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I've been advised from careers.stackexchange to post this question here as it's more financial than career advice.

I've received a job offer from a company and I'm looking to make a strong counter-offer. To make the strongest argument I'm trying to have as much information at my disposal. Salary, vacation and 401k matching have been factored in. However, I am having trouble with my pension and how to value it. The company I currently work for has a pension program (it's been frozen to no longer allow new employees to enter) while the prospective future company does not.

Due to my youth and years put into the program the amount of money seen from the aforementioned pension would be minimal currently; however, if I were to work at this company until retirement it would be a large chunk of money every month.

What is the best way to factor this in when making a counter-offer? By that I mean, when moving from a company with a pension to one without how do I determine its worth?

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    >By that I mean, when moving from a company with a pension to one without how do I determine its worth? Are you planning on saying to your prospective employer "I have pension rights in the amount of $X with my present employer which I will forfeit if I take the new job with you, and so you need to compensate me for this loss in cash as a sign-on bonus, or by depositing $X as a employer contribution into my 401k (vested from Day 1 of employment)?" If not, the only negotiation would be whether the new employer's 401k plan will accept a rollover from the payout of your current pension plan. – Dilip Sarwate May 15 '13 at 13:34
  • it's probably costing employer only $300/month since you're young. it's a little complicated but you can estimate it using online calculators. the thing w 401k is it can COLLAPSE at any time. pension mostly safe. – OneSolitaryNoob Feb 15 '18 at 0:13
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I am in a similar situation and have recently found a planner who says a pension that pays $100/month is worth $18k in savings at retirement. I know that doesn't answer your question directly, but could could use a simple interest savings calculator (bank rate has one) to see how much of your income you would need to save over x period of time and deduct that from you the offer at your prospective employer to compare "apples to apples"

However, I actually think the value of a pension at retirement is greater than listed above.

To illustrate:

  • In my situation, I accepted a position at a school under a teacher contract later than most in life.
  • Pension at age 60 (10 years teaching under union contract)=about $800/month
  • Amount needed to save to draw down $800/month (5%/month) for about 30 years (360 months) including a bit of interest earned on that pile during those retirement years = $200k.
  • Amount I would need to save per month @%6 simple interest for the 12 years until I reach age 60=about$1200/month pre tax money.

So in this example my pension would seem to be valued at about $14,000 in salary for those 10 years.

  • Depends on your lifespan, returns, and retirement age. 15 year annuity @ 6% you need $12k saved to get $100/month. 30 year annuity you'd need $17k. – OneSolitaryNoob Feb 15 '18 at 0:08
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The typical pension is worth about 8-10% of income. My source is that when my company eliminated the traditional pension and flipped to a cash value account, the deposit to the cash value was 8% of gross income each year.

Obviously, the terms of each plan will vary, this is a swag more than a valid fact that applies to all.

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    This percentage may greatly depend on any vesting schedules as well. – enderland May 15 '13 at 2:15
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Almost all companies in the US have changed from formal pension programs to 401k plans, and most companies that still have pension programs don't allow new employees to enroll in the new program; only the previous participants who are vested in the pension plan will get benefits while new employees get enrolled in the 401k plan. If this is the case with your prospective employer, then demanding that you be allowed to enroll in the pension plan is likely to be futile; in fact, the likely response may well be "Here is our offer. Take it or leave it" or "We are withdrawing the offer we made" especially if you are in a field where there are plenty of other people who could do the job instead of you. So be sure that you understand what your worth is to the company and how much leverage you have before starting to make counter-offers.

With regard to money that you might have vested in your current employer's pension plan, your options are to leave it there until you retire and start getting a pension (generally not advisable in these parlous times when the company might not even exist by then), roll it over into an IRA or into your new employer's 401k plan. This last is the only matter that concerns your prospective employer and where you might need to ask; the new employer's 401k plan might not be structured to accept rollovers. If the money in your current employer's retirement plan is in a pension plan, what is paid out for rolling over might be different (and smaller) than what has been credited to you thus far. For example, my (State Government) pension plan credited 8% interest per annum on the amounts I contributed but this was fake money because had I resigned and withdrawn the pension contributions (for the purpose of rolling over into an IRA or even just taking it as cash), I would have received only my contributions plus only 4.5% interest per annum. The 8% interest credited is available only for the purpose of the purchase of an immediate annuity upon retirement; it is not something that is portable to a new plan, and if I want a lump-sum payout upon retirement instead of a pension in the form of an annuity, it would be the 4.5% rate again...

  • @Chad It is not surprising that there are a few companies that still offer "old school" pension plans, but the OP specifically states that the prospective employer is not one of these, while the current employer does have a pension plan that presumably will, at a later date, provide pensions for the participants (including the OP) but this pension plan is not available to new employees of his current employer, who presumably participate in a 401k plan. – Dilip Sarwate May 15 '13 at 14:11
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    My company must be a real oddball, we have a 401K AND a pension plan that is open to new hires (long vesting period though). – JohnFx May 15 '13 at 22:08
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    @JohnFx Some pension plans have changed from a defined-benefit plan (You will get x% of your final salary (or average salary over last five years) if you work for us for y number of years) to a defined-contribution plan (you must contribute z% of your salary each year) at which point there is little difference between the pension plan and a 401k as far as the employee is concerned. Our pension plan is open to new hires too, is still a defined-benefit plan but the benefits are far smaller (and the mandatory contributions higher) for newer employees. – Dilip Sarwate May 16 '13 at 2:15

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