Redundant at 54 DB Pension

brewerdave

Effectively he isn't losing his redundancy if he retires before the date on the redundancy notice because the pension is being enhanced (ie the 5% reduction per year as per scheme rules is being reduced to 3%) ??

kidmugsy

brewerdave wrote: »

Effectively he isn't losing his redundancy if he retires before the date on the redundancy notice because the pension is being enhanced (ie the 5% reduction per year as per scheme rules is being reduced to 3%) ??

That sounds right. Suppose his scheme's normal retirement age is 65. With the 5% option a full pension of £100 p.m. becomes £50 p.m. With the 3% option he gets £70 p.m. The latter is 40% bigger than the former. I dare say that the widow's pension might be 40% bigger too - well worth checking. So how big a capital sum of redundancy compensation is worth giving up for a 40% bigger pension? Depending on how good the index-linking is, how much would an extra £20 p.m. cost = £240 p.a.? Somewhere around £10k. A correction would be needed for tax treatment but those are the lines to think along.

coyrls

kidmugsy wrote: »

That sounds right. Suppose his scheme's normal retirement age is 65. With the 5% option a full pension of £100 p.m. becomes £50 p.m. With the 3% option he gets £70 p.m. The latter is 40% bigger than the former. I dare say that the widow's pension might be 40% bigger too - well worth checking. So how big a capital sum of redundancy compensation is worth giving up for a 40% bigger pension? Depending on how good the index-linking is, how much would an extra £20 p.m. cost = £240 p.a.? Somewhere around £10k. A correction would one needed for tax treatment but those are the lines to think along.

The figure for a 5% reduction would be £95 and a 3% reduction £97.

AnotherJoe

coyrls wrote: »

The figure for a 5% reduction would be £95 and a 3% reduction £97.

Doh ! They aren't looking at 1 year early they are looking at 10.

Thrugelmir

coyrls wrote: »

The figure for a 5% reduction would be £95 and a 3% reduction £97.

The reduction %'s quoted are per annum. With ten years between 55 and 65. That's 50% and 30% respectively.

Dox

cdbhel wrote: »

I have emailed the full pension scheme rules to the Pensions Advisory Service along with the latest information we have received from the company. Thanks again.

Suggest you wait for their reply - nobody here has seen the rules so all the speculation is based partly on guesswork.

kidmugsy

coyrls wrote: »

The figure for a 5% reduction would be £95 and a 3% reduction £97.

The reductions are reductions per annum.

coyrls

kidmugsy wrote: »

The reductions are reductions per annum.

OK Got it.

enthusiasticsaver

He wont lose his redundancy if he waits until July and takes the pay off. Surely he can live off redundancy money until he decides to draw his pension after he reaches 55 5 months after redundancy? Yes, it will be reduced so if he has other options or the redundancy is large enough to delay drawing on the pension that is better.

A_Nice_Englishman

From the employer's point of view, they are prepared to pay £x and are giving the choice of having it as a lump sum or having it paid into the pension scheme to provide an enhanced pension.