I've read various posts in regards to negotiating a higher salary after receiving an offer. However, one piece of information I'm looking for is how to factor in a pension program when counter-offering.

When making a counter offer it behoves oneself to factor in all contributing factors. It's easy to factor in salary, vacation and even 401K matching. However, the question remains how does one properly factor in the pension?

Is there a set industry standard formula to dictate how this ultimately impacts one's salary?

  • Bees don't have hooves.
    – Eric
    Feb 18, 2015 at 15:00
  • Tagged this US, since it does matter. Do you intend to retire outside the US (e.g. India, China)? If yes, then expected future inflation in the USD may possibly eat up your pension savings. Depending on your scenario, it may make more sense to decline pension plan and buy property abroad.
    – smci
    May 22, 2015 at 3:01
  • Other basic questions: what age are you, what are the minimum and maximum contribution limits, what is the company matching scheme?
    – smci
    May 22, 2015 at 3:04

3 Answers 3


Joe Strazzere's remark is spot on. There's no standard way for factoring in pension benefits because people have different values. Basically, your decision is an investment one, and probably stands better chance of being discussed ad nauseam at Money SE

The risks are:

  • age-specific risks of your death/death of spouse,
  • unexpected changes in your lifestyle and consumption pattern,
  • significant downturns in the economy,
  • outright pension fraud,
  • defaults on securities in the portfolio,
  • regulatory changes (tax, prudential supervision),
  • large exchange rate swings,
  • probably a score of other factors I have inadvertently left out.

There are objective formulae to calculate the value of various alternatives, but unfortunately they don't reflect the fact that human judgment is less than rational. With this in mind, though, I recommend that you spend at least some time catching up on investment decision making and asset pricing. It may be a bit difficult on first and even on umpteenth readings, but your future well-being is at stake - forewarned is forearmed, they say.

P.S. In no way can this post be construed as personal investment advice. If in doubt, contact a professional advisor, do not trust random people on the Internet.

  • Thank you so much for your help & advice. I will take my question over there.
    – ist_lion
    May 14, 2013 at 20:13
  • 3
    Political risk is another one ie they change the rules in 10 or 20 years time
    – Neuro
    May 14, 2013 at 21:54
  • However, remember as soon as you leave this job you regain control over the 401K and can roll it over into whatever other 401K or IRA you want and allocate it however you want.
    – smci
    May 22, 2015 at 3:02

You don't say where you're based but here in the UK, final salary pensions are better than money purchase although the former is increasingly rare now.

Assuming it is money purchase (or similar) on offer you'll want to consider things like:

  • How soon you can join
  • How much you can contribute
  • How much the company contribute
  • How customisable the pension is (from safe investments to risky ones)
  • Whether a lump sum is payable (or an option)
  • Whether there is an extra death in service payout
  • Whether it is transferable
  • Whether you can transfer in an existing pension

etc etc etc

As I'm sure you're aware, a typical pension fund will invest in the stock market so it is a bit of a black art to calculate how each will (or could) pay out unless you were intimate with the details of how your pot was invested.

  • 4
    The OP's profile states Virginia, U.S. as his/her location. A couple other factors (401K, the PSU name & sports logo) imply that as well.
    – GreenMatt
    May 14, 2013 at 19:50
  • Is "money purchase" a UKism? I'm not familiar with the term .
    – GreenMatt
    May 14, 2013 at 19:51
  • 1
    Yes, these are the more common sort. Final salary as the name implies guaranteed a pension based on your salary on leaving the company. Money purchase schemes just invest the money with the returns depending on the vagaries of the stock market, bond returns, arbitrage etc.
    – Robbie Dee
    May 14, 2013 at 19:56
  • Thanks! Sounds a lot like what the 401K is in the U.S. 401K has some tax advantages (for most people), thus the name (401(K) is the section of the tax code that defines it).
    – GreenMatt
    May 14, 2013 at 20:03
  • 1
    @GreenMatt DC or Defined Contribution is the formal UK term for "Money Purchase"
    – Pepone
    Feb 17, 2015 at 21:32

For a DB Final Salary Pension you can estimate out what its worth by working out how many qualifying years you have in the scheme and at what rate you accrue (30th 40th or 60th are common) your salary and inflation. Obviously you have to take an average RPI.

You can then compare this value to a DC scheme by working out how much you would have to invest to get the same income assuming the same rpi.


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