Understanding Deferred Benefit Statement (or rather, not!)

ramagel

A little while ago I posted about the possibility if getting an early 'ill-health' pension from my two deferred pensions. I have finally stopped prevaricating and written to the trustees of both schemes to start the ball rolling.

What I could really do with some help understanding is my 'personal deferred benefit statement as at 6 April 2007' for Pension 1 and some sparse information for Pension 2 (the earlier of the two).

Some kind soul (I won't say who to spare her blushes) suggested I post the numbers here to get a translation into plain English!

These are the essential figures (at least I think they are) for Pension 1:

Deferred Pension at date of leaving £6,066.92 pa
Pre 1988 GMP etc etc 0.00 pa
Post 1988 GMP £306.80 pa

Deferred Pension at 6 April 2007 £6,668.96 pa
Pre 1988 GMP at SPA 0.00 pa
Post 1988 GMP at SPA £648.38 pa

Date of leaving was April 2005. SPA will be 2022 (65) currently 51-ish.

In the notes accompanying this statement, it quotes an estimated pension at NRD basis 2.5% RPI increase pa of £9,091pa.

Does this mean, in effect, that I could NOW claim a pension of £6,668.96 (or thereabouts) based on the “Deferred Pension at 6 April 2007" figure? That seems almost too good to be true, as I don't really expect (or have much desire) to live much beyond 65 anyway given the state of my health. That sort of extra money would come in really handy! But it can't be true, can it .....

These are the few figures I have for Pension 2:

Total Pension accrued to 1 May 2002 £2,760.19 pa

Then a bit later some updated information:

Preserved benefit at Nov 2006 £3,056 pa
with 60% spouse’s pension on death

This pension increases at RPI or 5% whichever is lesser.

[FONT=&quot]So, again, does this mean that I could NOW claim a pension of about £3,056pa? Seems too good to be true again ....[/FONT]


Any guidance on interpreting these figures would be very welcome – thanks in advance!

(Sorry I couldn't get the figures to line up!)

Debt_Free_Chick

ramagel wrote: »

Does this mean, in effect, that I could NOW claim a pension of £6,668.96 (or thereabouts) based on the “Deferred Pension at 6 April 2007" figure?

Almost certainly not. This is simply telling you that the current value of the pension you can expect to receive at 65 is £6,668.96 - but it will continue to be inflation-proofed (partly) until then.

If you take this pension early, then it's normally reduced for early payment. If you are due to receive £6k at age 65 then, on average, it will be paid for about 13 years. If you start to receive your pension at age 51 then, on average it will be paid for 27 years. There's no way that an amount intended to last for 13 years can be stretched to cover 27 years. So you get a smaller pension payable for a longer period of time.

[FONT=&quot]

So, again, does this mean that I could NOW claim a pension of about £3,056pa?

[/FONT]
[FONT=&quot][/FONT]
[FONT=&quot]Same applies. This is the current value of the pension that you would get at age 65.[/FONT]
[FONT=&quot][/FONT]

None of the figures you have there seem to tell you what you would get if you took the pension now. It's just a statement of the current value of what you would get at age 65.

HTH

seven-day-weekend

You need to ask your pension provider for another estimate asking what you would get if you took your pension now. Ask if there would be any difference if the retirement was for health purposes.

missile

If you decide to go ahead, remember to get quotations for a "free market option". Some pension providers give enhanced rates for those with medical conditions and may offer a considerably better deal.

Debt_Free_Chick

missile wrote: »

If you decide to go ahead, remember to get quotations for a "free market option". Some pension providers give enhanced rates for those with medical conditions and may offer a considerably better deal.

Although it needs to be noted that the OP has no right to a open market option. If the trustees used the OMO, then they would benefit from any better annuity rates.

The only option for the OP would be to take the cash equivalent, transfer it to a personal pension and then to buy an annuity.

ramagel

Thanks to you all for the "wrong" answer I couldn't see how the numbers could be payable now, but they didn't seem to be terribly meaningful beyond that!

I'm already writing to the 2 schemes to see what can be done.

Thanks again,

missile

OP did not say, possibly he does not know what type scheme his previous employers ran? Many employers operate money purchase pension schemes where he certainly would have the right to an OMO. See http://news.bbc.co.uk/1/hi/business/3197897.stm

It is certainly worth asking as he could get +30% and possibly more for impaired life annuity from a.n.other pension provider. see http://www.sharingpensions.co.uk/glossary19.htm#text6

Paul_Herring

ramagel wrote: »

as I don't really expect (or have much desire) to live much beyond 65 anyway given the state of my health.

Prevous answers appear to have missed this comment.

Ramagel - could you expand on this?

Debt_Free_Chick

missile wrote: »

OP did not say, possibly he does not know what type scheme his previous employers ran? Many employers operate money purchase pension schemes where he certainly would have the right to an OMO. See http://news.bbc.co.uk/1/hi/business/3197897.stm

It is certainly worth asking as he could get +30% and possibly more for impaired life annuity from a.n.other pension provider. see http://www.sharingpensions.co.uk/glossary19.htm#text6

He has a Deferred Pension Statement, so it's a defined benefit.

If it were money purchase, he would have a Statutory Money Purchase Illustration, showing fund values and example annuities.

missile

Financial ghurus have a language which seems designed to confuse the poor suckers who invest their hard earned.
You may be careful with your use of terminology, however I have seen various other terms used e.g. "retirement illustration" "quotation for Mr ....... " "Personal Pension Quotation" "Lifetime Annuity Quotation"

I suggest OP needs to speak to his scheme administrators re "Open Market Options".

Debt_Free_Chick

missile wrote: »

Financial ghurus have a language which seems designed to confuse the poor suckers who invest their hard earned.
You may be careful with your use of terminology, however I have seen various other terms used e.g. "retirement illustration" "quotation for Mr ....... " "Personal Pension Quotation" "Lifetime Annuity Quotation"

I suggest OP needs to speak to his scheme administrators re "Open Market Options".

But a deferred or preserved pension means just that ..... that he has an entitlement to a pension - not a pot of money.

Illustration & quotations estimate how much pension you might get from a pot of money. A Personal Pension Quotation shows an estimate of what you might get from your personal pension - again a pot of money. And a Lifetime Annuity Quotation again, shows the annuity (a specific term meaning a policy which pays out a pension) you would get, for a specific pot of money.

We're trying to help, honest