6% penalty / yr, for going early.

penpon

hi, if i take my pension early i get a 6% penalty for every year i go early, is there any way of avoiding this elsewhere, it is a company final salary , i have 25 yrs service attached to said pension, any ideas advice appreciated.

dunstonh

, is there any way of avoiding this elsewhere

No.

The scheme is funded and paid for to provide benefits at a given date. By taking it early you are a drain on underlying fund. That drain needs to be paid for. The choice is for the employer to pay it, other pension holders to pay it or for you to pay it. Often as part of a redundancy package, an employer may cover it but if its your own choice, then its unlikely you will find anyone else willing to pay it. And logically, why would they.

jamesd

Using income or capital from savings or investments is one popular way to handle this. A 6% loss of income for life is very expensive, far more expensive than just 6%, so it's also often useful to use credit to delay the work pension until the reduction is lower. Extending a mortgage term or switching to interest only or taking out overpaid money can be useful.

Use of a lifetime mortgage that allows repaying can also be useful if other tools aren't available. The mortgage interest rate will be of lower cost than the long term loss from taking it early. Say 18% loss for taking it three years early, paying 8% on a lifetime mortgage to pay living expenses for three years, then repaying the mortgage out of the higher income, is likely to be a good deal if other financing isn't available.

For fairly short terms, things like using 0% credit card deals can defer a lot of spending for a year to eighteen months by paying for it on the card.

So the key question for you is to see what resources you have available to use to delay and reduce the ongoing income loss by taking the pension later.

penpon

Forgot to say this final salary scheme closed in 2010, thanks for replies both.

bigfreddiel

penpon wrote: »

Forgot to say this final salary scheme closed in 2010, thanks for replies both.

that may be good -it may have been increased each year since then by RPI/CPI

my pearson fs pension that I left 30 years ago has been inreasing at 9% per annum!

cheers

fj

ajbell

bigfreddiel wrote: »

that may be good -it may have been increased each year since then by RPI/CPI

my pearson fs pension that I left 30 years ago has been inreasing at 9% per annum!

cheers

fj

I have a royal ordnance pension that is deferred and increasing at 5% a year
And i always thought it odd that it may be increasing by more now than if i were still contributing. I am lucky enough to have another final salary pension now that i am contributing to and the annual statements confirm that the deferred pension is increasing faster. At 9% you are doing great.
I got 20 years in the RO pension and it has almost doubled since i left and will double again before i take it.
Deferred pensions do better than pensions you are paying into.
Am i the only one to find this odd and regard myself as being lucky to have a
Current FS pension and a deferred one.
I also managed to get made redundant at the age of 35 with 20 years pension due to a surplus adding 4 years extra pension.

thenudeone

It's not a penalty.

You're getting a pension for more years if you draw it early.

Surely you don't think you can get the same amount per annum for 25 years as you would if you only received it for 20 years, say? Oh - perhaps you do.

Tancred

penpon wrote: »

hi, if i take my pension early i get a 6% penalty for every year i go early, is there any way of avoiding this elsewhere, it is a company final salary , i have 25 yrs service attached to said pension, any ideas advice appreciated.

No there isn't! What the hell do you expect for goodness sake!! If you want a bigger pension then work for longer you lazy so and so. :mad:

Spirit_2

penpon wrote: »

hi, if i take my pension early i get a 6% penalty for every year i go early, is there any way of avoiding this elsewhere, it is a company final salary , i have 25 yrs service attached to said pension, any ideas advice appreciated.

It is not a penalty. I find it helpful to look at your pension as a piece of elastic. When you stop contributing the fund is of a fixed size. If you go early you have to stretch it for longer so it gets thinner.

penpon

Thanks for the constructive views and explanations, for those who are a bit rude, and jumping to conclusions of my reasons for going early, just think again , before knocking people, there are genuine health reasons.

jamesd

When health issues are involved you should check whether ill health retirement is available to you. That can result in a payment of the full pension amount, not reduced for taking it early.