BT Pension at 56

Bannerman1962

I'm 56 years old

I left BT in 2004 and have a Section B final salary pension and lump sum waiting for me at 60.

Current estimate is an annual sum of £11,700 + Lump sum

I work full time at the moment and have been paying into a works pension (Saul) for the last 7 years with a retirement age of 65. (Pension and lump sum)

I am seriously considering taking my pension now at a reduced rate of 20% and effectively giving myself a 55% pay rise and allowing me to pay off credit card debts and a chunk of the remaining mortgage with the lump sum. Enjoying the extra income and actually being able to save rather than existing to break even every month (especially paying interest on credit cards) seems enticing.

Apart from the reduced rate of pension can anyone advise me if I have missed anything? I would also point out that with pension and salary I would still be on annual earnings of approx £25k so well short of higher tax.

atush

Are you of ill health and unlikely to make old bones? Do you have a spouse and dependents?

I would think it uniwse to lose 20% or more of your pension, and pay tax on it as well. unless you are despirate

Bannerman1962

I do actually plan to continue working for at least another 10 years in my current job, I enjoy and although the pay is not fantastic but it's secure. My partner is the same age as me and already draws her pension.
Whilst I am aware of the reduced amount for taking my pension 48 months early, the fact that my monthly income (and the ability to things with the lump sum) would be increased by over £600 would make the next 3 years a lot less stressful.

Dox

You seem to have thought it through, so go for it! You aren't 'losing' 20% of your pension - it will be payable for an extra four years and goes up while it is in payment.

kidmugsy

You plan to continue to work and to contribute to your current pension scheme. You are quite clear about the extent to which drawing the BT pension early will improve your life. It might therefore be entirely reasonable to take the BT pension.

Because you have spent much of your career in a final salary scheme, and therefore contracted out of SERPS/S2P, it would be wise to get the official prediction of your eventual State Pension. You might then investigate whether you could get a bigger State Pension by making extra National Insurance Contributions. That might prove a cost-effective way to compensate for your BT pension being smaller because of Actuarial Reduction.

Dox

kidmugsy wrote: »

Because you have spent much of your career in a final salary scheme, and therefore contracted out of SERPS/S2P, it would be wise to get the official prediction of your eventual State Pension.

Being in a final salary scheme doesn't mean members were automatically contracted out of SERPS; many were, but quite a few final salary schemes were never contracted out.

kidmugsy

Dox wrote: »

Being in a final salary scheme doesn't mean members were automatically contracted out of SERPS; many were, but quite a few final salary schemes were never contracted out.

Was the BT scheme contracted out?

tigerspill

kidmugsy wrote: »

Was the BT scheme contracted out?

Yes - until March 2009. Then contracted in from April.