{ "media_type": "text", "post_content": "I've seen various threads where people (some big 4?) have referred to their companies' pensions. Can someone explain this to me? Why would anyone in this day and age offer pensions (versus 401k etc)?", "post_id": "576b6dcc5f57661300ea99ac", "reply_count": 24, "vote_count": 3, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting", "feed_type": "crowd" }
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I've seen various threads where people (some big 4?) have referred to their companies' pensions. Can someone explain this to me? Why would anyone in this day and age offer pensions (versus 401k etc)?

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Yeah we get a pension and a 401k.

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Yeah but can you explain what this means in practice? When I think of a pension I think something like you get paid $X per year after retirement for every Y years worked at the company

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@A1 6% and 8% match both seem really good, especially if from day 1

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The 401k plan offered by Deloitte sucks from the matching perspective. The pension is kind of a 'hey we know you basically can't invest in anything because of independence issues so here's some money to incentivize you not to make us the next andersen'.

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That's exactly what pension is. Depending on age and time with firm, your pension accumulates at a certain rate. Once you reach a certain age, you get a monthly payment throughout retirement

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@EY2 but what does a pension mean if say you work for 3 years then leave?

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It means your payment is really small

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Thanks for all the input. I just don't understand why a company would set themselves up for future liability when it obviously has caused huge problems in other industries.

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But do you have to pay out everyone who has ever worked at the company for the rest of their lives regardless of how long they stayed? Even if it's minuscule for someone who left while still very junior, it seems like a big hassle. I get using it as an incentive once you make partner.

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Yes, better than a stick in your eye, but likely not better than a higher bonus percentage or 401k contribution in the present instead. There are tradeoffs.

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Pensions, like all annuity products, offer diversification of longevity risk (plus tax deferral, but that's available elsewhere). BCG, you keep saying getting a bigger bonus or more 401k is better, but you might not agree if you live to be 110 and you exhaust your retirement savings.

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Managing straight life annuities isn't that hard. With a large group, the longevity risk is fairly well defined. As long as you're responsible with the payments you promise and make the plan contributions as needed. Where other companies got lost was that they promised juicy pension benefits in exchange for current wage cuts in labor negotiations. That dynamic is unlikely to happen here.

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Both for us as well

Ex D here - the 401k sucks though. The % is shitty and the pension has some weird rules around it. Accenture just does 401k with 6% match. KPMG has a good one, I believe (I could be wrong) they match 401k at 8%.

EY pensions for partners can exceed 350k/year

I don't recall exactly how the pension works. At ACN, you get 3% at yr 1 and 6% at yr 2.

When you have a pension in a partnership model, and the pension is one of only truly quantifiable value propositions of staying long term, it's not THAT hard to imagine why leadership would keep it

@OP- at EY it's a long play, you spend 10-20 years at partner level, and you are required to retire at 58, then you collect 350k a year for life

Yes, that is how the pension works, partners have a separate pension fund here, if you only spend a few years they may just offer you a buy out but best option is to let it sit, it continues to compound til you are at retirement age, the monthly pay out will be small but better than a stick in your eye

^i agree 100%, the pension is only worthwhile if you're a partner here, our 401k match is a big stinky pile of shit and bonus well about the same, and they just moved from a defined benefit pension system so the benefit is worth way les

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