Pension affected by compulsory redundancy

Jax1973

I’m 50 and I’ve been told that due to compulsory redundancy there is a discretion applied to my pension which means if I take my pension at 60 (rather than 65) it’s un reduced and if I take it earlier at 55 it has a 5year reduction applied. What does this mean in simplistic terms? Thanks for any advice as I’d like to understand before going to discuss it further at work. 

Swipe

It means you can retire on the full normal 65 pension amount if you defer taking it until you are 60 but if you take it at 55 it'll be reduced by the equivalent of 5 years service. So you could either find another job for the next 10 years and retire on full pension or work for another 5 years and receive a smaller pension at 55.

Marcon

Normally if you retire before your scheme's normal retirement age, and you are in a defined benefit (final salary) scheme, the starting level of your pension is reduced to reflect the fact that it is being paid sooner than expected and for longer. The reduction is often around 4% per year, so letting you take it five years early at 60 with no reduction is excellent news. 

If you take your pension at 55, it will be reduced (the scheme will be able to tell you by how much) for the reasons set out above.  

mark55man

But although it will be reduced you will receive it for 5 years longer.

Normal reduction is about 5% per years and you will be worse off in total terms if you live more than about 20 years  (ie you will have done better waiting to take a higher amount). However, only you know the value of having that income stream earlier. It is a bit difficult in that you will have to find something else for the next 5 years - although if you can make your current savings last till then being able to take something at 55 may be very beneficial

As the poster above says 5 years of no actuarial reduction is quite a significant benefit