Wait for payrise before taking pension?

Andy_L

IME the "final salary" used for pensions is not your annual salary the day you walk out the door but an average 12 months salary to prevent the distorting effects of a pay rise (or indeed cut) just before retiring. As said previous that could be the last 12 months or the best 12 months in the last 3 (or more years) years with various levels of indexation. Thus if, e.g., you worked for 1 month after the 1% pay ride you'd get 1/12 x 1% or 0.08% extra pension. Not a lot but better than nothing, plus you'd also get an extra 1/12th year of service increasing the pension that way as well

Freecall

Have you checked with the scheme administrator to see what your current pensionable salary is?

You may find that it is higher that your current actual salary, especially if you are in the public sector.

This situation frequently arises with public sector pensions because of index linking prior to retirement. Depending on the scheme rules you may be entitled to get the best of more than one measure. For example, you might be able to use the best 12 month period in the past 5 years.

If your real salary has only been increasing at 1% each year for a few years but this notional figure has been rising in line with an index such as RPI then you will be able to use this higher figure.

The scheme administrators should be able to tell you what the figure is and how it might be used in your pension calculation.

littlelad

Andy_L wrote: »

IME the "final salary" used for pensions is not your annual salary the day you walk out the door but an average 12 months salary to prevent the distorting effects of a pay rise (or indeed cut) just before retiring. As said previous that could be the last 12 months or the best 12 months in the last 3 (or more years) years with various levels of indexation. Thus if, e.g., you worked for 1 month after the 1% pay ride you'd get 1/12 x 1% or 0.08% extra pension. Not a lot but better than nothing, plus you'd also get an extra 1/12th year of service increasing the pension that way as well

Thanks for clarifying for me.

Freecall wrote: »

Have you checked with the scheme administrator to see what your current pensionable salary is?

You may find that it is higher that your current actual salary, especially if you are in the public sector.

This situation frequently arises with public sector pensions because of index linking prior to retirement. Depending on the scheme rules you may be entitled to get the best of more than one measure. For example, you might be able to use the best 12 month period in the past 5 years.

If your real salary has only been increasing at 1% each year for a few years but this notional figure has been rising in line with an index such as RPI then you will be able to use this higher figure.

The scheme administrators should be able to tell you what the figure is and how it might be used in your pension calculation.

My scheme says final pay is last year or one of last three, whichever is better. OH and I have had pay rises since 2006 ranging from 0.4%-1% and his TPS pensionable salary is certainly higher than his current salary but I didn't think this was so for LGPS but maybe only because I've not noticed any specific discussions on indexing/LGPS? I will ask them as you suggest, thanks.

jem16

littlelad wrote: »

TPS pensionable salary is certainly higher than his current salary

TPS is based on the average of the best 3 years out of the last 10 years. At the moment this is significantly higher than the actual salary.

littlelad

jem16 wrote: »

TPS is based on the average of the best 3 years out of the last 10 years. At the moment this is significantly higher than the actual salary.

Seems that TPS is a better scheme (in current climate)?