Going part time with a final salary pension

onlyroz

My husband has just turned 50 and has a rather good final salary pension scheme with his job. He would like to go part time but is concerned how this will affect his pension. Does anybody know how much of an affect it would be if he were to reduce to, e.g., 2/3 of his current hours? Would he be wiser to stick it out full time until he reaches 55? At which point would he be able to "retire" (i.e. start drawing his pension) but then be re-employed on a part time basis? Or are there any other options available?

hyubh

onlyroz wrote: »

My husband has just turned 50 and has a rather good final salary pension scheme with his job. He would like to go part time but is concerned how this will affect his pension. Does anybody know how much of an affect it would be if he were to reduce to, e.g., 2/3 of his current hours?

Usually benefits are calculated against the whole time equivalent salary against the length of calendar membership pro-rated for any part time periods. So if someone in a 1/80th scheme and on £30K pa drops down to 50% hours for the last ten years, having built up 20 years full time service before then and (for the sake of argument) goes on to see their rate of pay stay the same to the end, they will finish with a pension of £30,000 x (20 + [10 x 0.5]) x 1/80 = £9,375 pa. If they had stayed full time it would have been £30,000 x 30 x 1/80 = £11,250.

Would he be wiser to stick it out full time until he reaches 55? At which point would he be able to "retire" (i.e. start drawing his pension) but then be re-employed on a part time basis? Or are there any other options available?

You need to name the actual scheme if people aren't just going to pluck numbers out of the air - there is no 'standard' set of final salary scheme rules.

mgdavid

what is the commutation rate for retiring 10 years early? if it's 5% (not unusual) then he will lose half of the entitlement on top of the reduction for the period of part-time working - it had bette be a 'rather good final salary scheme' :eek:

atush

He would most likely be better off working full time until he is 55. Working PT will reduce the pension.

onlyroz

I think the normal retirement age is either 60 or 65. Can they prevent him from taking early retirement at 55?

mgdavid

onlyroz wrote: »

I think the normal retirement age is either 60 or 65. Can they prevent him from taking early retirement at 55?

Stopping working and taking the pension at whatever age is simply a matter of understanding the Scheme Rules, without them we cannot say what is or isn't possible for your husband.
It is up to the employer and their HR/personnel policies whether they consider taking retired staff back on as contractors or whatever, again without having access to the policies we cannot tell. Some so, some don't.

hyubh

onlyroz wrote: »

I think the normal retirement age is either 60 or 65. Can they prevent him from taking early retirement at 55?

Who are 'they'? You still haven't named the pension scheme...

Spirit_2

The scheme I am in is very simple - part time years accrue benefits at the proportin of time worked in the year, the salary rate remains as if it was full time. So someone working 50% of the hours would accrue half a years worth of the full time benefit. If for the last 8 years of my career I worked 50% then I would accrue 4 years benefit.


The benefit of not retiring may be that your OH does not incur any actuarial reduction by taking his pension early. This is what leads me to think I will move to part-time working rather than a very early retirement.

onlyroz

I've dug out the pension paperwork and it says:

Your pension is calculated as the accrual rate times the relevant period of pensionable service times your final pensionalble salary. Pensionable salary is your basic annual salary plus such other emolumnets determined by the employer to be pensionable. When you retire, your final pensionable salary will be based on the highest average of your pensionable salary over any 12 consecutive months in the last 3 years preceding your retirement.

If you currently work part-time the pensionable salary shown is the full-time equivalent of your earnings and the pension calculations shown assume that you continue working your current part-time hours until you reach the normal retirement date.

I'm not quite following, from the above, what would happen to the pension if you worked part time in the last few years of pensionable service. Do they use the part time salary as the final pensionable salary, or do they calculate a full-time equivalent salary from this?

I also don't see anything in the document about early retirement - the normal retirement age is 60 but I can't see anything about letting people retire before this. Can they insist that you work until 60?

jem16

onlyroz wrote: »

Do they use the part time salary as the final pensionable salary, or do they calculate a full-time equivalent salary from this?

The final pensionable salary is the full-time equivalent.

I also don't see anything in the document about early retirement - the normal retirement age is 60 but I can't see anything about letting people retire before this. Can they insist that you work until 60?

You can stop work anytime you like. However it is perfectly possible that they won't allow the pension scheme to be accessed any earlier. You would have to ask.

hyubh

onlyroz wrote: »

I'm not quite following, from the above, what would happen to the pension if you worked part time in the last few years of pensionable service. Do they use the part time salary as the final pensionable salary, or do they calculate a full-time equivalent salary from this?

The latter. The two paragraphs are tackling different issues - the first is saying your final salary for pension purposes will be your basic salary plus any additional payment in the final year that you paid pension contributions on (e.g., discretionary bonuses or certain sorts of overtime might be classed as pensionable). In contrast, the second paragraph is saying a part timer's basic salary for pension purposes is their whole-time equivalent salary.

I also don't see anything in the document about early retirement - the normal retirement age is 60 but I can't see anything about letting people retire before this. Can they insist that you work until 60?

It's not that a pension scheme will insist you work until 60 - it's saying you can't draw a pension (an income!) from the scheme until that point. If you have other savings, you're free to 'retire' earlier.