Pension Increase Exchange (PIE )

Daniel54

I hadn’t come across this before,but have recently been offered a PIE on the smaller of two DB pensions,both in payment.

I am 64 next year and my wife a year younger

By way of background,the larger DB is £ 40k pa indexed at RPI up to 5% My wife has an NHS pension in payment of £15 k pa. We have savings ( SIPP /ISAs ,unwrapped S&S,cash) of over £500k.No debts or mortgage .We are both entitled to the full NSP

On that basis we are already well set to have more than enough for a long retirement without fear of running out of funds.

The PIE pension is £23k pa increasing at a fixed 5 % pa. The offer is to increase this to £ 45 k pa,with no further increases .At RPI of 5% ,the projected cross over point is at the age of 78.The offer represents 85% of future projected increases ,assuming normal cohort life expectancy

I would only accept the offer on the condition it was not a BCE 3 ,which requires 20 out of my group of 90 to accept and thereby create an exemption

The IFAs appointed by the pension provider (free of charge) have advised against acceptance ,on the basis I have no need for enhanced early payment and therefore should not risk a reduction in the total future value of the pension.This is sound and logical thinking,but I will check it out with my own IFA.

The reason for posting is that I am nevertheless tempted to accept.The thinking being that I would be hedging against lower than expected life expectancy and bringing forward income that is more likely to be spent ( and/or gifted to children out of regular income) in the period up to my 80s.

I suspect this is not a black and white decision ,but wonder what others here think or might do regarding this offer .

AnotherJoe

I’d take the extra money per year now, because you are in good health and able to spend it now on things you enjoy

Your spending at age 78 will likely be considerably less than now and your income will still support care home fees should they be needed plus you have the £500k to fall back on plus possibly downsizing.

Daniel54

Thanks for the feedback.which is appreciated Subjectively,that is the way I am leaning. Pensions,savings and house value will already ensure that I/we can afford good care should we require it in later life.

kidmugsy

How would the deal affect the widow's pension?

What about tax? I can imagine a Corbyn government reckoning an income of £40k + £45k + state retirement pension as deserving of punishment.

What about means testing? They might even decide that on £85k you should be denied your SRP.

But these last two points demand a crystal ball.

Audaxer

Daniel54 wrote: »

The IFAs appointed by the pension provider (free of charge) have advised against acceptance ,on the basis I have no need for enhanced early payment and therefore should not risk a reduction in the total future value of the pension.

That sounds like good advice to me. I know it is tempting but I would take that advice unless I had particular plans on what I was going to spend the enhanced early pension on.