Advice on Voluntary Early Release options needed

Fruittea

Hi experts - I'm asking for opinions on whether I should ask for an additional 3 years added to my pensions or take a lump sum amount.


I'm in the Environment Agency Pension Fund. Salary around £44K. With a whooping 35 years and 295 days on my last statement (March 31 2013). My lump sum would be capped at a years salary.


I'm kinda thinking that the added pension would be a better deal over time - my proposed retirement date could be 31/3/2014. Advice would be welcome or if anyone could point me to a calculator so I can work it out - I'd be grateful.


Many thanks in advance.

kidmugsy

Give us a few clues:

How much is your annual pension going to be if you do, and if you don't, take the maximum lump sum? Are you free to take a lump sum of any size between £0 and £44k?

How old are you?

Is your pension going to be index-linked; and if so, how?

xylophone

Give us a few clues:

http://www.eapf.org.uk/Active-Members/Active/Guide-to-your-benefits/Retirements.aspx

Fruittea

kidmugsy wrote: »

Give us a few clues:

How much is your annual pension going to be if you do, and if you don't, take the maximum lump sum? Are you free to take a lump sum of any size between £0 and £44k?

How old are you?

Is your pension going to be index-linked; and if so, how?

Hi there. I'm trying to find out how much it will be. At the last statement it said the estimated pension was £20.630 p.a. The pension lump sum is £50.886.


The VERS scheme is separate and voluntary and offers a lump sum of up to the annual salary a choice of an added three years on the pension.


It's an either or choice you can't combine on the offer.


I'll be 58 if I retire next year - so are the three years added better value than a lump sum that is additional to the pension lump sum


Sorry if this sounds confusing.


Thanks for the link to the eafp site I've tried to use the pension illustrator but it won't work as I'm under 60 for some reason.


Will continue to look at the eafp for additional clues.


Thanks for any help.

Fruittea

Weird I just tried the illustrator again and it seemed to work.


It gave me a figure of £27,305. So that's £6675 pounds more a year if I can get the added three years.


If I took the £44,5K lump sum that would only be equivalent to 6.6 years at the same rate.


So I think I should hold out for the years rather than the money. Please say if I'm getting this wrong.


Many thanks for the prompts so far. - really helpful.

hyubh

Fruittea wrote: »

It gave me a figure of £27,305. So that's £6675 pounds more a year if I can get the added three years.

That doesn't sound right. With respect to your standard benefits:

- Membership up until April 2008 produces a pension at final pay x no. of years / 80, plus a lump sum of the pension x 3
- Membership post-April 2008 produces a pension of final pay x no. of years / 60, plus no standard lump sum

As such:

2013 - 35 = 1978
2008 - 1978 = 30
2013 - 2008 = 5

44000 x 30 / 80 = 16500 pension for pre-April 2008 membership
16500 x 3 = 49500 lump sum
44000 x 5 / 60 = 3666 pension for post-April 2008 membership

16500 + 3666 = 20166; you’ve reported 20630 with a 50886 lump sum on your last ABS, so close enough. Now, if we add 3 additional years into the mix, the addition is 'just' 44000 x 3 / 60 = 2200 using my figures, and only a bit more it would seem if using the real ones.

hyubh

hyubh wrote: »

That doesn't sound right.

As an aside, given these things -

- The number of added years here is essentially a free choice of the employer (up to a maximum - IIRC that's 10)
- If you take that option, they will be paying a(n additional) strain charge to the pension fund to cover the pension cost
- That charge will be calculated on an actuarily neutral basis

I would *guess* the value of the added years is intended to be roughly what the lump sum option would be. That said, the tax implications for you as individual wouldn't enter into the employer's costings... which would lean me towards the added years option, other things being equal (and assuming you won't be getting into any annual allowance or lifetime allowance problems.)

Fruittea

Very many thanks - all useful advice. Still nothing from my employer but it will help me decide.