Pension Commencement Lump Sum

atush

Can you refinance? Over 3% is high these days.

Ander37

I will look at that, thanks but am tied for another three years or so. I'll have to number crunch to see if it will be worth it.

kidmugsy

Ander37 wrote: »

The PPF scheme tables show that if I take my 60 tranche 5 years early I only lose 4.9% in total! and taking my 63 tranche 8 years early I only lose 9.8% in total.


Kidmugsy, I do take your point about paying off mortgage! I do realise that I may be better investing the TFLS in ISAs for myself and my wife to produce a better return than my mortgage interest rate, currently 3.18%pa and indeed may ultimately do just that. I am however rather debt averse, even though I realise mortgages are a very cheap form of debt.

Golly, those are stunning terms from the PPF. I wonder who is subsidising that? I hope it's not me.

As for the mortgage, when the chance to remortgage comes up you could always consider an offset mortgage - they do seem to offer pretty good flexibility. But if you really hate debt then clearing it probably is a fair use of the money. The point of capital is to give you comfort and security after all.

kangoora

kidmugsy wrote: »

Golly, those are stunning terms from the PPF. I wonder who is subsidising that? I hope it's not me.

As for the mortgage, when the chance to remortgage comes up you could always consider an offset mortgage - they do seem to offer pretty good flexibility. But if you really hate debt then clearing it probably is a fair use of the money. The point of capital is to give you comfort and security after all.

As far as I am aware the PPF guarantee existing terms for pensions but subject to a 10% reduction in overall calculated benefits under the 'old' scheme rules. Also, I think you lose any accrued pension over £30k in the PPF.

I believe the PPF is non-government funded, it's paid for by big business payments and also what they can claw back from the company pension schemes that fold to my knowledge. If it does go under, say something the size of the BT pension scheme folds, for example, I think it highly likely the government would subsidise it - hope so anyway, one of my pensions is in there now

Sorry if it sounds a bit woolly but been a while since I looked at the PPF rules.

kidmugsy

kangoora wrote: »

If it does go under, say something the size of the BT pension scheme folds, for example, I think it highly likely the government would subsidise it

My memory is that the BT scheme anyway has a Crown guarantee - whether that kicks in before the BT scheme could throw itself into the arms of the PPF I don't know. But I'm still struck by how small the OP's reduction for drawing early is going to be. It's risible: he'd have to live to 150 not to be better off drawing early.

I'm delighted by your assurance, kangoora, that I'm not subsidising it - but who is? How can it make any sense?

greenglide

I'm delighted by your assurance, kangoora, that I'm not subsidising it - but who is? How can it make any sense?

"All eligible defined benefit schemes, as defined in section 126 of the Pensions Act 2004" pay for it. See http://www.pensionprotectionfund.org.uk/levy/whopays/Pages/WhoHastoPay.aspx

So everyone who has a defined benefit pension not yet in payment and, of course, their employers.

Anyone who is actually in receipt of a DB pension isn't impacted as their pension is already cast in stone.

As the number of DB schemes continues to shrink it must be harder to fund? Of course the big funds like BT can only fail if BT goes out of business which, in the foreseeable future seems unlikely but in the longer term, who knows?

kidmugsy

greenglide wrote: »

"All eligible defined benefit schemes, as defined in section 126 of the Pensions Act 2004" pay for it. See http://www.pensionprotectionfund.org.uk/levy/whopays/Pages/WhoHastoPay.aspx

So everyone who has a defined benefit pension not yet in payment and, of course, their employers.

Do you have any idea, greenglide, why the PPF offers such munificent terms? Is there any chance, OP, that they've got this wrong? They really have given you it in writing, have they?

greenglide

In this case could it not be because the original scheme, which is now in the PPF, offered these extravagant terms and these are carried forward into the PPF?

Otherwise I wonder if I could have persuaded my employer to go bankrupt a few years ago and then I could have got the PPF to fund an early retirement under these terms!

It does seem "odd"!

TH1878

kidmugsy wrote: »

My memory is that the BT scheme anyway has a Crown guarantee - whether that kicks in before the BT scheme could throw itself into the arms of the PPF I don't know. But I'm still struck by how small the OP's reduction for drawing early is going to be. It's risible: he'd have to live to 150 not to be better off drawing early.

The BT scheme does have a Crown guarantee. I seem to remember that the Government argued it only applied to the pre privatisation benefits but I'm pretty sure they lost that court case and it applies to the whole scheme.

Edit : details here: http://www.btpensions.net/56/277/crown-guarantee-update

I'm delighted by your assurance, kangoora, that I'm not subsidising it - but who is? How can it make any sense?

The PPF is paid for by levies (partly based on risk of the scheme) on existing pensions schemes. It is not underwritten by the Government and the 90% (which is very rarely actually 90% anyway!) is not guaranteed. If a very large scheme went into the PPF then they would most likely reduce the level of protection.

There are many other rules which make the PPF unattractive - the main one is no escalation on pre-97 excess pension.

Ander37

Again thanks for all your comments, very helpful.


kidmugsy, in answer to your question of have I got it in writing the answer I'm afraid is yes and no! Yes insofar as the figures used come from the PPF website itself where in its technical section it has tables quoting their figures for actuarial reduction. They seem easy to use as they just have NRD as one entering argument and age taking benefits as the other. I phoned their helpdesk to confirm that these figures were correct and was assured that they were. The no comes in the fact that I cannot get a written pension estimate until I am 6 months short of my 55th birthday, pen is poised but cannot send till Dec 9th! I am also aware of the 10% reduction in benefits I am subject to but would lose 10% whether I wait till NRD or not.