Commercial Semi-State - DB Pension or DC

[clonbolia]

Hello all,

I've searched the threads and can't find specific advice on the following. I'm a young employee and have been offered entry to my company's defined benefits pension scheme. The alternative is to join a DC scheme that is just starting up (the company will pay 9% of my salary into it).

I will be among the last employees allowed to join the DB scheme. It had a large actuarial deficit but they have recently fixed this (e.g. capped the cost of living at 4% maximum, weakened link from pensions to wage levels of existing employees). The company itself is Blue Chip.

From previous jobs, I have a significant DC pension pot (although don't ask me about invesment performance ....).

I am young - in my 30s - married and have young children. I do have a motive to leave something behind for them.

Any advice on how I make the choice? Any models or good websites? Among my concerns are:

a. Will I get treated fairly as among the last person into the scheme?

b. A 4% cap on cost of living adjustments? This seems to expose me to risk if hyperinflation occurs post-retirement.

c. If the PRSI pension is eventually means tested - would a DC pension give me better ability to avoid this means test (e.g. buying a house with my lump sum).

d. How do I compare risk (investment performance for DC) vs returns?

e. If I am in a DB pension, is my ability to contribute to PRSA's limited?

Any advice welcome.

 

[ajapale]

Hi Clonbolia,

Im moving your question to Public Sector Pensions which is where commercial semi state DB pensions are discussed on AAM.

aj

 

[Anfear]

Many questions!
a. the trustees are obliged to look after all members fairly, but current pensioners always have priority in the event of problems with funding deficits.
b. I think we're all in trouble anyway if hyper-inflation strikes!
c. I think it would be impossible to say with any certainty - too far into the future
d. Take professional advice on the risk/returns issue. As (the late, great) Red Adair said, "if you think hiring a professional is expensive, try hiring an amateur!"
e. Shouldn't be! (PRSA AVC's) & it's a good idea if you can afford it! Revenue rules set the limits.