Taking a DB Pension at 55 with actuarial reduction

Thrugelmir

bluenose1 wrote: »

In fact by 75 I will still have received £4,000 more by taking it at 55.
I know this doesn't take account of inflationary increases but is there anything I am missing?

At a 2% average inflation rate you'd be up by £1,206 (just for the pension).

At 75 by deferring the pension. You'll be in hand by £1,693 per annum and the gap will continue to widen.

Staying young is question of mental attitude and looking after ones self. Easy enough to do. 75 isn't old.

mapleoak

Hi - sorry for jumping in but I’m curious as I’m in the Civil Service and will have completed 38 years later in the year and over 55. If my organisation had a voluntary redundancy exercise and I applied and was successful would I get a lump some for redundancy AND potentially a lump sum from my Civil service pension if I chose to “retire” a year so later, or can you only have one or the other?

Good luck with your decision Bluenose1, I hope it works out for you.

Kind Regards

ProDave

Brynsam wrote: »

Only if you've reached the scheme's Normal Retirement Age. If you retire early and are below NRA at the time the scheme fails, you don't get any priority over deferred pensioners.

Are you sure?

I started drawing one small DB pension at age 50, because the scheme rules said I could, but the scheme rules also said something to the effect that in the event of a fund shortfall, priority goes to pensioners, rather than deferred pensioners. It made no mention of normal scheme retirement age in that statement, and as I see it, I am now a pensioner in that scheme, not a deferred pensioner.

Tromking

mapleoak wrote: »

Hi - sorry for jumping in but I’m curious as I’m in the Civil Service and will have completed 38 years later in the year and over 55. If my organisation had a voluntary redundancy exercise and I applied and was successful would I get a lump some for redundancy AND potentially a lump sum from my Civil service pension if I chose to “retire” a year so later, or can you only have one or the other?

Good luck with your decision Bluenose1, I hope it works out for you.

Kind Regards

Don’t take this as gospel but from my recollection the closer you are to retirement the more redundancy pay out is reduced.

mapleoak

Thanks - that makes sense. I just didn’t know whether one disallowed the other as presumably you could take a large redundancy payment only to then take a large lump sum from pension - if you were of a certain age and close to retirement (or at least over 55 in my case) - so sort of two bites of the cherry - which I assume the Government wouldn’t want people to do.

hugheskevi

Hi - sorry for jumping in but I’m curious as I’m in the Civil Service and will have completed 38 years later in the year and over 55. If my organisation had a voluntary redundancy exercise and I applied and was successful would I get a lump some for redundancy AND potentially a lump sum from my Civil service pension if I chose to “retire” a year so later, or can you only have one or the other?

The redundancy and pension are separate things, although a voluntary exit (which is different to voluntary redundancy) can include the employer paying the cost to buy-out an actuarial reduction for early payment of pension.

Hence there is no issue with receiving a cash lump sum voluntary exit payment and then a pension commencement lump sum.

Don’t take this as gospel but from my recollection the closer you are to retirement the more redundancy pay out is reduced.

Correct, redundancy is usually limited to a maximum of 21 months of salary, but this is reduced to the amount of time to normal pension age if lower.

I started drawing one small DB pension at age 50, because the scheme rules said I could, but the scheme rules also said something to the effect that in the event of a fund shortfall, priority goes to pensioners, rather than deferred pensioners. It made no mention of normal scheme retirement age in that statement, and as I see it, I am now a pensioner in that scheme, not a deferred pensioner.

If the sponsoring employer becomes insolvent and the pension scheme is underfunded, a test is performed to see whether pension benefits equal to or greater than Pension Protection Fund (PPF) level of compensation.

If benefits above PPF levels cannot be secured, the scheme enters the PPF and scheme rules cease to apply, being replaced with PPF levels of compensation which only protect those over normal pension age.

hyubh

ProDave wrote: »

Are you sure?

I imagine Brynsam is referring to the terms of the Pension Protection Fund (PPF) - pensions (deferred or in payment) when the member is below NPA get an immediate haircut, those for when the member is above NPA don't.

I started drawing one small DB pension at age 50, because the scheme rules said I could, but the scheme rules also said something to the effect that in the event of a fund shortfall, priority goes to pensioners, rather than deferred pensioners.

It isn't really possible for scheme's rules to legislate for its own underfunding - DB is a straitjacket. A scheme can legitimately lower transfer values when it hits funding problems, and there may be discretionary aspects to increases in payment. However, nearly all private sector schemes apply statutory revaluation when a member is deferred, i.e. they can't legally grant lower increases in deferment even if they wanted to prioritise pensioners in times of distress.

bluenose1

Bravepants wrote: »

Won't they offer you the opportunity to buy out the actuarial reduction with your redundancy package?


Edit: Unless of course you no longer work in the Civil Service!:)

If only. Unfortunately I no longer work in the Civil Service so my Pension has been deferred.

bluenose1

Thrugelmir wrote: »

At a 2% average inflation rate you'd be up by £1,206 (just for the pension).

At 75 by deferring the pension. You'll be in hand by £1,693 per annum and the gap will continue to widen.

Staying young is question of mental attitude and looking after ones self. Easy enough to do. 75 isn't old.

I agree 75 isn't old, though all the 75 year olds I know have reduced their spending considerably as tend to holiday less etc. I suppose for me my thoughts are that my SP kicks in at 67 so I will be cash rich then compared to the age of 55 -67. Taking the civil service pension at 55, possibly even 54 means I could afford to retire a couple of years earlier than expected.

bluenose1

mapleoak wrote: »

Thanks - that makes sense. I just didn’t know whether one disallowed the other as presumably you could take a large redundancy payment only to then take a large lump sum from pension - if you were of a certain age and close to retirement (or at least over 55 in my case) - so sort of two bites of the cherry - which I assume the Government wouldn’t want people to do.

Not sure if it's still the same but when I left the civil service in 2005 over 55s for redundancy had their pension enhanced as if they had worked to 60 and paid immediately.
Our whole office of 250 staff was told they were being made compulsory redundant. The terms in them days were ridiculously good. It was a farce and waste of taxpayers money as they then decided there were jobs for all but honoured the compulsory terms. I left the civil service altogether with 2 years pay, but some got even bigger payouts and started in other civil service departments within months.