Pensions calculator simplified

The last post turned out longer than I intended. For those people who don’t want to engage with the detail, here are the main points.

If you don’t want to get into the complexity of the pensions calculator then I suggest you make the following changes to the default figures. Enter 4.5% for inflation, and add 2.5% to that figure for each promotion you expect to get before you retire. These are both reasonable assumptions, as I explain in the earlier post. For investment returns put 6.0%, and increase your rate of contributions to the DC plan to 8% (the max permissible).

And the conclusion I drew once I’d played with the calculator?

If you stick with the default figures then CAB2011 can in some cases look good. But that’s because the assumptions for the vast majority of people will be hopelessly inaccurate. I’m a well paid Executive Producer, and if I put the default figures in, then CAB2011 pays about the same as the existing final salary scheme. But if I assume one more decent promotion before I retire (inflation 4.5%, salary increase 7.5%) then under CAB 2011 I am £20000 (yes, twenty thousand) a year worse off than on the existing scheme. The other alternatives are even worse.

It’s not that surprising. CAB2011 is a con, designed to confuse the issue, which is the destruction of the BBC’s existing scheme for nakedly political reasons. If we weren’t massively worse off under CAB2011 then Mark Thompson wouldn’t be able to boast about saving money, and the whole exercise would be pointless.

 

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