reaching 55

Graham001

Hi Sorry if I am a bit vague, but I have little information to go on but here is what little I have:

This is a company pension scheme, it was originally "Lucas Pension Fund" and has been subsequently taken over by TRW. I do know that in the original "Lucas Pension Fund" the funds were invested. Other than personal details the only other details on the statement are:

Pension Benefit.
The current level of your deferred pension is...................******
Your deferred pension when you left active membership...******
Your deferred pension is payable on...............................******

At the bottomit says

The transfer value of your defferred pension as at 1 December 2011 is......................................................................******

for obvios reasons I cannot post figures but i hope this helps,

jamesd

Yes, that tells us the answer. It's a defined benefit pension and deferred pension is correct wording.

The transfer value of this type of pension is almost always less than the actual value, often substantially less. If you were to transfer out to get 25% you would face a substantial loss because of this difference in values. Unless you were known to have a medical condition that would cause you to die soon it is unlikely that you could find an IFA who would agree to the transfer. There are a few other niche cases where it would be possible, like a scheme about to enter the Pension Protection Fund if you were entitled to more than the PPF would pay out, also sometimes for single people, perhaps in combination with poor health.

For this type of pension it might be possible to take the pension early. This would be both lump sum and income, not just lump sum. This is almost always a very expensive bad idea. Also, taking a lump sum from this type of pension is usually a bad idea. The true value of lump sums is perhaps 28 times the amount of pension income given up. Typically someone would only get 12-22 times, so the pension scheme makes a nice savings whenever someone takes a lump sum.

If it was instead a defined contribution type, I'd write that it is almost always a good idea to take the maximum possible lump sum, because that does provide identical value - actually a little higher due to some tax breaks if an annuity was to be purchased. And for these there is no great penalty for taking it at age 55 if you reinvest the lump sum inside a S&S ISA, though there is a change to the death benefits that you'd need to be aware of and manage.

So use great caution if you read about lump sums because it hugely depends on which type of pension it is and yours is of the avoid taking variety.

Why do you want the lump sum now? There's almost always a better alternative to taking a lump sum from this type of pension.

Graham001

Thanks JamesD for making things clearer. I was not particularly looking to take out a lump sum, But I have a pension scheme with my current employer, that permits me to retire any time after 55. (This said, if I were to retire at 55, I would have a pension shortfall) My intention was to try and model both my pensions, so that I can be clear on my financial situation at varying stages, so that I have financial security. It is clear that the longer I work the more I stand to gain from both pensions, but there may come a stage where I want to seek other avenues in life. (Obviously not as a financial advisor LOL)

jamesd

Tell us more about the other work pension. Is it also defined benefit or is it instead defined contribution?

For the first defined benefit one, you could ask them what the commutation rate for lump sums is - that 28 to 12-22 multiplier. That would give a better idea of just how bad or (unlikely!) good it is to take a lump sum from it.

For a defined contribution pension you don't even need to retire to take the money.

xylophone

If you were to transfer out to get 25%

If his FS pension allows him to take his deferred pension at 55 he would not need to transfer out- he could take his 25% and an immediate pension but there would be an actuarial reduction which for ten years early could be substantial.

There could also be GMP considerations.

xylophone

Surely those different male/female reduction rates are now illegal?

I've no idea - I was just using the table to illustrate to the OP that taking a DB/FS pension early can lead to a substantial actuarial reduction.

xylophone

This is a company pension scheme, it was originally "Lucas Pension Fund" and has been subsequently taken over by TRW.

http://www.telegraph.co.uk/finance/personalfinance/2725657/How-to-trace-your-lost-funds.html

" For instance, the Lucas Varity pension scheme changed its name as a result of a takeover in the 1990s and is now called the TRW Benefit Administration (UK) The Lucas Pension Scheme."

http://www.lucaspensioners.org.uk/jm/index.php?option=com_content&view=article&id=2&Itemid=3

http://www.trwpensions.co.uk/ You will need to click on "deferred" and then make your way through the list but by way of example only, I saw that if you fetch up on the "Closed Lucas Works" page, you find

"When can my deferred pension be paid?

Pre 12 November 1991 leavers:

The Normal Retirement Age for men is 65, and for women is 60.

Benefits may be received before these ages subject to a reduction for early payment. This reduction is not guaranteed.

Currently you may receive your benefits from age 55."

However, you would need to find your exact place within your particular section to get some idea of your situation.