High public sector pay figures 'endemic' say Danielle Boxall
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Public sector professions are leading the pack when it comes to pensions. A retirement income of £46,000 a year may seem like a dream to most people but it’s a reality for some professionals.
Incredibly, one profession receives more in pension than they currently earn from their job, according to new research from financial and pension experts Pension Times.
Teachers earning an average salary of £40,000 a year can expect to receive an annual pension of £46,000 in retirement, making this the most generous public sector pension scheme of all.
They pay between 7.4 percent and 11.7 percent of their salary into their scheme.
Depending on their salary, their employer may pay a further 16.48 percent of salary into their pension.
This means a 35-year-old teacher earning an average salary of £40,000 could expect an annual pension of around £46,000 if they retire at age 68.
By contrast, the average UK pension pot stands at £61,897, according to the Financial Conduct Authority. That’s enough to generate income of just £3,000 a year.
Armed forces personnel also benefit from generous pensions. They receive the second highest retirement payout at £41,000 a year, even though their pension benefits have been reduced in recent years.
The Ministry of Defence pays the equivalent of 1/47th of their annual earnings into their pension, and this is increased every year in line with inflation.
An army sergeant earning £36,000 who retires at 60 as a major after completing 32 years of service can expect an annual retirement income of £41,000, plus a tax-free lump sum of £22,000.
Politicians aren’t far behind.
MPs benefit from one of the most generous pension schemes out there, which Pension Times said is hardly surprising “as they’re responsible for setting pension rates”.
The current salary of a 57-year-old politician is £76,011 year and they can look forward to an annual pension of around £34,000 if they retire at 65 years old.
The figures show that town planners enjoy an average pension of £29,500 a year.
Police officers earning an average salary of £30,000 can expect annual pension of around £28,000.
This is far more than the £20,000 that firefighters can expect, or the £14,500 NHS employees receive on average.
NHS employees enjoy a CARE scheme, which entitles them to 1/54th of each year’s earnings. They contribute between 5 percent and 14.5 percent of their salary, depending on how much they earn.
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A senior nurse earns on average £35,000 and can expect to retire aged 65. With 25 years service they could have a pension income of around £14,500 a year, plus a maximum lump sum of around £60,000.
Perhaps surprisingly, tax inspectors are at the lower end of the scale, with HMRC’s finest receiving £13,000 a year pension on average.
Choosing a job with an attractive workplace salary makes sense, said Jonathan Watts-Lay, director of workplace pension specialists WEALTH at work. Under the auto-enrolment workplace scheme, employees contribute four percent of salary and receive a minimum three percent from their company, plus tax relief worth one percent.
This adds up to contributions totalling eight percent of salary and Watts-Lay urged workers to start saving early to make sure their pension has maximum time to grow.
“Those who start saving in their 20s could increase their pot by 25 percent at retirement,” he said.
The alternative is to train as a teacher.
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