Wife retired early yesterday from M&S - please help!

Jazzevo

Please help us make the right decision. My wife is 57 and retired this week from M&S after 14 years service. Had she continued to work until NRD (May 2022), her benefit statement as of March 2013 states she would have received an annual M&S pension of £7464. She retired this week and has three options: A) a full pension of £3328 pa; a reduced pension of £2314 and a max tax-free cash sum of £15,413; C) a reduced tax free cash sum and a reduced pension.

Importantly, she also receives store discount of £3000 pa if she retires but would lose this if she simply resigns and doesn't take her pension until NRD.

We don't need he money right now as I am still working and receiving a good income but clearly that will change in time so we really do need to make the best decision in terms of what option to take.

Would really appreciate some help. Thanks.

dunstonh

General rule of thumb is that if you dont need the money, you dont commence the pension.

However, for personal advice, we dont have enough to go on as we would need to know your personal financial circumstances, health, budget etc and the penalties applies for early commencement vs normal retirement date.

CLAPTON

you need to know what her pension would be at NRD if she simply resigns now and doesn't take the pension (your figure of 7462 assumes she works until NRD?)

Jazzevo

Many thanks. My wife has been told that there is an early retirement factor - the pension has been reduced by a factor of 0.71, 71% of NRA, a 19% reduction. Based on this, we're estimating that if she didn't take the pension until 65, she would receive £5400 pa. However, if she takes this option, I guess she has not 'retired', she has 'resigned' and will therefore lose her store discount of £3000 pa, which we will certainly use to the full.

Does this help?

Much appreciated.

MoneyMate

:j I Hope your Wife has a great and long retirement :j

MoneyMate

MoneyMate wrote: »

:j I Hope your Wife has a great and long retirement :j

ps/ Welcome to MSE :T

whitewing

Isn't the store discount a % off the retail price? Would you actually use it all?

atush

And for others contmeplating this decision, try asking it one year to 5 years + before retiring (ie not the day after lol) as you would have had more opetions then.

We need more info on the 3K 'discount'. Ie is it 3K off goods of that amount or more, or it is a set % discount? the value of the perk is int he details.

Otherwise, my one bit of advice is, how much did she earn this last year, and how much went into her M&S pension? If you/she have savings, she could put the remainder of her eintire income this year into a Personal pension and evry 80 she puts in will become 100. she can then take 25% of the pot tax free.

Then after april next year she can draw the rest, making sure to keep under her Personal tax allowance.

kidmugsy

Jazzevo wrote: »

Many thanks. My wife has been told that there is an early retirement factor - the pension has been reduced by a factor of 0.71, 71% of NRA, a 19% reduction.

I suspect you mean that there is an actuarial reduction of 29%, leaving her with 71% of what she would otherwise get in eight years time; is that right?

If so, that means that (if we make the bonkers assumptions of ignoring inflation and investment returns) her total pension income for deferring and not deferring will become equal 27.6 years from now. Is there an objective reason to believe that she is unlikely to last until age 85? I suspect that if there is no reason on health grounds to avoid deferring, the decision comes down to weighing up your fear of inflation (is your own pension well-protected?) versus the desirability of the £3k p.a. goodie "which we will certainly use to the full". Another way to look at it is that deferring brings the equivalent of a 4.374% p.a. uplift in her pension (plus inflation-protection I assume?) for each of the eight years, with the accumulated uplift continuing thereafter. Does that strike you as more valuable than the goodie, or less?

A second consideration is tax. If she is retiring in the sense of giving up earning altogether, she'll presumably get this pension tax-free to begin with. Will she be a taxpayer once her State Retirement Pension begins? (You do have a forecast for that, I hope? You are taking steps to ensure she gets credited with her full 35 years of contributions?) Don't forget, too, that the goodie is tax-free. (And, I ask myself, how long can you be confident that M&S can afford such a goodie?)

Third consideration: tax-free lump sum. The offer is equivalent to a commutation rate of about 15 - that is not particularly good value, so if (as you imply) you have no special need for a small tax-free lump sum, I'd think she'd probably be better taking her whole benefits as pension.

One last thought: if, come her State Pension Age, she regrets having settled for the 71% pension, she could always partly repair the situation be deferring her state pension for a few years. The return on that is an inflation-linked 5.8% p.a.

xylophone

Re single tier state pension

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

http://www.ftadviser.com/2014/07/22/pensions/personal-pensions/government-slashes-state-pension-deferral-increase-y9yQMSeLsSIWCsji9ycQXI/article.html

It should soon be possible for your wife to obtain a state pension statement calculated under the new rules.

aliby21

The £3000pa 'goodie' seems to be a major factor for you, yet you are basing your decision on a "guess" as to what will happen to it in each scenario (take pension now vs defer). Could you find out what would happen if she deferred?

Jazzevo wrote: »

Many thanks. My wife has been told that there is an early retirement factor - the pension has been reduced by a factor of 0.71, 71% of NRA, a 19% reduction. Based on this, we're estimating that if she didn't take the pension until 65, she would receive £5400 pa. However, if she takes this option, I guess she has not 'retired', she has 'resigned' and will therefore lose her store discount of £3000 pa, which we will certainly use to the full.
.