Clueless really about pension

brianissac

Hi folks
I am considering my options regarding early retirement. I am almost 59 and would like to finish at 60. I am in a LGPS and will have 20 years at 60. It is a mix of final salary etc. My last statement gave me a figure for benefits as of March 2017 and also a higher figure for the projected benefits at NRA. If I choose to retire st 60 a %age will be deducted. I believe the deduction will be less for the years covered by the final salary part. But here is my really naive question.
Is the %age deducted from the projected amount or the amount as of March 17 or March 19 by the time I want to finish

Many thanks

Silvertabby

In order to benefit from Rule of 85 transitional protections in respect of your pre 2008 service you would have to meet the criteria - ie, your service and age at retirement must equal at least 85. At age 60, with 20 years of service, you won't meet that.

If you would not satisfy the 85 year rule by the time you are 65 All your benefits are reduced if you choose to draw your pension before your Normal Pension Age. The reduction will be based on how many years before your Normal Retirement Age (protected Normal Pension Age for pension built up before 1 April 2014) and new Normal Pension Age (linked to State Pension Age) for pension built up from 1 April 2014) you draw your benefits.

It looks to me that you will have to pay the full reductions on all of your benefits if you retire at 60. The reductions will be applied as at your date of retirement. Once you are within your last 12 months ask your LGPS provider for a full retirement options quote as at your chosen date of retirement

ADD:

In round years, pension accrued pre 2014 would be reduced by 24% if taken at 60 (5 years before NRA) and pension accrued between 2014 and date of leaving would be reduced by 27.8% if taken at 60 (6 years before NRA).

brianissac

Many thanks for the reply. The good news I take from that is that the majority will be at a less %age reduction or what I paid in between 1999 and 2014 ��

My naive and probably hopeful question was would the deductions be made from the projected pension eg benefits as of March 2017 are £15k projected benefits at NPA are £24k. So if taken at age 60 would the reductions be made from the £24k or the £15k... I reckon I know the answer ☹️

Silvertabby

Many thanks for the reply. The good news I take from that is that the majority will be at a less %age reduction or what I paid in between 1999 and 2014 ��

Yes, but not by much - 24% for pre 2014 and 27.8% for the rest

My naive and probably hopeful question was would the deductions be made from the projected pension eg benefits as of March 2017 are £15k projected benefits at NPA are £24k. So if taken at age 60 would the reductions be made from the £24k or the £15k... I reckon I know the answer ☹️

Sorry, but the reductions will be from your actual pension of £15K (plus whatever you accrue between 1 April 2017 and your date of leaving) .

mgdavid

If you have other sources of funds - savings, ISAs etc - it's often better to live off those for a few years and defer the pension until as near to NRA as possible and suffer less actuarial reduction.

atush

brianissac wrote: »

Many thanks for the reply. The good news I take from that is that the majority will be at a less %age reduction or what I paid in between 1999 and 2014 ��

My naive and probably hopeful question was would the deductions be made from the projected pension eg benefits as of March 2017 are £15k projected benefits at NPA are £24k. So if taken at age 60 would the reductions be made from the £24k or the £15k... I reckon I know the answer ☹️

My naive and hopeful suggestion is to open a personal pension (or AVC if there are benefits to doing so).

You will get tax relief on any you put in (ie if a BR taxpayer, 100 into yiour pension will cost you 80), plus access at retirement to the whole fund- 25% tax free, and 75% taxed at your rate depending on other income.

Put in enough to live on, and you will reduce the actuarial reduction of the DB pension. Do it for 2 years, and even better. You can do this either side of April 5th 2018.

Even if you dont use it to delay retirement, ou could use the fund to not take any addtional TFLS and therefore get a higher annual pension for life

kidmugsy

If you are a bit short of cash to follow Atush's suggestion you could even consider remortgaging your house to raise some capital. You'd want to do that while you are still employed.

kidmugsy

Silvertabby wrote: »

It looks to me that you will have to pay the full reductions on all of your benefits if you retire at 60.

Are you sure? Maybe it's just a case of somebody writing bad English, but consider "If you would not satisfy the 85 year rule by the time you are 65 ....". But he would (I assume) satisfy the 85 year rule by the time he was 65 if he carried on working until then.

Silvertabby

“ It looks to me that you will have to pay the full reductions on all of your benefits if you retire at 60.
Originally posted by Silvertabby ”

Are you sure? Maybe it's just a case of somebody writing bad English, but consider "If you would not satisfy the 85 year rule by the time you are 65 ....". But he would (I assume) satisfy the 85 year rule by the time he was 65 if he carried on working until then. Posted by kidsmugsy

Yes - he'd meet the Rule of 85 at 65, but the transitional protections in his case only apply to his pre 2008 benefits - which still have an NRA of 65.