Posted by N.E.One on 17 January 2001 at 18:25:15:
In Reply to: N Plan Plus C Plan better combination???? posted by Alan Palmer on 17 January 2001 at 13:03:29:
Alan,
I am no expert on this, so stand to be corrected on all this, but I understood that if you joined when the C Plan was introduced then you got several years credited to your C Plan that you weren't required to pay for.
I have done some hypothetical calculations.
So suppose one was born in 1947, then in 1982 one's age would have been 35. The way I read the documents was that in these circumstances if one joined the C Plan one was credited with 10 years service at 2.2% from the age of 25. So if one had been employed from age 21 one lost 4 years of N Plan but gained 10 years difference between C Plan and N Plan (and by the way, if you look at the definitions, I believe the N Plan wasn't 1.75%, in practice it was probably 1.4 or 1.5% for higher paid people).
I think what you are pointing out is that the offer wasn't as attractive as it was made out to be. If one had delayed going to the C Plan by 4 years I believe one would not have had the 10 years backdated C Plan. In this case if one had delayed by 4 years one would have 14 years at N Plan , giving approx 20-21% as opposed to 10 years at 2.2% = 22%. So,as far as I can tell, one effectively probably gained by 1 or 2% final salary over the cost of 5% before tax salary over 4 years. I've no idea whether this is good or bad.
To take this further, if after 1982 one delayed by 12 years then one would have had 26 years N Plan at approx @1.5% = 38-39% for no outlay, compared with 22 years C Plan @2.2% = 48.4%, so the C Plan gave one an extra 9-10% over 12 years at a cost of untaxed 4 or 5% of one's salary for 12 years. This is a better ratio.
If in this example one had delayed by 4 years and then moved to the C Plan then 12 years after the 1982 event one would have been 47 and I think one would have accumulated 18 years N Plan (= approx. 26-27%) plus 8 years C Plan (=17.2%), giving a total of about 44 % of one's salary. In this csae, compared with the N Plan one would get 4% extra final salary for an outlay of before tax 4% for 8 years.
In 1982 we should all have been very strongly advised to seek pensions advice from an independent advisor. The fact was that many of us were working very hard for IBM and completed the forms (or not) if we had any spare time.