Take a final salary pension early or wait

robin61

Linton wrote: »

Are you looking at these numbers correctly? Are you sure that they arent projections of what you will get at 60 being increased by inflation? If so they say nothing about what you will get if you take the pension early.

I think this is probably correct. The OP would need to contact Accenture and ask for a quotation if he wanted to take the pension early. I think he's just been taking these figures from his annual benefit statement. They've gone up gradually due to being linked to CPI.

robin61

GSP wrote: »

Hi Happyhero,
I would say very ballpark and depends on schemes but based on your numbers available you could be looking at £750,000. Play around with a calculator on the the tidewaywealth website to see the various scenarios with or without lump sums and the "growth" rates.
Personally, I did not take a lump sum and keep it all invested in the pension.

In your case you have other investment options as well so are better equipped than me at getting through retirement.

The message mostly seems to be is enjoy, as well as of course being careful.

I don't expect the transfer value will be worth anything like that amount. (Sorry). My projected BT pension is quite a bit more than the OPs and my figure wasn't that high. If I remember correctly it was around 22 times the annual pension. I didn't give it a second thought. Easy for me to rule that out.

robin61

happyhero wrote: »

Hmm, I think when I ask for figures this year I am going to be a lot more specific about what figures I want.

As for this thread I feel more inclined to wait until 60 as it seems there is a very strong chance that the real figures for drawing early could be a fair bit lower.

Taking it one step further, anybody any idea on why it would not pay to leave the money not taken past 60 with this particular BT DB pension, surely it would increase its annual potential normally the longer I left it.

Also what effect would not taking the £50,000 lump sum have on the yearly income figure for me?

You can ask Accenture for acquotation to convert lump sum to extra pension. It will depend on market conditions, whether you want the extra pension to be based on joint lives and your age. Nobody except Accenture will be able to give you that figure.

As part of the current pension consultation BT is proposing to add pension if you take it later ( like an actuarial reduction in reverse) although I've not seen the figures. However I'm really not sure if that's going to be applied to people who are already deferred members. I expect maybe not. However Accenture should be able to tell you.

If I was you if you are thinking about taking your pension early you can ask for your figures and compare them to what they will be at 60. I'd expect to see a reduction of a bit over 5% per annum. But as I said in my previous post these figures could improve later in 2018.

justme111

I would say the reduction values are more like 4%/year.
Do not forget , if you wait for bigger pension you get more out of scheme but will pay more in tax out of what you get so the net result in your pocket woyld need to be calculated

robin61

Here you are OP. I have just dug out the Actuarial reduction table for scheme B. Which it looks like you must be in judging by the lump sum figures you gave.

For pre 2009 service the reduction figures for taking the pension before you are 60 are as follows

Age 57 14.2%
Age 58 9.8%
Age 59. 5.1%

Accenture gave me these a while ago but I believe they are still correct. I believe the reduction is calculated on a daily basis but this should give you a really good idea. Just apply these reduction figures to your age 60 pension.

highet

hi happyhero - to correct a common misconception, an actuarial reduction is not ''a penalty' for taking your pension before normal retirement age but is an exact calculation to account for fact pension will in theory be paid out for an increased length of time. It is calculated such that if you survive to average age for your peer group your payout will be the same no matter what age you retire at - if you die before average age you would have been better to take pension before NRA, if you outlive your average age you will be better off having waited til NRA - as noone knows how long they will live it is always a gamble although one you can play the odds with if you know your family history, current state of health etc

capital0ne

happyhero wrote: »

Hello Linton, not 100% sure but it has this line above the figures "The value of your benefits as at the date of this letter, are as follows:" so I think tthat means that is what I would get at the date of the letter, how do you read that, it seems obvious but then I start doubting myself?

HappyH, You are reading it incorrectly, it means as of the date of this letter this what you will get when you reach 60.

Taking it early will knock it back by 5% for each year before you turn 60.
And converting the lump sum to pension is probably a ratio of 12:1 - i.e. £12 will buy you £1 of pension. You need to ask this question tho'.

PeacefulWaters

highet wrote: »

hi happyhero - to correct a common misconception, an actuarial reduction is not ''a penalty' for taking your pension before normal retirement age but is an exact calculation to account for fact pension will in theory be paid out for an increased length of time. It is calculated such that if you survive to average age for your peer group your payout will be the same no matter what age you retire at - if you die before average age you would have been better to take pension before NRA, if you outlive your average age you will be better off having waited til NRA - as noone knows how long they will live it is always a gamble although one you can play the odds with if you know your family history, current state of health etc

as different schemes apply different reductions, it's anything but exact.

sandsy

capital0ne wrote: »

HappyH, You are reading it incorrectly, it means as of the date of this letter this what you will get when you reach 60.

Yes, I agree. It reads as if these are the revalued figures from date of leaving until today. So it doesn’t appear to include any element of projected revaluation to normal retirement age. So assuming inflation exceeds 0%, the figures will continue to increase year on year.

sleepymans

Some of these final salary pensions do not allow people who have already left the employer to either take the pension early nor take it any later....in fact some pension not claimed at 60, or whatever the scheme retirement age is, can be lost.

Be very very careful you fully understand the rules of the scheme and how they affect you In Your situation.

You probably will have the option, at 60, to take less lump sum in exchange for a higher pension, or a larger lump sum for a lower pension.

That!!!8217;s when you need to get your crystal ball polished!