NHS pension..any benefit in deferring

Stubod

Hi, spouse looking to take early retirement (1995 scheme, normal finishing age would be 60, but probably go at 58)...am I correct in assuming that as it is based on average of last 3 years that there is no financial benefit in deferring it for 2 years?

thanks for any replies

kidmugsy

Won't there be an actuarial reduction for taking it early? 10% or so, perhaps?

Stubod

Hi kidmugsy...yes, not anticipating the ""full" amount, likewise the slump sum...just wondering if there would be any "benefit" to not taking the pension straight away...

kangoora

Well, as kidmugsy says, the benefit would be not losing 10% of your annual pension for the rest of your life.

27 years (assuming live to 85) x 10% of pension

(plus the inflation adjustments on that 10%)

Thrugelmir

Stubod wrote: »

Hi kidmugsy...yes, not anticipating the ""full" amount, likewise the slump sum...just wondering if there would be any "benefit" to not taking the pension straight away...

There's no benefit in taking the pension early. Given the pension is index linked over the years the potential financial loss will be considerable. Taking it early will reduce the potential dependents pension as well.

Stubod

Hi,

and thanks for the replies, but does not really answer the question (my fault for not making it clear)..

I understand that the pension will be worth less if taken early (approx £1k for each year not worked)..however spouse is adamant that they will be "going early" by at least 2 years....ie spouse retiring anyway at 58.....the question is...is there any advantage to not take the pension at 58 but to postpone actually drawing the (reduced) pension for another 2 years? (eg I am aware that if you delay taking the state pension the amount you finally get will increase for each year it is deferred)....

thanks..

Thrugelmir

Stubod wrote: »

is there any advantage to not take the pension at 58 but to postpone actually drawing the (reduced) pension for another 2 years?

You've been receiving the answers to this very question. By not drawing the deferred pension until normal scheme retirement age there'll be no actuarial deduction.

firesidemaid

But surely, as OP's partner won't be paying into said pension for those 2 years, they'll get 2/80ths less anyway?

kidmugsy

firesidemaid wrote: »

But surely, as OP's partner won't be paying into said pension for those 2 years, they'll get 2/80ths less anyway?

Yes, but that's not what is meant by "actuarial reduction", is it?

hyubh

firesidemaid wrote: »

But surely, as OP's partner won't be paying into said pension for those 2 years, they'll get 2/80ths less anyway?

The actuarial reduction will be on top of missing out on two years reckonable membership. Leaving two years early but not drawing the pension until NRA will avoid the actuarial reduction.

robin61

It means you do not get the benefit of paying into it for another two years but also what has been built up so far will get reduced by 10%. On the other hand you get the benefit of taking the pension early and not having to fund two years living expenses out of your savings between 58 and 60. It's all a gamble regarding how long you live. I guess it depends whether you are a 'bird in the hand' person or not and whether you want the money sooner or later.
For me I worked out all things considered that it would take around 20 years to start making a profit from deferring by which time I would have been in receipt of a State pension as well for about 10 years so probably fast approaching 80 with more income than I need anyway.
Not an easy decision though and whatever the right decision is depends on individual circumstances.