Should I take my pension now?

kazzy20a

I have worked for the same company for 34 years paying in to a final salary scheme all that time, I have recently been part of a TUPE transfer to another company and therefore I won't be able to continue contributing to the final salary scheme any longer. My intention is to join their scheme however...

I am 51 and could take my final salary scheme pension now.

The lump sum of £52000 would clear my mortgage which is currently costing me £360 p/m this is a tracker mortgage with 17 yrs left to go (currently at a low interest rate but will go up at some pLoint) the monthly pension amount is £650 for the rest of my life. So my dilemma is...

Do I
1. Take the pension, pay of my mortgage and invest in something else
2. Transfer the pension into my new employers scheme (not final salary)
3. Leave it frozen until I retire
Would appreciate any thoughts
BM

Linton

kazzy20a wrote: »

I have worked for the same company for 34 years paying in to a final salary scheme all that time, I have recently been part of a TUPE transfer to another company and therefore I won't be able to continue contributing to the final salary scheme any longer. My intention is to join their scheme however...

I am 51 and could take my final salary scheme pension now.

The lump sum of £52000 would clear my mortgage which is currently costing me £360 p/m this is a tracker mortgage with 17 yrs left to go (currently at a low interest rate but will go up at some pLoint) the monthly pension amount is £650 for the rest of my life. So my dilemma is...

Do I
1. Take the pension, pay of my mortgage and invest in something else
2. Transfer the pension into my new employers scheme (not final salary)
3. Leave it frozen until I retire
Would appreciate any thoughts
BM

Has the figure of £650/month if you retire at 51 been obtained from your pension scheme? If so how does it compare with retirement at the default age? Retiring early on a Final Salary scheme can be very expensive.

It is almost always a bad idea to transfer out of a final salary scheme into a defined contribution one. The terms would have to be unusually generous for it to be considered.

The FS pension wont be frozen: the benefit will continue to increase with inflation.

quotememiserable

Linton wrote: »

Retiring early on a Final Salary scheme can be very expensive.

Retiring early means you get a lower pension, but collect it for more years. It will be based an actuarial assessment so it should have the same total value whenever you take it (based on someone who lives to average age). It wouldn't normally be wise to take it so early unless you need it to live on now, because if you wait you'll get a higher pension which will probably be important to you when its the only income you have.

Zero_Sum

kazzy20a wrote: »

I have worked for the same company for 34 years paying in to a final salary scheme all that time, I have recently been part of a TUPE transfer to another company and therefore I won't be able to continue contributing to the final salary scheme any longer. My intention is to join their scheme however...

I am 51 and could take my final salary scheme pension now.

The lump sum of £52000 would clear my mortgage which is currently costing me £360 p/m this is a tracker mortgage with 17 yrs left to go (currently at a low interest rate but will go up at some pLoint) the monthly pension amount is £650 for the rest of my life. So my dilemma is...

Do I
1. Take the pension, pay of my mortgage and invest in something else
2. Transfer the pension into my new employers scheme (not final salary)
3. Leave it frozen until I retire
Would appreciate any thoughts
BM

are you sure about that? as it's normally 55.
I know for mine it was changed from 50 to 55 a few years back.

xylophone

the only income you have.

He'll also have state pension - he might want to get a forecast.

He intends to join his new employer's pension scheme.

are you sure about that? as it's normally 55.

It is possible that his right to draw an actuarially reduced pension at 50
was protected?

xylophone

2. Transfer the pension into my new employers scheme (not final salary)

I wouldn't in your shoes - and you would need an IFA sign off to do it?

If you leave your pension in the old scheme it is not frozen - see
http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/revaluation

If you take the pension now, the pension plus your salary might push you into higher rate tax.

On the other hand, you have a definite use for the lump sum and you could use the money saved each month to invest into a stocks and shares ISA?

hyubh

kazzy20a wrote: »

I am 51 and could take my final salary scheme pension now.

The lump sum of £52000 would clear my mortgage which is currently costing me £360 p/m this is a tracker mortgage with 17 yrs left to go (currently at a low interest rate but will go up at some pLoint) the monthly pension amount is £650 for the rest of my life.

Perhaps you might try putting more numbers to this? E.g., find out the normal retirement age of the final salary pension (this may be earlier than the age at which you intend to retire full stop), then compare the cost the mortgage interest between now and then vs. the cost of having the pension reduced for taking it early. Plainly, you can only make a guess of the latter given (at the risk of sounding morbid!) you can't accurately predict your own death. Nonetheless, a reasonable estimate could be made.

2. Transfer the pension into my new employers scheme (not final salary)

Definitely not, especially with the amount of service you have built up in the final salary pension.

atush

Leave your pension, do not transfer it.

And don't take a pension early unless you need to (esp in your case as you have another job). It will be worth more if you leave it.


But do join your new company's pension scheme.