56 year old subject to penalties for accessing pensions

Silvertabby

“ I'm not an expert in the RM pension schemes - but it does look like that these benefits, in line with most unfunded public sector schemes, can't be transferred to DC (private pension plan). Could someone in the know confirm that for the OP?

xylophone wrote: »

https://www.royalmailpensionplan.co.uk/section-c/leaving-scheme/transferring-out

Thank you. Then OP's husband will have the double whammy of obtaining a CETV from RM, then finding an IFA who is willing to recommend a transfer from a DB scheme to a private pension.

Don't think that would help the OP, in any case, as any reduction from what they were 'expecting' will be a problem.

Linton

Mr.Generous wrote: »

If he is unwell now take it early, you are looking at a 20 year break even situation if you wait. Not many of us are certain we will live beyond 75 years, we hope so, but people over 50 die every day, over 60 its entirely normal.

According to Office of National Statistics data a male aged 55 now in average health has a life expectancy of another 31 years with a 20% chance of dying before 75. So unless there is serious life shortening ill health it could be foolish to take the pension early.

ermine

Wiltsmum wrote: »

He was shocked to find the figures reduced by 5% for each year under 65, effectively halving the figures. Next we were told to transfer it to an open market pension to save being subject to these penalties but apparently they still apply.

Did not a moment's reflection tell you that if people could clear off at 55 with no actuarial reduction there wouldn't be anybody over 55 in his workplace?

A DB pension is typically predicated on the retiree living about 20 years after normal retirement age, so the 5% p.a. early payment hit is fair enough.

Odd to assume that transferring it out, were that possible, would magically cancel out the reduction from paying it over a longer period. Sure, you would convert the DB pension into a lump sum, and maybe that would be the same if he stopped contributing, but arithmetically spreading that lump sum from 55 to death brings you less every year that spreading it from 65 to death, unless for some reason you know his life expectancy is < 65, which I hope is not the case.

Transferring the CETV out and going DIY would seem unwise if the actuarial reduction came as a surprise.

Wiltsmum

Thank you. We now have a better understanding of what has happened. My husband paid into something he didn't understand fully. I have a private pension and it is completely different. I can access it in full at 55. He thought he could do the same. We are both usually have no problem understanding financial matters but this one foxed us. So thank you. I won't take the question down as it may help others but do not want messages that intimate we are unintelligent.

Thrugelmir

Wiltsmum wrote: »

I have a private pension and it is completely different. I can access it in full at 55.

Maybe so. However your potential pension would be greatly diminished by the lack of further investment for another 10 years. The law of compound returns will result in the outcome being significantly higher in the future. Reinvestment of income being the core driver of building a large enough pot to fund a comfortable retirement. Unless one makes a plan well in advance to save additional monies to bridge the gap to state retirement age.

tacpot12

Thank you for leaving the question up. If you were not clear about something, you can bet that there are others who were also not clear about the same thing.

Wiltsmum

My pension is large so I will be on a very lovely beach. But thank you.

enthusiasticsaver

It is very common for pensions to be reduced by up to 5% for each year early that you take it unless you have some protection like Rule of 85. Some pension schemes also have some built up protections. My DH paid into a booster pension scheme with the intention of retiring early and his pension was only reduced by about 1% for each year and he ended up taking it at 59 as it was calculated with a retirement age of 60 instead of his spa of 66. Similarly mine was not reduced by that much either due to another pension being transferred in. Obviously you will be receiving it for longer if you draw on it at age 55 but some people use s and s isas to bridge the gap rather than draw on the pension. Don't forget though if your DH is actually retiring the figures for drawing it at age 65 are calculated assuming he contributes up until that age too which obviously he won't if he is retiring. You need to look at deferred pension quotes to get an accurate figure.

Wiltsmum

Husband not retiring. He has other pensions. This pension closed years ago. Royal Mail started a new scheme last year that he pays into.

xylophone

Have both you and your spouse obtained state pension statements?

https://www.gov.uk/check-state-pension