can you help me understand my pension figures please

happyhero

Hi can anyone help me with understanding my pension please a little better than I do. I used to work for BT and I had a Final Salary pension. I am now 55 and not drawing any pensions. The BT one pays out at 60.


I recently asked for my pension figures and received the following


Total Pension at date of leaving £11,986.19pa


Total Pension current value £17,276.89pa


Total Lump Sum at date of leaving £35,958.57


Total Lump Sum Current value £51,830.68

Is the Total Pension current value, what I would get now if I retired now or what I will receive at 60?


And do I just divide this £17,276 into 12 to get my monthly income figure?


Will the monthly income be paid with tax already taken or gross?


Will the £17,276 continue to increase with inflation until I draw it at 60?


Would it grow further if I didn’t take it at 60?


With the lump sum of £51,830.68, I thought you could take up to 25% so if there is a choice why is this showing me this figure, do I presume this is 25%?


I assume the £17276pa comes from a big pot I have contributed to but it does not show what it is, can I work this figure out from the above figures?


Why are they showing the £11,968pa figure, is it to show how the pa figure has grown since leaving from £11k to 17k? ( I assume the same goes for the lump sum figure)?


If I could put off taking my pension at 60, what might I expect the pa and lump sum figure to grow by, ie I want to see if it looks worth doing?


With the lump sum can I put off taking it to increase the pa figure and would that be the best thing to do?


Am I right in thinking that Final Salary Pensions are best left to run and not mucked about with, ie you don't go looking for better annuities like you do with ordinary pensions?




Any answers/help appreciated.

Linton

happyhero wrote: »

Hi can anyone help me with understanding my pension please a little better than I do. I used to work for BT and I had a Final Salary pension. I am now 55 and not drawing any pensions. The BT one pays out at 60.


I recently asked for my pension figures and received the following


Total Pension at date of leaving £11,986.19pa


Total Pension current value £17,276.89pa


Total Lump Sum at date of leaving £35,958.57


Total Lump Sum Current value £51,830.68

Is the Total Pension current value, what I would get now if I retired now or what I will receive at 60?

Neither, the scheme rules may not allow you to take the pension early, or if they did, there would probably be an "actuarial reduction". It's what you would get if you were 60 at the date when the current value was given.

And do I just divide this £17,276 into 12 to get my monthly income figure?

Yes

Will the monthly income be paid with tax already taken or gross?

Tax will be deducted in accordance with a tax code issued by HMRC - exactly the same process as for salary.

Will the £17,276 continue to increase with inflation until I draw it at 60?

At a revaluation rate defined by the scheme rules
Would it grow further if I didn’t take it at 60?
Depends on the scheme rules

With the lump sum of £51,830.68, I thought you could take up to 25% so if there is a choice why is this showing me this figure, do I presume this is 25%?

The 25% is for DC pensions. For DB pensions the lump sum is defined by the scheme rules.

I assume the £17276pa comes from a big pot I have contributed to but it does not show what it is, can I work this figure out from the above figures?

With a DB pension you dont have a personal pot. There is one pot for everyone which the scheme manages to meet all its obligations. Your pension is simply an obligation on the scheme. What the Transfer Value of your pension may be depends on the scheme rules and calculations done by the scheme's actuaries to ensure your departure isnt to the disadvantage of all other scheme members.

Why are they showing the £11,968pa figure, is it to show how the pa figure has grown since leaving from £11k to 17k? ( I assume the same goes for the lump sum figure)?

Yes
If I could put off taking my pension at 60, what might I expect the pa and lump sum figure to grow by, ie I want to see if it looks worth doing?

Depends on the scheme rules
With the lump sum can I put off taking it to increase the pa figure and would that be the best thing to do?

It could well be the best thing to do, however whether this is allowed depends on the scheme rules

Am I right in thinking that Final Salary Pensions are best left to run and not mucked about with, ie you don't go looking for better annuities like you do with ordinary pensions?

Generally yes. It particular fairly rare circumstances, eg life shortening seriously poor health or unusually generous transfer values it may be worth investigating. Legally it would require paying for IFA advice which could well be not to transfer. Whether you could find someone to accept the transfer against IFA advice is a possibly difficulty.


Any answers/help appreciated.

.......................................................

atush

It is what you would get now, it will continue to be uprated by the rate your scheme uses until then. So to know what you would get ask them what your index % is. Or you could roughly work it out by using the old figures you have, and seeing how it grew between those timer periods to find out the %.

AS to the 25% question, we dont know but it could be your BT scheme gives an automatic Lump sum. If it does, and is less than 25%, you would probably be better off not taking more. Do you have a scheme booklet?

Yes DB pensions in general are best left alone to run, not mucked aobut with. Excpet i some limited cases such as being of ill health and having no spouse.

Edit, because linton said it better while I was typing lol

happyhero

Wow, thanks very much for all the help, talking in general now about the lump sum, I know its lovely to get one, but talking being financially sensible now, what would you do for the best outcome, bear in mind I would recieve this at 60 and I am hopefully in good health then, would it be better to take it and do something in particular with it or better to try and have it become part of the the pension and increase my annual income.

I am assuming I don't really need it at the time too.

I am thinking also would it be best invested somewhere that may give me a better return than say putting it back into the pension, I do regulary invest in shares and funds so I could do this, but I was wondering if there is something else to consider for this sort of sum possibly?

i.e what would you do with it in my position?

HappyMJ

happyhero wrote: »

Wow, thanks very much for all the help, talking in general now about the lump sum, I know its lovely to get one, but talking being financially sensible now, what would you do for the best outcome, bear in mind I would recieve this at 60 and I am hopefully in good health then, would it be better to take it and do something in particular with it or better to try and have it become part of the the pension and increase my annual income.

I am assuming I don't really need it at the time too.

I am thinking also would it be best invested somewhere that may give me a better return than say putting it back into the pension, I do regulary invest in shares and funds so I could do this, but I was wondering if there is something else to consider for this sort of sum possibly?

i.e what would you do with it in my position?

Are you still working?

I'd take the 25% tax free lump sum and increase my workplace contributions to the maximum amount you possibly can.

happyhero

HappyMJ wrote: »

Are you still working?

I'd take the 25% tax free lump sum and increase my workplace contributions to the maximum amount you possibly can.

No I now try to generate an income through my investments, I am not a professional but self taught. I invest in shares and funds and sometimes it goes well and I take income and other times its tough and I don't take anything, I like to maintain a minimum and so only take profits if my portfolio goes up. Its a much nicer life at home with the kids but poorer than when I was working for BT. Can't have it all I suppose.

So I can't do what you suggest unless there is a worthwhile way to create something similar in my situation. I am well aware of SIPPS etc but looking at what else is possible.

atush

If you arent working now, you can still open a personal pension and pay in 2880 per year, and the govt will pay in tax releif (even if you dont pay any tax) and it will be 3600.

When you come to take this money later, 25% of it will be tax free and the rest you can draw on when needed. It will be taxable income, added to your other income.

happyhero

atush wrote: »

If you arent working now, you can still open a personal pension and pay in 2880 per year, and the govt will pay in tax releif (even if you dont pay any tax) and it will be 3600.

When you come to take this money later, 25% of it will be tax free and the rest you can draw on when needed. It will be taxable income, added to your other income.

Ok I know about this and I can do the obvious maths but how does it compare do you think compared to anything else I could do? Would you favour this over anything else?

Cant remeber right now what the options are at the end ie if I can ever get my remaining 75% out or if its trapped in a pension paying
scheme forever, sorry if I'm being dumb here, my minds a blank on the options right now?

OldBeanz

You have an annual pension of £17k and presumably will get another £6k plus when 66. You do not pay NI contributions on this. I would be buying a 5 Litre Convertible Ford Mustang for approx £38k and wasting the leftover £20k on something frivolous.
You have a guaranteed level of income that many on here aspire to so do not dabble with your BT pension and enjoy doing what you will with the lump sum.

atush

happyhero wrote: »

Ok I know about this and I can do the obvious maths but how does it compare do you think compared to anything else I could do? Would you favour this over anything else?

Cant remember right now what the options are at the end ie if I can ever get my remaining 75% out or if its trapped in a pension paying
scheme forever, sorry if I'm being dumb here, my minds a blank on the options right now?

The 75% isnt trapped, you have choices how and when to take it.

AS to how it compares, it compares in that someone is giving you 720 quid, do you want it or not?