Taking a Final Salary Pension at 55

wonton

Hi,
I'm 55 and have been given my options for taking early retirement from an old company pension when I was working there.
You hear about final salary schemes folding in the news so am I better taking it while the money is there or waiting and hope it's there in 5 years time?
The projection is obviously better in 5 years but I'm thinking it's better to have it now because I can?

I suppose what I'm asking is - once I start drawing on the pension is that a more secure option for me.

Any Opinions?
Thanks

MoneySavingUser

Have you seen the scheme's accounts - does it have a deficit?

If the scheme fails it will go into the PPF and you will get 90% of the benefits you would have gotten if it hadn't failed.

If it goes into the PPF after you start taking the pension then I think you keep getting 100%.

You will probably have to take a reduction in benefits to take the pension at age 55 - do you know how much this is?

dunstonh

You hear about final salary schemes folding in the news so am I better taking it while the money is there or waiting and hope it's there in 5 years time?

Very few actually go that way and they are all protected by the PPF.

You say you are better off taking it now. So, this suggests you have done the calculations against leaving it vs taking it now and have factored in the costs and the PPF option (if it went that way).

The projection is obviously better in 5 years but I'm thinking it's better to have it now because I can?

You are the one that has done the calculations. Not us. So, is it better when you take into account the PPF?

wonton

It is in deficit and I will have to take a reduction in benefits. When I'm 60 I can take full benefits.

I guess I'm assuming it will PPF so I have to work out if 90% of full benefits (at 60) is better or worse than taking it now.

If it does PPF will I have to wait until 65 then? if which case I may take it now

Mr.Generous

I have looked at mine like this, at 60 pension is (say) 16k per year, at 55 its £12k. ok a lot more, but taken at 55 12k x 5 years = 60k. So at £4k more per year it would take 15 years to break even. That would put me at 70. If I don't live to that I've lost out. At 55 I plan to spend some of the money on booze, loose women and holidays, the rest I'll waste.

robin61

Does taking the pension at 55 mean you want to retire or will you still be working until you are 60 or longer ?
Do you actually need the money from this pension ? If you don't then why take it early ? You would be paying a lot of tax on it and accepting an actuarial reduction.
Although he scheme is in deficit that doesn' t neceserally mean it is about to go pear shaped.

sandsy

What's the deficit level?
Is the employer paying extra contributions to try to address the deficit?
Is the employer financially sound?

atush

how much is the reduction for taking it now? And how long will you still work?

Thrugelmir

dunstonh wrote: »

Very few actually go that way and they are all protected by the PPF.

Scheme deficits are currently estimated at £380 billion. The PFF doesn't have the assets to underwrite even a fraction of this liability.

atush

And that is assuming all DB pensions would fail as of today. W/o new payments into the fund, and with 100% of all schemes going down?

dunstonh

Scheme deficits are currently estimated at £380 billion.

Although that figure is subjective and suffers big swings. The assumptions that lead to those sort of figures have gone from being overstated to understated. Still some issues for sure though.

The PPF could not take them all but currently the PPF is in surplus.

It is really hard at the moment as the transfer values being offered by many schemes really tests the resolve and the conventional thinking.