Actuarial Reduction

xylophone

Re Grad

https://forums.moneysavingexpert.com/discussion/comment/70783402#Comment_70783402

Is this a British Steel Pension by any chance?

https://www.bspensions.com/standard-section-s5/deferred-pensioners-s29/early-payment-s69.html

'The reduction is not as straightforward as applying a percentage reduction back from age 65. In order to calculate the cost of early payment, a number of general assumptions have to be made by the Scheme Actuary, including:
whether or not the member is likely to be married when they die;
how long the member (and any spouse) would be expected to live;

what the average rate of inflation would be throughout the member's (and any spouse's) future lifetime both before and after retirement, (this determines the rate of pension increases in the future); and

the average rate of investment returns that any cash sum invested in the Scheme at the date of retirement would be expected to earn over the member's (and any spouse's) future lifetime.

In carrying out these calculations for Deferred Pensioners, the reduction is calculated by the Scheme Actuary on a "cost neutral" basis. This means that, taking all members in aggregate, the Scheme should make neither a gain nor a loss as a result of early retirement experience.'

VickLad

Going back to my original point. In my calculations, I did a quick projection forward for both the pension as it would be paid at retirement age and from the actuarial reduction, applying what has been the long term RPI index as applied to the pension. The difference is broadly a 40% reduction in the total benefits paid up to age 84. This is hardly cost neutral if applied across all pension members.
It is a small pension using the figures quoted by the pension fund it would generate less than £2,500 up to retirement age if taken early but what in effect I am being told is that that the reduction of that £2,500 would have generated 40% of the total pension payable. This figures I used were based on the pensions value at April 2014.
Since my original post I have spoken to a number of colleague and friends both retired and still working all have suggested that compared with their DB pension rules and experience the reduction does seem excessive.
[FONT=&quot]No doubt all will be clearer when the pension fund get back to me. [/FONT]