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Anyone ever taken a "sabbatical" from work - how did it pan out?


Butch

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The idea is being mooted at my place of work, the terms (not yet agreed but are being discussed) remain as they have in the past when it has been offered:

Pay at rates of 20% of Salary.

Pension contributions adjusted accordingly.

Length of service / Terms of Employment remain the same.

Maximum 1 year / minimum 3 months.

Company can request return to work with minimum 1 months notice, holiday etc all pro rata.

No restrictions on other employment for the individual, but cannot be within the same Industry, for a competitor either in a freelance or consultancy capacity*

*this is very basically a sum up of that condition, it goes much more in depth than that.

I am tempted, but the kicker for me is the pension reduction. I'm on a final salary pension and would appreciate suggestions on how to mitigate the dent one year of low contributions might be done, my first idea was to stick my equivalent weekly amount into  a SIPP or maybe a well performing fund - but that is no guarantee of performance!. However, I am contemplating 6 months if it is offered, so would that make a huge difference in the grand scheme of things?.

Be interested to read of any BM's who've undertaken one and how you got on with it.

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I asked for one 3 years back, and didn't hear anything back via my boss on HR's decision.

Till I got invited into a what should have been a regular one to one with my low life boss, to find a member of HR in the room. 

Was made redundant with a big pay off I couldn't possible refuse, and marched out of the building by security( the systems and data I had access to made that a necessity, no argument from me.)

In all seriousness it was the best decision I ever made but no help to you unfortunately.

However it might be something for you to  ponder, how will your employer react to you asking? What would happen if you re-ran my experience?

Edited by Lemondropkid
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25 minutes ago, Butch said:

I'm on a final salary pension and would appreciate suggestions on how to mitigate the dent one year of low contributions might be done, ............

How is the pension calculated? Is it number of years of service divided by 60 multiplied by the final salary?

As you are an employee throughout the sabbatical, your years of service should not be affected.

If the final salary is, for example, the average over a specified period of time, it's possible the pension could be affected.

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I had a year's unpaid sabbatical from work in '99 2000, having worked there for 11 years. I asked the boss 9 months prior, and it was agreed 3 months later, when they secured a replacement  for me. The only terms were that my role was available to me when i returned, and i offered to give them 3 months (as opposed to the standard month) notice if i wasnt intending on returning.

I spent 9 months travelling, then went back and did a bit of freelancing at the same establishment.  After my replacements year contract expired (he wasnt very good!) I was welcomed back.

One of the best things I ever did. I left tired and demoralised by the job, and returned with batteries charged and full of enthusiasm. Mind you, within 3 years that had all gone, and when I asked again a few years later i was refused. I think they are of great benefit to all involved.

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7 minutes ago, Bazle said:

How is the pension calculated? Is it number of years of service divided by 60 multiplied by the final salary?

As you are an employee throughout the sabbatical, your years of service should not be affected.

If the final salary is, for example, the average over a specified period of time, it's possible the pension could be affected.

Hi Baz

It's the former, years service divided by 60 then x FS as far as I'm aware. To be honest it's not something I've looked into too deeply because I thought that for 6 months, over a period of an expected / predicted (God willing) 35 year length of service it won't make any odds. I did "bring" service with me when I transferred my old pension into the company one.

As my company runs what seems to be a plethora of different schemes depending upon length of service, some stakeholder etc, it's a bloody minefield at times.

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42 minutes ago, Lemondropkid said:

I asked for one 3 years back, and didn't hear anything back via my boss on HR's decision.

Till I got invited into a what should have been a regular one to one with my low life boss, to find a member of HR in the room. 

Was made redundant with a big pay off I couldn't possible refuse, and marched out of the building by security( the systems and data I had access to made that a necessity, no argument from me.)

In all seriousness it was the best decision I ever made but no help to you unfortunately.

However it might be something for you to  ponder, how will your employer react to you asking? What would happen if you re-ran my experience?

Our redundancy package in the UK is not that great. I faced redundancy 2 years ago and my company only offers "statutary" amounts so it's not that great and wouldn't work for me sadly.

They have offered payoffs in the past, but only to senior managers. Sadly I'm not important enough to warrant such an offer 🙂

Glad to hear you got lucky with yours, sometimes life takes a turn which while unexpected, is a blessing in disguise.

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Sabbaticals are more common in Oz , think you can even bank your holidays over there ..

I would have jumped at it if it had been offered, especially if they are still paying you 20% of salary ... they may adjust your pension service, so if you took off 12 months , only 20% ( 2.4 months ) would count towards pension  or that total period may not count ... but loosing 1/60 shouldn't make that much difference to your final pension ... but best to clarify the terms 

if they are offering it , I assume it must be to help them out during a quiet period ... I suppose redundancies could follow if things don't pick up in the next 12 months 

I took redundancy after 28 years and was lucky enough to get 3.5 weeks per year, really happy I took it and had 18 months off before taking another job 

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1 hour ago, Butch said:

Hi Baz

It's the former, years service divided by 60 then x FS as far as I'm aware. To be honest it's not something I've looked into too deeply because I thought that for 6 months, over a period of an expected / predicted (God willing) 35 year length of service it won't make any odds. I did "bring" service with me when I transferred my old pension into the company one.

Butch, 

You have to find out how "final salary" is defined in your pension scheme.

In recent years, there has been a move to call it the average salary over the last  x number of years, or (hopefully not!) over the whole period of employment.

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1 hour ago, Bazle said:

How is the pension calculated? Is it number of years of service divided by 60 multiplied by the final salary?

As you are an employee throughout the sabbatical, your years of service should not be affected.

If the final salary is, for example, the average over a specified period of time, it's possible the pension could be affected.

Ditto from me.

Quite often final salary pensions accrue 2% per years served up to a maximun of 60%, then have a forfeit for years taken before an end term which is often greater,

IE. Loose 3% for every year retired before age 60.

It's important you understand your options before committing.

The final salary used in the calculations can be offered in a few ways,

IE.  last 12 months pay, average earlings over last 3 years and so on.

Edited by boydeste
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5 hours ago, Butch said:

Our redundancy package in the UK is not that great. I faced redundancy 2 years ago and my company only offers "statutary" amounts so it's not that great and wouldn't work for me sadly.

They have offered payoffs in the past, but only to senior managers. Sadly I'm not important enough to warrant such an offer 🙂

Glad to hear you got lucky with yours, sometimes life takes a turn which while unexpected, is a blessing in disguise.

We are due to be made redundant end of February. Was originally planned for end of October but delays caused it to be put back. Can't come quick enough. Absolutely mentally exhausted by the place, new owners have turned it to shit. Getting 19 years standard redundancy plus 2 months salary loyalty bonus for staying until the relocation is completed,plus week per year up to 12 weeks for notice period. So I'll be taking some time out. Beginning of spring as well so planning on taking a holiday (Covid permitting), and a bit of touring the UK on the bike. 

Last time I took time off was in 2001/2002 when I was in Thailand for 11 months. Came back like brand new, as at the time had been having relationship and addiction problems. Wasn't a sabbatical, just quit my job. 

I think it does you the world of good mentally and would take one occasionally if finances and the employer allows it. 

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9 hours ago, Butch said:

Our redundancy package in the UK is not that great. I faced redundancy 2 years ago and my company only offers "statutary" amounts so it's not that great and wouldn't work for me sadly.

They have offered payoffs in the past, but only to senior managers. Sadly I'm not important enough to warrant such an offer 🙂

Glad to hear you got lucky with yours, sometimes life takes a turn which while unexpected, is a blessing in disguise.

Tell them from now on you want to be known as Doris and you are reassigning you gender.

Blonde wig, short skirt, high heels next day.

They fire you sue them 2010 equalities act protected characteristics blah blah ,,,,,,,,, sue them again emotional trauma, mental health crisis, Doris is feeling like a trip to Beachy Head is in order.

HR will come running lump sum, compromise agreement enhanced pension job done.

Mine's a San Miguel Lite thanks mate .... 🍻

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Best thing I ever did was take a sabbatical from work. Did it when I was in my mid-30's. At the time I was a self-employed coder. Really enjoyed the work, but had burned out from the hours I was putting in and how it was preventing me from living my motto "work to afford my time off".

I used the time off to go back to school and complete a degree. Cool thing about that is when I had dropped out of college a decade earlier I was on academic probation for falling below a GPA of 2.0. When I returned to college the slate was wiped clean and ended up graduating with something like a 3.8 GPA. Life experience and being a motivated student helped a lot on that.

Those two years back in college were great. I called it my sabbatical from real life. Because of my high GPA and involvement with an accounting fraternity landed a job after graduating with one of the then big six accounting firms. Lasted three years there, but that job helped me land another job with a multi-national software/consulting firm which in turn really boosted my annual earnings and allowed me to ultimately retire at age 52 to Thailand.

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On 12/1/2021 at 12:07 PM, Bazle said:

Butch, 

You have to find out how "final salary" is defined in your pension scheme.

In recent years, there has been a move to call it the average salary over the last  x number of years, or (hopefully not!) over the whole period of employment.

Hi Bazle

It's not the average salary over the last 3 years, it used to be, but they stopped it in 2010 and it changed to the years of service divided by 60. There are penalties of 5% a year if taken before retirement "age" which is 65 (although no mandatory retirement is enforced if you want to keep on working).

As it stands the maximum length of service is 40 years, if I work until I'm 58 then I will have accrued that length of service as when I started I had transferred my old pension in which "brought" me a few years.

Looks like it might be a possibility going forward, and I've checked, I can work as a self employed financial liason officer for Isaan farm girls working in Pattaya during that time (but won't tell the Mrs for Tax purposes 🙂  )

Edited by Butch
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32 minutes ago, Butch said:

Hi Bazle

It's not the average salary over the last 3 years, it used to be, but they stopped it in 2010 and it changed to the years of service divided by 60.

Years of service divided by 60, multiplied by what though?

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3 minutes ago, Bazle said:

Years of service divided by 60, multiplied by what though?

Sorry Baz:

1/60 of total pensionable salary x total pensionable service.

I thought it was basic salary but it includes shift premiums but not bonuses. Every day is a school day,

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1 hour ago, Butch said:

Sorry Baz:

1/60 of total pensionable salary x total pensionable service.

I thought it was basic salary but it includes shift premiums but not bonuses. Every day is a school day,

Thanks, Butch,but we are still not there!

How is "total pensionable salary" defined?

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6 hours ago, Bazle said:

Thanks, Butch,but we are still not there!

How is "total pensionable salary" defined?

Baz I am copying verbatim:

"your pensionable salary for benefits is 1.5 times the lower earnings limit in force on Jan 1st each year or 25% of your basic salary if lower"

There is one more paragraph which applies to me:

"at the point that your benefits are calculated  Final pensionable salary rather than pensionable salary, is used. Your final pensionable salary is the higher of your pensionable salary in the last 12 months of pensionable service or the average of the highest three consecutive years of pensionable salary in the last 13 years of pensionable service".

Want a Hoist motor calibrated? no problem, call me, want to know how pensions work, I'm bloody clueless!!.

 

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34 minutes ago, Butch said:

Baz I am copying verbatim:   ......

"There is one more paragraph which applies to me: .. "

Let's ignore that for the moment, but see later.

"your pensionable salary for benefits is 1.5 times the lower earnings limit in force on Jan 1st each year or 25% of your basic salary if lower"

I assume "Lower Earnings Limit" refers to the LEL for National Insurance purposes - £120 per week, £6,240 per year. One and a half times that is £9,360.

If your basic salary is below £37,440 (i.e. 4 x £9,360), the relevant figure would be 25% of your basic salary rather than £9,360.

So 1/60 of total pensionable salary x total pensionable service (let's assume 40 years) would give a maximum pension of £6,240 p.a., which sounds very wrong! There must be something missing - maybe another pension scheme?

HOWEVER ...,.

In relation to your opening question about how a sabbatical might affect your pension, perhaps you have posted the answer ....

"at the point that your benefits are calculated  Final pensionable salary rather than pensionable salary, is used. Your final pensionable salary is the higher of your pensionable salary in the last 12 months of pensionable service or the average of the highest three consecutive years of pensionable salary in the last 13 years of pensionable service".

So, if your earnings fall in your final year, all is not lost as you can use the average of three previous consecutive years.

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5 minutes ago, Bazle said:

"There is one more paragraph which applies to me: .. "

Let's ignore that for the moment, but see later.

"your pensionable salary for benefits is 1.5 times the lower earnings limit in force on Jan 1st each year or 25% of your basic salary if lower"

I assume "Lower Earnings Limit" refers to the LEL for National Insurance purposes - £120 per week, £6,240 per year. One and a half times that is £9,360.

If your basic salary is below £37,440 (i.e. 4 x £9,360), the relevant figure would be 25% of your basic salary rather than £9,360.

So 1/60 of total pensionable salary x total pensionable service (let's assume 40 years) would give a maximum pension of £6,240 p.a., which sounds very wrong! There must be something missing - maybe another pension scheme?

HOWEVER ...,.

In relation to your opening question about how a sabbatical might affect your pension, perhaps you have posted the answer ....

"at the point that your benefits are calculated  Final pensionable salary rather than pensionable salary, is used. Your final pensionable salary is the higher of your pensionable salary in the last 12 months of pensionable service or the average of the highest three consecutive years of pensionable salary in the last 13 years of pensionable service".

So, if your earnings fall in your final year, all is not lost as you can use the average of three previous consecutive years.

So 1/60 of total pensionable salary x total pensionable service (let's assume 40 years) would give a maximum pension of £6,240 p.a., which sounds very wrong! There must be something missing - maybe another pension scheme?

Very wrong, if assuming lower earnings limit, my basic salary is way way way above that,  I get a yearly summary of my pension and how it performs and the value at time of writing including death in service etc.

It is bloody convoluted to be honest, I'm lucky enough to be on the final salary scheme and get a yearly report, I think the best option is to speak to the Dept and ask the effect it will have, if any if I take a sabbatical.

For the sake of 6 months, even if I stick a grand a month in a half decent fund that should cover any shortfall.

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50 minutes ago, Butch said:

So 1/60 of total pensionable salary x total pensionable service (let's assume 40 years) would give a maximum pension of £6,240 p.a., which sounds very wrong! There must be something missing - maybe another pension scheme?

Very wrong, if assuming lower earnings limit, my basic salary is way way way above that,  I get a yearly summary of my pension and how it performs and the value at time of writing including death in service etc.

That does not sound like a final salary scheme to me!

Are you making any contributions?

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1 hour ago, Bazle said:

One further thought - if you are nearing retirement, you should be able to ask your employer for a pension forecast. Probably a good idea to do so.

It's what is called legal requirement Baz not just some please help me out here.

Pensions are serious stuff and seriously regulated 2021 in the UK ........ apart from private sector 25% draw downs.

Heartbreaking sometimes .......... advise Butch and ignore and advise again ,,,,,,,,,,,,, process mate.

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  • 4 weeks later...
On 12/3/2021 at 11:04 PM, boydeste said:

That does not sound like a final salary scheme to me!

Are you making any contributions?

sorry to pick this up after a while @boydeste I'm not making any contributions outside the amount the company take from my wages (no AVC's for example). It is definitely a final salary scheme though, as it was closed to new members in 2006 and swapped to a "stakeholder" pension.

Instead of AVC's I pay into a fund which, on average gives decent returns , way above what I'd get in a bank. Any divvies are just reinvested. (again, thanks to @Bazle for directing me to a place to find one).

 

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