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Early Retirement from Pension Scheme
Borderer_2
Posts: 1 Newbie
Hi, I am about to take voluntary redundancy (i.e. I have virtually been told to volunteer otherwise it will be compulsary! I get an extra 50% for volunteering. The amount I will receive is £53,504 so happy to volunteer.
I have also been asked whether I want to take Early Retirement from the Company Pension Scheme and it is this part where I would like some opinions before I talk to a financial advisor.
I am 54 years and 5 months old with 21 years 6 months service. The company pension scheme is a Defined Benefit Scheme.
The retirement benefits shown on my last statement , if remaining in service until normal retirement age were as follows:
Final Pensionable Salary £52,273, Potential Service 32 years:
Option 1 Pension at NRD £25,621 p.a
Option 2 Lump Sum £127,917 and Reduced Pension at NRD £19,187
My early retirement estimate shows the following:
Final Pensionable Salary £52,290 Total Service 21 years 5 months.
Option 1 £10,726 p.a.
Option 2 Lump Sum £52,945 and Reduced Pension £7,941.
In all cases there is a spouses death after retirement pension of 50% of the option 1 pension.
For purposes of Lifetime Allowance the capital value of the early retirement benefits is estimated to be £214,533
I also have AVCs which on last statement had a buying power of £1,210 p.a. at age of 65.
My problem is that I have no idea whether it is best to take the early retirement option or not or if taking it whether to take Option 1 or Option 2. I will contact a financial advisor but would like any opinions/advice before doing so.
I do not have a mortgage or any debts and will have approx. £80,000 in investments/bank accounts once I receive my voluntary redundancy.
It is likely that I will work again but in a much lower paid job.
Thanks in advance.
I have also been asked whether I want to take Early Retirement from the Company Pension Scheme and it is this part where I would like some opinions before I talk to a financial advisor.
I am 54 years and 5 months old with 21 years 6 months service. The company pension scheme is a Defined Benefit Scheme.
The retirement benefits shown on my last statement , if remaining in service until normal retirement age were as follows:
Final Pensionable Salary £52,273, Potential Service 32 years:
Option 1 Pension at NRD £25,621 p.a
Option 2 Lump Sum £127,917 and Reduced Pension at NRD £19,187
My early retirement estimate shows the following:
Final Pensionable Salary £52,290 Total Service 21 years 5 months.
Option 1 £10,726 p.a.
Option 2 Lump Sum £52,945 and Reduced Pension £7,941.
In all cases there is a spouses death after retirement pension of 50% of the option 1 pension.
For purposes of Lifetime Allowance the capital value of the early retirement benefits is estimated to be £214,533
I also have AVCs which on last statement had a buying power of £1,210 p.a. at age of 65.
My problem is that I have no idea whether it is best to take the early retirement option or not or if taking it whether to take Option 1 or Option 2. I will contact a financial advisor but would like any opinions/advice before doing so.
I do not have a mortgage or any debts and will have approx. £80,000 in investments/bank accounts once I receive my voluntary redundancy.
It is likely that I will work again but in a much lower paid job.
Thanks in advance.
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Comments
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Hi borderer,
There's too much to note here of the things you need to ask. But here's one I'd ask in your shoes about pensionable service (I've used this as an example to show you of a question that's not obvious - but which is nevertheless important):
(a) Is your pensionable service counted in years and days (as most public sector schemes are)? If yes, there's no problem.
(b) Is your pensionable service counted in ‘whole years completed’? If yes, then I see that you’re half way through a year - can you negotiate a full rounding up of that year’s service? It is more likely that the more months you have completed, the better the chance you have of getting your pensionable service ‘bumped-up’! If it is calculated on this method, how about asking for the amount you have paid in (which will be absorbed) to be returned to you as an addition to your redundancy? If you don’t ask you don’t get…
(c) If your pensionable service is counted in years and months completed then you may be able to negotiate rounding up your pensionable service to the ‘completed month’ – every little helps!
An IFA who specialises in pension analyses of defined benefit pension schemes would be the best route to take.
I hope you find a new job swiftly.
Mike Jones
I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser.0 -
what you would have earned as a pension if you had continued to 65 is irrelevant as you aren't continuing to work.
To decide whether or not to takle the pension early requires you to know what the projected payout at 65 would be, given you are actually leaving.
If there is no actuarial reduction is taking it early then its a total no brainer to take it now... in any event a bird in the hand etc... so take the pension now.
the second issue is whether to take the lump sum or the larger pension
taking the larger pension works out at 5.33% return on the 'lost' capital.. if this is an inflation linked pension then a return of 5.33% plus inflation is impossible to beat elsewhere....
On the other hand if you work out the cash flow for the two options... depending upon your assumptions then it takes over 20 years to break even.0 -
If the pension is index linked and you're comfortable that you won't need to access the 80k for spending but can allow it to grow so as to provide future (hopefully tax free income) I'd go for option 1.This assumes you are in line for a basic state pension at 65.
If not index linked, I'd go for the additional cash, as you would also make a tax gain from the 10k age allowance @65 by having a further 2k of taxable income within it and it would enable you to build up the tax free income pile further.
Then max out both your ISAs to 7.2k a year and use NSI index linked certificates for tax free cash earnings when income's not required..Trying to keep it simple...
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hi, to all I just got pc so be gentle my co. is employee owned and i would like to know how long will it take for me to get mylump sum after i roll out i am 100% vested and assets are worth 16.000.oo please give me some help
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bobby_lagroone wrote: »hi, to all I just got pc so be gentle my co. is employee owned and i would like to know how long will it take for me to get mylump sum after i roll out i am 100% vested and assets are worth 16.000.oo please give me some help
Are you in the US by any chance? Despite the .com domain, this is actually a UK site and I suspect there are very few here with sufficient knowledge of US pensions to be able to help.
Is this a 401k plan? If so, there are plenty of US based forums with lots of experienced folk who can help over there
Warning ..... I'm a peri-menopausal axe-wielding maniac0
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