Should I stop paying into my final salary pension?

3 June 2014


I am 52 and have paid contributions into my employer's defined benefit scheme for 36 years but have been told it is not worth paying in for any longer than 40 years. How long should I pay into it for?
JJ/East Yorkshire


Normally, an employee does not become eligible to become a member of his employer's occupational pension scheme until reaching the age of 18. Therefore, it is likely that you have only accumulated 34 years' pensionable service within your current scheme.

The maximum pension that can normally be accumulated within a defined benefit pension scheme is two-thirds of your final salary. This is usually an average of the best three consecutive years out of the last 10 years of service before retirement.

On the basis that you have 34 years' service in the scheme, you will need to remain a member for another six years in order to obtain maximum benefits. This gives a total service within the pension of 40 years and any service in addition to this is unlikely to achieve any increase in pension benefits, although death in service benefits would remain in place.

HMRC limits the total amount of pension benefit that you can accumulate during your working life to a lifetime allowance, which is currently set at £1,250,000.