Please cast an eye over my calculations

Steveswift

Morning all,


If you wouldn't mind can some one check I have this right in principle please.


Taking my Teaching pension at aged 55 which I turn on May20 of this year.


Salary 35k Service 9 years.


35000x9/80 = Annual Pension of £3937.50 x 3 Gives a lump of 11.812K


I can take at an additional 25 % of my pot to increase the lump.


25% of £3937.50 = 984 x 12 ( commutation factor) = £11,812




? Does this mean that I get the £11.8 K from the initial lump
plus if I chose to release 25% and other £11, 812, so a total of £23612 lump. With a then reduced annual pension of £2953?


Hope that this all makes sense.


Cliffs, do a get the initial lump associated with the pension + the lump for giving up 25%.




Thank you for any help.


Regards


Steve

traineepensioner

Is there any actuarial reduction for taking the pension early? (I assume that the NRA for your pension scheme is 60 or 65)

Total pension pot would be calculated (roughly) as 20 X £3937.50 = £78,750
So 25% of pension pot would be approx £19,687

Linton

A commutation factor of 12 is pretty mean. The lump sum will be worth far less than (perhaps half after taking tax into consideration) the money required to replace the lost pension. So unless you gave an overwhelming need for the cash or special circumstances such as life shortening ill health it makes financial sense to minimise the lump sum.

Zelazny

A few things (based on information found on the web, so take with a pinch of salt):

Steveswift wrote: »

Taking my Teaching pension at aged 55 which I turn on May20 of this year.

The Teachers pension has an NPA of 60 or 65, depending on when you started service and any breaks you may have had. Assuming no breaks, your NPA will be 60, so you'd be taking the benefits 5 years early. I found some factors from 2011 which suggested that you'd have a reduction to 79.4% for taking it at age 55 (factors can be found at http://www.teachers.org.uk/files/tps2011-earlyretirementfactors_nk.pdf)

Steveswift wrote: »

Salary 35k Service 9 years.
35000x9/80 = Annual Pension of £3937.50 x 3 Gives a lump of 11.812K

All sounds about right, but the actual pension would be 3937.5 x 79.4% = £3,126.38
The lump sum would be three times this, so £9,379.13

Steveswift wrote: »

I can take at an additional 25 % of my pot to increase the lump.

25% of £3937.50 = 984 x 12 ( commutation factor) = £11,812

Not quite. When you retire you can take at most 25% of the value of your pension as cash, so the lump sum detailed above has to be accounted for. With a commutation factor of 12, the actual amount you would be able to take at maximum is: £16,748.46 - so this would be the £9,379.13 lump sum plus another £7,369.33 from the pension, meaning you give up £614.11 pension and have £2,512.27 per year left.

(the maths is complex, but the test is simple - for the valuation purposes, £1 of pension is "worth" £20 cash, so the total value of the benefits is:
16748.46 + [2512.27x20] = £66,993.86
1/4 of this is £16,748.47
1p difference is due to rounding.)

So your options would be:

£3,126.38 per year plus £9,379.13 lump sum

or

£2,512.27 per year plus £16,748.47 lump sum

Please let me know if you have any questions about this.

Daniel54

[QUOTE=Steveswift;65033610

I can take at an additional 25 % of my pot to increase the lump.


25% of £3937.50 = 984 x 12 ( commutation factor) = £11,812/QUOTE]

You probably know this,but that commutation factor is really poor value

atush

Don't take it early, and if you do don't take additional LS.

Steveswift

Thank you all very much for the helpful responses.


Regards


Steve