"level pension option"?

bundly

Trying to fill in a form to get my RPS pension. There is an option asking me if I would like to "take the level pension option". There are no guidance notes to explain what this means.

I found this on their website:

"Level pension. You may want to take your RPS benefits before you can claim your State Pension. The level pension option helps even out your income when you start claiming your State Pension. You draw a higher RPS pension before you claim your State Pension and a lower RPS pension after reaching State Pension age. This option is subject to eligibility and the terms of it will be based on your State Pension age when you take your pension from the RPS."

I want to draw a higher RPS pension before I claim my State Pension and a lower RPS pension after reaching State Pension age. So do I opt IN or OUT of a level pension?

Thanks

Linton

It reads like it is defining "Level Pension" to mean the option of maintaining a steady long term income by doing what you want - paying out more than otherwise before you get your SP and less afterwards. This is occasionally found with DB pensions. So you would say yes to the question.

However without that definition one could argue that level meant level pension from RPS (whoever they are). What is written on a website isnt definitive. So if you are worried I suggest you get confirmation from RPS.

Brynsam

RPS is Railways Pension Scheme - so you'd expect complications!

bundly

Linton, so to get more money earlier on, I should choose YES? But you are not sure. It's not at all clear, is it?

I was hoping to get it in the post today but I guess, unless someone else in the RPS comes along and gives a 100% certain answer, I shall have to delay till I can ring them :-(

mgdavid

I can't see the confusion; you want to opt in for level pension.

Brynsam

bundly wrote: »

Linton, so to get more money earlier on, I should choose YES? But you are not sure. It's not at all clear, is it?

I was hoping to get it in the post today but I guess, unless someone else in the RPS comes along and gives a 100% certain answer, I shall have to delay till I can ring them :-(

I think you'll find your local post has already been collected (few areas have a collection after about noon on a Saturday) so I wouldn't fret about not getting the form off today.

If you want to even out your income before and after you reach State Pension Age, you say 'yes' to a level pension. Section 12 of the scheme booklet covers the point: http://www.mynrpension.co.uk/media/1515/RPS-60-NR-Scheme-booklet.pdf

Linton

bundly wrote: »

Linton, so to get more money earlier on, I should choose YES? But you are not sure. It's not at all clear, is it?

I was hoping to get it in the post today but I guess, unless someone else in the RPS comes along and gives a 100% certain answer, I shall have to delay till I can ring them :-(

Now that we have a reference to an official document in Brynsam's posting I agree that YES will give you the larger pension early on that you want.

bundly

Linton wrote: »

Now that we have a reference to an official document in Brynsam's posting I agree that YES will give you the larger pension early on that you want.

Cheers Linton!

NIMBUS10

Hi,


I opted for the "levelling option" when I took early ill-health retirement....here are some things to think about before making a irreversible decision.


1: Before anything else get a SP forecast/statement, this will give you an idea of how much the levelling will increase your occupational pension as generally the OP uplift is based on a single persons SP rate on the day you retire.
Also it will tell you if you were contracted out during your employment, if you were then you will almost certainly not get a full SP.


2: Find out how much your OP will decrease by the time the SP comes into payment because if your SP is lower (due to contracting out) than the full amount of the decrease in your OP this shortfall may not be covered by the SP.


3: If your OP says it will pay the increase until your SP age make sure they mean your SP age (if it has been extended..to say 66) the OP may be set up using 65 as the SP age....thereby you could end up at 65 having a reduced OP and also have to wait for a year until the SP starts. Hopefully you will find that like my OP they will pay until the SP starts.


4: This is vital for your long term income..... find out if the OP reduction (once you are getting SP) is for a set period of time or for life. My OP was to be reduced for 10 years and then increased to what my OP would have been in the 11th year on.... minus the uplift. Now because my SP age is 66 they are reducing my OP for 9 years instead.


As the levelling option is expensive for the scheme to administer, I found the reduction in my OP (once SP is payable) is pretty hefty....but thankfully is covered by the SP ...even though I had been contracted out.....again check your situation!.


When I was in the situation you are in today I was in hospital (recovering form a stroke) I just saw the increased monthly income figure....and as I felt I needed my monthly income in (unexpected retirement) to be as close to my working monthly income I went for it.
Years later I now know I will be paying a lot more back than I have had paid out....had I at the time been up to really studying the figures I may have made a different decision......so do the sums.
In fact saying "paying back" in incorrect....it's just the figure of reduction in the monthly OP payment.


As an aside....
Many people in my pension scheme who took the levelling option tried to have the scheme trustees reverse their decision as they had found in ALL cases that it would have been better financial sense to have got a personal loan to supplement their OP until SP was payable!.


However the trustees refused to entertain the idea as it was a binding irreversible decision on the pensioners part. This would probably still stand in your situation too.


Looking at your pension booklet I see that the pension in payment increases are generous being RPI+0.5%, just bear in mind that (like my scheme) any scheme that uses RPI as the annual increase are really working toward getting this changed to the lower CPI.....so like we all have to do if we are getting increases inline with RPI take into consideration that it could be on borrowed time.


As a result of using CPI over....over the lifetime of your OP it will save the scheme a lot of money.....in the long run though that's better for you as a pensioner as the scheme will still be able to afford to pay out.... swings and roundabouts I suppose!

bundly

NIMBUS10 wrote: »

Hi,


I opted for the "levelling option" ... .....in the long run though that's better for you as a pensioner as the scheme will still be able to afford to pay out.... swings and roundabouts I suppose!

Wow Nimbus!

I'm a bit gobsmacked by the level of detail you have posted... that is so very kind, THANK YOU!

I will go through it all again tomorrow!