Am I missing something?

uk1

zagfles wrote: »

If you beyond the normal retirement date!! If you weren't then it is scaled back. So whether you take it early or not makes no difference!!

Which is what I said.

My understanding is that so long as the fund isn't taken into PPF before the OP's normal retirement age and as long as the early pension taken is below the absolute limit (it is) then the protection is better in that it will not be scaled back. As far as I know if he waited and it went into the fund before he took it it is scaled back.

Jeff

PensionTech

No, no, no.

When you say "the protection is better", what do you mean? Do you mean the protection is better if he has taken early retirement as opposed to normal retirement?

uk1

PensionTech wrote: »

No, no, no.

When you say "the protection is better", what do you mean? Do you mean the protection is better if he has taken early retirement as opposed to normal retirement?

Yes, yes yes, (one will do ....... ) because in that scenario it will not be scaled back under any reasonable circumstances can it.

PensionTech

Yes it can. It will be scaled back if he takes early retirement and the scheme goes into the PPF before NRD. Read my post #31. Not to mention that the cap itself is actually reduced as well if you take early retirement, with the reduction being higher the earlier you retired.

To put it simply:

If you take early OR normal retirement, and your employer goes bust before you reach NRD, your benefits will be paid out at the 90% level.

If you take early OR normal retirement, and your employer goes bust after you reach NRD, your benefits will be paid out at the 100% level.

There is therefore no benefit from retiring early compared to retiring at normal retirement age with regard to PPF compensation (with the exception of locking in the PCLS at the full rate if your employer does subsequently go bust before NRD - but that is an unlikely scenario and your PCLS is affected by the fact that you are taking a lower pension because of the early retirement reduction anyway.)

uk1

PensionTech wrote: »

There is therefore no benefit from retiring early compared to retiring at normal retirement age with regard to PPF compensation (with the exception of locking in the PCLS at the full rate if your employer does subsequently go bust before NRD - but that is an unlikely scenario and your PCLS is affected by the fact that you are taking a lower pension because of the early retirement reduction anyway.)

The rest of your post seemed to me to agree with what I said with the exception of this last point. Repeating the same thing doesn't change it.

Your sticking point seems to me my suggestion that a bird in the hand might offer better protection and less worry than a subsequent uncertain bird in a bush. You therefore ignore the possibility - or perhaps probability - of things changing due to future PPF underfunding. This might happen because most or at least many DB's are in deficit and being grossly under funded and it seems quite likely to me that relatively few of these that default and then seeking entry into the fund could cause the government to need to step in. In that scenario I could see a reasonable probability of the government scaling back benefits for new benficiaries. They might "enhance" the programme by saying simply

"The government re-establishes it's commitment to the PPF and will underwrite any guarantees the fund may require to continue to offer reassurance to pension scheme members. At the same time we make this pledge the government also promises existing beneficiaries that we will make no changes to their payments.

However it does seem unfair that ordinary tax payers on average earnings who have no chance of enjoying these generous defined benefits pensions should be expected to step in and pay a subsidy to those in such generous schemes who are not currently receiving a pension. So I announce today that the two current caps for beneficiaries for future pensioners protection will be capped at a maximum of average earnings with the scaling back reduced from a scale that started at 90% to a new cap starting 80% ....... "


...... or something similar.

It also seems to me that current pensioners in schemes are possibly less likely to be treated harshly than those not currently taking pensions because they can make changes to their future pensions. That position seems a perfectly reasonable scenario in the current environment to be concerned about. I was in a similar situation to the OP but worst in a sense because I took my pension at around 12 or 13 years before NPD with a severely scaled back ERF pension. I was concerned about the way the corporation I worked for was being managed, the risk of the pension fund being dumped and felt safer having my pension earlier. I felt a bird in the hand was probably better than an uncertain bird in a future bush.

So from the OP's perspective why would you disagree with those reasons for taking the pension earlier? Why might taking the pension earlier might not offer a better level of protection?

Jeff

PensionTech

No. My point, and zagfles' point, is that there is no entitlement to a higher rate of PPF compensation as a result of retiring early. You seem to imply that there is. There is not. You get the same PPF compensation whether you retire early or at the normal time, although the cap could be lower if you retire early. The 90% vs 100% thing depends only on when the scheme goes bust, which you cannot control.

Your speculation on future changes to the level of PPF benefits themselves are a little far-fetched. I agree that the PPF may be called on more in the future but I don't think anyone should take any particular action that affects their personal finances on the basis of a completely unsubstantiated prediction about if, when and how any changes to the PPF will materialise and affect people in different circumstances. There are all sorts of things that could happen to the PPF or to schemes at risk of going into the PPF (look at the things being proposed for Tata Steel for instance), but when there isn't even any smoke, it's a bit odd for you to start talking about how exactly the fire will burn, and even odder to recommend specific action on that basis.

I actually haven't gone into the OP's situation. That's not what I'm responding to here. I saw an argument between you and zagfles regarding whether you get a higher level of compensation if you retire early, and stepped in to point out that zagfles was right (you don't). Generally I don't think retiring early from a DB scheme is a good idea in most circumstances; the actuarial reduction applied for early retirement is often pretty bad for those with normal lifespans, and if you're working at the same time, you will end up paying a lot of tax on the extra income. DC and other savings can be good ways to fund yourself between the end of work and drawing your DB pension at the scheme's normal retirement age. This is conventional wisdom, and for good reason. Whether it suits this person's circumstances I can't necessarily say. However, I do know one thing: they won't get a higher level of protection through the PPF if they retire early than they would get if they retire at the normal age. So when I asked "Do you mean the protection is better if he has taken early retirement as opposed to normal retirement?" and you said "Yes", you were mistaken, and that is my point.

If you knew that all along, then I will stop trying to convince you - but you put your arguments across in a very strange way, if that is the case.

uk1

You haven't reflected what I actually said accurately.

However.

1. This thread is about the OP's situation. That is what is being discussed,

2. Your opinion that the PPF will not be subjected to future strains and possibly "neccessary enhancements" as being "far fetched" is simply different to my own. Perhaps I am just older than you



Jeff

PensionTech

1. Yes, but with faulty arguments about PPF protection, which are now corrected. You're welcome

2. I didn't say I think that the PPF will not be subjected to further strains; in fact I actually said "I agree that the PPF may be called on more in future". I will agree to disagree that you should rearrange your finances on the basis of hypotheticals about the exact terms of possible future changes to the PPF.

uk1

PensionTech wrote: »

1. Yes, but with faulty arguments about PPF protection, which are now corrected. You're welcome

2. I will agree to disagree that you should rearrange your finances on the basis of hypotheticals about the exact terms of possible future changes to the PPF.

Have it your way. :cool:

TriathNanEilean

kidmugsy wrote: »

Without googling for it, just tell us what you think the life expectancy of the average 58 year old male is.

I didn't see an answer (not a definitive one anyway) in the rest of the thread. I was interested so I found a calculator and got the answer (for 58 y.o. male in UK) of 24.11 more years. 82.11.