Commutation rates

elantan

Hi all,

Have googled this but not quite got the answer I was looking for, just doing a wee review on OH's pension and working out commutation rates etc, now I understand what a 15:1 would be or a 19:1 etc but husbands rates are 19:10:1 at age 60 and 16:60:1 at age 65 I'm confused as to how to work this out.

We are a long way from retiring still ( well I spose its not that long now 15 years or so) and as I'm sure some of you are aware I'm trying to do my best to get us into the best position financially, still working away with my pension in the back ground but thought it wouldn't do any harm to look at Mr El's

I understand it isn't such a great idea to take the lump sum, and tbh I'm not sure if we will, it's just good to have an understanding of how it all works.

Can anyone give me an explanation of how the above 3 numbered commutation ones work ?

Also the widows pension is 1/90th per year of years worked, do I work that out in the same way I work out the 1/60th for pension ie: amount of years ( say 10 for eg) x 1/60 x £20,000 for eg ? Only use the 1/90 in place of the 1/60?

Thanks in advance

elantan

Anyone ? Even a link to a site that shows me how to work it out would help, I googled last night and got information on how to work out the two numbered ones ie:10:1 or 17:1 but can't quite figure out the three numbered ones

Hmmmm

Annie1960

Sorry, I don't understand what you are asking. Is this a private pension, or what? Are you asking about commuting your pension income to take a lump sum or vice versa?

I'm sure you'll have more answers if you set out your question more specifically.

elantan

Grrrr posted something and it didn't go

Will try again

Thanks Annie for replying, I didn't mean to be cryptic sorry

I am currently looking at husbands pension, I have never bothered looking into this as he has a company pension, but thought it would be good to look at his for a change

Husband is in a DB final salary pension

He earns 1/60th per year of employment towards his pension so for eg if he works there for 30 years he gets 50% of his final wage as a pension per year

I understand that bit but am currently trying to understand the lump sum bit

I understand that there are commutation rates ( I may be using the wrong terminology sorry) and usually this is something like 12:1, now I understand that that means for every £ he looses per an bum he receives £12 as his lump sum

However the figures for my husbands pension are 19:10:1 at age 60 and 16:60:1 at age 65

I don't understand what those numbers mean so was wondering if someone with knowledge could either explain it to me or give me a link so that I can work it out, I have googled it several times but only seem to find information on the two numbered ones is 12:1 am nothing on three numbered ones ie 16:60:1

I am just trying to have a better understanding of what the possible future choices should be when husband retires

Does that make it any clearer ?

kidmugsy

Your question is now perfectly clear but I have no idea of the answer. I've never seen the three-number way of reporting commutation before. Where is dunstonh when we need him?

greenturnips

That looks like 19.1 and a 16.6 CF to me

elantan

greenturnips wrote: »

That looks like 19.1 and a 16.6 CF to me

If this is the case ... My husband would be better taking his lump sum at 60 rather than 65? I was under the impression that leaving it till 65 was generally the better idea ?

We haven't made any decisions regarding lump sums etc we are merely gathering info so that we can understand things better when the time comes to make these decisions

greenturnips

When you say better, it really depends what you are after, higher cash or residual pension. This doesn't sound right to me, assuming the NRD is 65, the 60 benefit should not be better.

When you say you know how to calculate the pension, are you taking into account potential actuarial early retirement penalties and assumed future growth? What is the NRD of the pension? What formula are you using to work out the cash?

elantan

I'm using the info provided by his pension which is available online ?

It probably won't be exact as I imagine that should he choose to retire before 65 there will be some form of penalty in respect of the 1/60th's ? Although there is no mention of any penalty regarding the 1/60th's

There is however the information regarding the lump sum at 60 and 65 hence the reason I have the two different figures ?

At this stage I am trying to understand it so that I can explain it to my husband, he is constantly being told by work mates to take his lump sum at 55 as they all did, I have explained commutation rates to him and he kinda understands the basics ( for eg the 12:1 commutation rates not the type he has 19:10:1) but I would like to fully understand the three figured ones so that I can explain them to him, so that he is more aware rather than listening to work place gossip ... As I mentioned in a previous thread ( the lump sum one) a lot of his work mates have made mistakes I don't want us to

greenturnips

Putting the 3 figure CF aside, which I think maybe what I have previously said, you are not going to be able to make any comparison without first applying the penalties for early retirement. I think this is going to be the key to the calc.

As previously mentioned, I can't see how a 60 benefit will be better.

Work mates are a nightmare, these "pub financial advisers" have no idea what they are talking about most of the time. What I find a lot of the time people only tell you about the good bits and leave out any negative points.

elantan

That's exactly the way I feel as well

I do imagine he will be better off leaving it till 65 but if you are correct and the figures I found are right then he would be better taking the 19:1 rather than the 16:6 which would mean taking the money at 60 ?

From what I gather the penalties apply more if he was to take retirement at 50 or 55 not so much the 60 or 65

His father was in the same pension and took his retirement at 50 and lost quite a lot of his money as far a I am aware