to try to make it a bit clearer. Really this is using percentages, but I figured it was easier to explain it this way, then got it wrong... :doh: ] I can see two ways to calculate this; they come up with different numbers, and I can't figure out what I've done wrong. It all seems so simple, and I don't like feeling stupid! Option 1: I will have to pay 4 pounds more, and they'll pay me 8 pounds less. Therefore I'm 12 pounds worse off. Option 2: My total pension will fall from 30 to 26 pounds, and this will cost me 4 pounds more. Therefore I'm 8 pounds worse off. Please could someone tell me which of these is correct, and why? It's driving me mad! Thanks for your time, and thanks very much in advance for any help. Rich.
I stopped my pension 5 years ago, now investing in Stocks and Shares ISA should be retiring by 60 at this rate. Better returns, no management fee, no annunities, free to spend when I like and I'll get the full amount. Pensions and the biggest freud scam in the UK.
Software Kinetics - Dependable Software news
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Do you have a union? If so, get them involved - they can fight the employer for a fairer deal. The company has to give 60 days notice of closure, so now is the time to organize your workforce.
*pre-emptive celebratory nipple tassle jiggle* - Sean Ewington
"Mind bleach! Send me mind bleach!" - Nagy Vilmos
CodeStash - Online Snippet Management | My blog | MoXAML PowerToys | Mole 2010 - debugging made easier
No union, sadly. The company are currently going through the "consultation" phase, but it's taken as read that this just means "we've given you notice: get used to it". Rich.
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I stopped my pension 5 years ago, now investing in Stocks and Shares ISA should be retiring by 60 at this rate. Better returns, no management fee, no annunities, free to spend when I like and I'll get the full amount. Pensions and the biggest freud scam in the UK.
Software Kinetics - Dependable Software news
Ditto. I started my own company so that I could direct money and investment profits through it (so as to keep it at arms length from the PAYE system of my normal job). I make money from property rental income, direct third party contracting work and money lending. I estimate I will retire at 57-58 with about £500K cash plus the apartment (and rent thereof), so will be adequately catered for in retirement. (This assumes I maintain my 7.3% return of investment pa).
--------------------------------- I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave CCC Link[^]
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Before I start, I should say that this isn't for my homework! I know how that would go down... :) My workplace is looking to "harmonise" some of the benefits that it offers its staff. Definitely not cost-cutting - please try to remember this! Currently, if I pay 4 pounds into my work pension, the company pay in 26, which is nice. Under the new arrangements, if I pay in 8 pounds, they'll pay in 18. This might be good too, so I don't want to sound too ungrateful - I just want to work out how much worse off I'll be with the new arrangement. [ I edited the above to try to make it a bit clearer. Really this is using percentages, but I figured it was easier to explain it this way, then got it wrong... :doh: ] I can see two ways to calculate this; they come up with different numbers, and I can't figure out what I've done wrong. It all seems so simple, and I don't like feeling stupid! Option 1: I will have to pay 4 pounds more, and they'll pay me 8 pounds less. Therefore I'm 12 pounds worse off. Option 2: My total pension will fall from 30 to 26 pounds, and this will cost me 4 pounds more. Therefore I'm 8 pounds worse off. Please could someone tell me which of these is correct, and why? It's driving me mad! Thanks for your time, and thanks very much in advance for any help. Rich.
The answer to this (in absolute terms) is £8 because they were giving you £26, but now they are giving you £18. So - option 2. But it depends how you look at it. If instead of the arrangement they have gone for, they said they would still give you £26 but you had to pay in £8 (or £26, £100, or whatever) - in theory you are no worse off, but in practice you are having to pay more to get the same from them. Their argument would be that you going to get it all back eventually - but that depends on your view of how well the pension is going to do...
Jon CodeWrite
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No union, sadly. The company are currently going through the "consultation" phase, but it's taken as read that this just means "we've given you notice: get used to it". Rich.
There's nothing preventing you from joining a union now and getting their involvement.
*pre-emptive celebratory nipple tassle jiggle* - Sean Ewington
"Mind bleach! Send me mind bleach!" - Nagy Vilmos
CodeStash - Online Snippet Management | My blog | MoXAML PowerToys | Mole 2010 - debugging made easier
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Ditto. I started my own company so that I could direct money and investment profits through it (so as to keep it at arms length from the PAYE system of my normal job). I make money from property rental income, direct third party contracting work and money lending. I estimate I will retire at 57-58 with about £500K cash plus the apartment (and rent thereof), so will be adequately catered for in retirement. (This assumes I maintain my 7.3% return of investment pa).
--------------------------------- I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave CCC Link[^]
Dalek Dave wrote:
I estimate I will retire at 57-58 with about £500K cash plus the apartment (and rent thereof), so will be adequately catered for in retirement.
(This assumes I maintain my 7.3% return of investment pa).Very nice! I estimate that I'll retire shortly before death (because it's good to have something to look forward to) with a pat on the back and a nice pen. :) Rich.
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Dalek Dave wrote:
I estimate I will retire at 57-58 with about £500K cash plus the apartment (and rent thereof), so will be adequately catered for in retirement.
(This assumes I maintain my 7.3% return of investment pa).Very nice! I estimate that I'll retire shortly before death (because it's good to have something to look forward to) with a pat on the back and a nice pen. :) Rich.
My wife reckons that she will have to work for three years after she dies in order to afford to retire. (Actually she is 11 years younger than me and women live longer, so I best spend all my money quick, otherwise when I die she will just go shopping for 20 years!)
--------------------------------- I will never again mention that I was the poster of the One Millionth Lounge Post, nor that it was complete drivel. Dalek Dave CCC Link[^]
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Before I start, I should say that this isn't for my homework! I know how that would go down... :) My workplace is looking to "harmonise" some of the benefits that it offers its staff. Definitely not cost-cutting - please try to remember this! Currently, if I pay 4 pounds into my work pension, the company pay in 26, which is nice. Under the new arrangements, if I pay in 8 pounds, they'll pay in 18. This might be good too, so I don't want to sound too ungrateful - I just want to work out how much worse off I'll be with the new arrangement. [ I edited the above to try to make it a bit clearer. Really this is using percentages, but I figured it was easier to explain it this way, then got it wrong... :doh: ] I can see two ways to calculate this; they come up with different numbers, and I can't figure out what I've done wrong. It all seems so simple, and I don't like feeling stupid! Option 1: I will have to pay 4 pounds more, and they'll pay me 8 pounds less. Therefore I'm 12 pounds worse off. Option 2: My total pension will fall from 30 to 26 pounds, and this will cost me 4 pounds more. Therefore I'm 8 pounds worse off. Please could someone tell me which of these is correct, and why? It's driving me mad! Thanks for your time, and thanks very much in advance for any help. Rich.
There are 2 things to consider: 1.) the loss of income today and 2.)the lowered accumulated value of your pension at the time you retire. 1.) You lose 4 pounds of income today. In the first option, your 4 pounds is matched with 26 pounds. That is an instant 650% gain. Hard to beat. In the second option, your 8 pounds is matched with 18 pounds. That is an instant gain of 225%. Hard to beat, but significantly less than option 1. In the first option, you are paying 13.33% of a $30 pension contribution. In the second option, you are paying 30.78% of a $26 pension contribution. 2.)The option 2-26 pound contribution is only 86% of the option 1-30 pound contribution. You are contributing 14% less from this point forward. As mentioned in a previous reply, compounding that loss over the years is a huge reduction in your pension when you start to draw on it. In summary, you are paying more out of your pocket today and will will receive less pension in the future. Lose-Lose.
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There are 2 things to consider: 1.) the loss of income today and 2.)the lowered accumulated value of your pension at the time you retire. 1.) You lose 4 pounds of income today. In the first option, your 4 pounds is matched with 26 pounds. That is an instant 650% gain. Hard to beat. In the second option, your 8 pounds is matched with 18 pounds. That is an instant gain of 225%. Hard to beat, but significantly less than option 1. In the first option, you are paying 13.33% of a $30 pension contribution. In the second option, you are paying 30.78% of a $26 pension contribution. 2.)The option 2-26 pound contribution is only 86% of the option 1-30 pound contribution. You are contributing 14% less from this point forward. As mentioned in a previous reply, compounding that loss over the years is a huge reduction in your pension when you start to draw on it. In summary, you are paying more out of your pocket today and will will receive less pension in the future. Lose-Lose.
Thank you for this - I hadn't considered it in terms of percentages. That's my favourite number so far! :) Sadly I did, however, know that it was a lose-lose. :( Rich.
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Before I start, I should say that this isn't for my homework! I know how that would go down... :) My workplace is looking to "harmonise" some of the benefits that it offers its staff. Definitely not cost-cutting - please try to remember this! Currently, if I pay 4 pounds into my work pension, the company pay in 26, which is nice. Under the new arrangements, if I pay in 8 pounds, they'll pay in 18. This might be good too, so I don't want to sound too ungrateful - I just want to work out how much worse off I'll be with the new arrangement. [ I edited the above to try to make it a bit clearer. Really this is using percentages, but I figured it was easier to explain it this way, then got it wrong... :doh: ] I can see two ways to calculate this; they come up with different numbers, and I can't figure out what I've done wrong. It all seems so simple, and I don't like feeling stupid! Option 1: I will have to pay 4 pounds more, and they'll pay me 8 pounds less. Therefore I'm 12 pounds worse off. Option 2: My total pension will fall from 30 to 26 pounds, and this will cost me 4 pounds more. Therefore I'm 8 pounds worse off. Please could someone tell me which of these is correct, and why? It's driving me mad! Thanks for your time, and thanks very much in advance for any help. Rich.
No question about it. A company cost cutting measure. I guess they are hoping to get real benefit by fewer people taking advantage. Company cost cutting is a bitch.