pension muddle

gerT

please help, I am 48 and my db pension has just been deferred and a new dc scheme has started.
The db will be worth around £12,000 p.a.and will track cpi up to 6% pa. I also qualify for rule of 85 when 60 years old.
With the new dc scheme 23% of my wage (earn about £32,000) is being paid in.
I will also have my full state pension allowance (35 years?) by the time I am 55 and this is also when my mortgage is paid.
My question is will I be able to take the dc pension at 55 and live on it until I am 60, when I then can take my db pension?
I feel I may need around 12kPA to live on, but intend to do some work maybe 3 months a year until around 60.

thanks in advance

jamesd

State pension first. Your DB scheme is probably contracted out so you would have been accruing only entitlement to the basic state pension, not any earnings-related additional state pension. Assuming that you have the usual juvenile credits you'd have around 31 years of this in your flat rate state pension foundation amount, plus a year or so of earnings-related additional state pension. So your foundation amount at the start of the flat rate rules will be something like the full (30 years) basic state pension plus a couple of Pounds of additional state pension. Say £118 combined. Once the flat rate starts you will get 1/35th of the flat rate cap added to your entitlement each year. Assuming the flat rate is £155 that's £4.42 a year and it will take (155 - 118) / 4.42 = 8.4. years to get to the flat rate cap level. With just six years between 2016 and you reaching 55 you probably won't have accumulated the flat rate maximum by then.

You can ask for a sate pension forecast a year or so after the flat rate comes in and that would give you a better idea than my rough estimate. You can also ask for a state pension statement now to find out your current position. You will be able to get more flat rate years by buying them or, probably, using self-employed contributions if you have a hobby from which you make or might make some money.

Given that the time from 55 to 60 is only five years it's good enough to just multiply the income needed by the number of years to get your pension pot target size at 55. So you need 12 x 5 = £60,000 in today's money. Very rough calculation of the pension contributions assuming growth is only at inflation level is that they will be worth 0.23 x 32,000 x 6 (or maybe 7) = £44,160 for six years. Assuming 4% plus inflation average growth you'd instead have £49,800. So still a shortfall. You'd need to add around 5% more, going from 23% to 28% to get there.

The part time working should give you some safety margin on top of that.