Early retirement...

Dunree

quotememiserable wrote: »

Well, it depends on your scheme rules, but since this is clearly a DB scheme, with 99% certainty it will increase with inflation, possibly capped at (say) 5%. So even greater value in taking the pension, because this increase will have enormous benefits in the long term.

Thanks QMM

If I take the £60k, once the debts are cleared, that will give me roughly a years salary in the bank.

All going well, we intend to sell up and move to the coast in two years, but in the mean time, I'll probably do private hire just to tick over and give me something to do.

The current job is very high pressure at times and with the changes going on at TFL, I can see that it won't be a good place to work in the future, so I'd rather get out now before my health really starts to suffer.

I really appreciate all the advice and info so far folks, you are very much helping make my mind up. It never ceases to amaze me the knowledge on this forum.

Good night all, and thank you

HappyMJ

I like option 4 myself.

By the time 2029 comes around you will have the state pension in payment which will replace the fall in your personal pension.

jamesd

Dunree wrote: »

I'm 53 and had enough of work...

What is the normal retirement age for the scheme? What is the actuarial reduction for this if it's earlier than NRA?

Usually it's a bad idea to take a defined benefit pension before NRA even if it's allowed. This is because the actuarial reduction tends to be very punitive. Not always, though.

Things like getting 0% for purchase credit cards can often be a good move to delay taking it and reduce the lifelong actuarial reduction. for longer terms things like an increased mortgage or equity release mortgage can be a good move. In these cases you'd plan to repay from a lump sum (if that is a good deal for the scheme, it often isn't) or the higher income with the lower actuarial reduction.

I'm using 17,000 here because you wrote 17k but it does make some difference if it's not exactly 17k, the exact number would help if that isn't it.

Looking at your lump sum figures you can get an increase in lump sum from £60,000 to £81,619.47, £21,619.47, at a cost of income reduction for life from £17,000 to £13,094.10, £3,905.90. Commutation rate for that is 21,619.47 / 3,905.90 = 5.5:1. That is so low that I have difficulty in believing that the numbers are accurate, since the worst I've seen previously has been around 8:1 and 12:1 in public sector schemes is common and also a bad deal. If those numbers are right, don't take the increase in lump sum, you'll make the money back in higher income in less than six years and can presumably use borrowing instead if you really had a need for a lump sum.

Using your later post you appear to have the option of £18,018.35 a year and no lump sum or that £17,000 a year and £60,000 lump sum. Commutation factor for this is 60,000 / (18,018.35 - 17,000) = 58:1. That's close to twice the highest commutation rate I've seen and represents a very good deal if the numbers are accurate. Check that they are and if they are, taking the 60k looks like a good move because you only need to make 1.7% on your money to beat what the 60k will pay you if left in the pension.

The options that provider a pension that starts high and reduces from 26 November 2029 are to provide you with a higher income from the work pension until your state pension can start, or until close to that. It's to help people who have no other source of income. The drop has to be there because of the higher initial payments, or else the scheme would be paying you more money than it should.

Like Linton I'm very suspicious about these numbers because the commutation rates are too extreme to seem right. If they are right and you don't want one of the 4 variations, take the 60k lump sum.

Option 4 plus lump sum might be interesting but we don't have the numbers. To evaluate this one really want to know what is the built in lump sum available that has no reverse commutation so that can be used in the calculation. That's because taking that amount of lump sum and no more may offer the best deal if you need a higher income until state pension age.

One thing that happens in some schemes is that there is a built in lump sum - perhaps the 60k - and if you don't take it there is a "reverse commutation rate" used to buy more income. That could explain why taking the 60k lump sum looks like a good deal, the reverse commutation rates are usually bad.

Since the provider will take the money back from you if the numbers are wrong, tell them about the commutation rate calculations and ask them to confirm that the numbers really are right because they look too extreme to be right.

Option 4 with a lump sum might well be the best option if you want that higher income until state pension age. But don't have the numbers to sort out the commutation rate to see how it looks.

This writing about taking the 60k doesn't override the usually bad to take it early, borrow instead, generalisation. To counter that we need to know how much you can cut the actuarial reduction by stopping work but not taking the pension for a few years.

DesG

jamesd wrote: »

Like Linton I'm very suspicious about these numbers because the commutation rates are too extreme to seem right. If they are right and you don't want one of the 4 variations, take the 60k lump sum.

Figures may be skewed due to the previous transfer in I would say:

"I also transferred my previous pensions into the pot."

kidmugsy

Options 1 & 2 are both so inferior to option 5 that I'd consider only options 3, 4 & 5, if it were me. I'd also try to establish whether my widow's pension will be the same whichever of those options I take.

Have you checked the size of State Retirement Pension that you will be due? Have you checked whether a bit of part time work, plus paying the corresponding NICs, might increase that pension?

Do you think that you'd be happy working part time until your State Pension Age, and then pack it in when your state pension begins? If so, taking the reducing pension might be less attractive.

jamesd

DesG wrote: »

Figures may be skewed due to the previous transfer in I would say

Yes, they could be. I was wondering if they might be in AVCs and if the value of the AVC pot might be £60,000. That would explain the excellent commutation rate for that bit.

Dunree

Hi guys,

I haven't logged in for a wee while but I've had a look at some of the posts.

The figures are all from the Pension Scheme people.

I do have an AVC which is completely separate from the pot. There is roughly £5k in there.

I'll go through the posts in more detail within the next couple of days and reply to any information asked for.

Thank you once again for taking the time to respond

Dunree

Hi,

I've managed to get some figures for three different retirement dates.

All figures come direct from the pension fund website. The age that you can start to draw your pension is 50 and it increase annually by RPI.

I have been paying full NI since 1980.

Hope this helps.

To retire today:

Option one: Pension of £18090.25 a year.

Option Two: Pension of £13140.05 a year plus a maximum lump sum of £81925.81.

Option Three: Pension of £20587.10 a year reducing to £14363.61 a year from 26 November 2029.

Option Four: Pension of £15268.62 a year reducing to £9045.13 a year from 26 November 2029 plus a maximum lump sum of £88020.84.

Option Five £17000 p/a plus a lump sum of £60,000

To retire 1/6/2018:

Option One: Pension of £20832.59 a year.

Option Two: Pension of £14968.64 a year plus a maximum lump sum of £94116.41.

Option Three: Pension of £23636.58 a year reducing to £17413.09 a year from 26 November 2029.

Option Four: Pension of £16949.75 a year reducing to £10726.26 a year from 26 November 2029 plus a maximum lump sum of £107323.76.

To retire 1/6/2021:

Option One:
Pension of £25719.86 a year.

Option Two:
Pension of £18120.57 a year plus a maximum lump sum of £115129.27.

Option Three:
Pension of £29127.29 a year reducing to £22903.80 a year from 26 November 2029.

Option Four:
Pension of £20486.77 a year reducing to £14263.28 a year from 26 November 2029 plus a maximum lump sum of £130903.93.

Dunree

Ps, I can't take all of it out of the pot. I can only do this with the AVC.

And, having checked with the Online Government Pension calculator, I'm due full pension when I'm 67.