Commutation rates in context with age.

jimi_man

I have a quick query about commutation lump sums. I know this has been done to death on here, so I apologise in advance.

I’m a public sector worker, and on retirement I have the option to commute, which at present I don’t intend to do for various reasons, though I’m still considering. One of the considerations is that the commutation rate is about 21:1 which, from reading various other posts on here, seems fairly ok, with 12:1 generally considered poor.

However in context, that is when I am 51. Therefore does that make it somewhat less generous? I was thinking that if someone who is 65 took a 12:1 rate, then that would work out better than taking 21:1 when you are 51?

Have I got this right?

Linton

Whether 21:1 is worse at 51 is worse or better than 12:1 at 65 I dont know. But, yes the age is important in that you get a much smaller pension at 51.

To take some numbers: you cant get a commercial pension at that age but taking an age of 55 you can get an inflation linked pension of about 2.3% compared with 3.4% at 65. So a "fair" commutation payment at 55 should be about 1.5 times that at 65. So it would seem that the 21:1 ratio cannot be very much more generous than the 12:1 at 65.

jimi_man

Thanks for that. That's pretty much what I thought. I don't really want the money and would rather have the extra income. I hear people at work discussing how good the rate is, yet when I sat down and worked it out it didn't seem that great.

andrea_louise

Hi Jimi_man,

Where did you find details of the 21:1 commutation rate? I can only find details of the particularly poor 12:1 rate?

Thanks Andrea

jimi_man

Hi

It depends which public sector scheme you are in. Mine is one that offers a commutation rate dependent on age; the older you are, the worse it is. For my age when I finish, at 51, it's about 21:1. For people younger than that it starts from about 23:1 if you are 48, to about 18:1 for 60 year olds.

bilbo51

jimi_man wrote: »

Hi

It depends which public sector scheme you are in.

Which scheme are you in please?

andrea_louise

Thank you Jimi_man and Bilbo51.

I am a member of LGPS, I retired at 38, (IHR) Only 12-1 was available to me.

jimi_man

The Police Pension Scheme '87.