How much pension will I have with this...

IAMIAM

Hi,

Having looked at pensions & re-evaluating life following covid lockdown, I have finalised & got figures on current pension situation and wondered how do I roughly work out what pension I will receive from this, aged 40 retiring age 60.

TPS 2015 Scheme
3 year-buy out, to receive it all at 65 without reduction. 
Currently accrued £4000 per annum, approx £750 a year is being added to this based on current salary 45k
£3000 additional pension purchased with NPA 68, to be taken at 65 too, with actuarial reduction, I cannot change the NPA to 65
This is the maximum I can put into this, they will allow no more as all the above is equating to the maximum £7100 flexibly allowed.
Will all the above potentially give me circa £2.5k to £3k per month after tax at 65 in 20-25 years with taking the maximum lump sum?
I cannot find a calculator that can predict it based on the % increases that I will receive too (inflation etc)
Old Defined Benefit Company Pension
£4.5k per annum at age 60 or £5k at age 65. Current CETV Value of 100k. I am hoping to use this as 20k per annum between 60-65 instead of drawing it as a pension.

I have a LISA but not really started with it yet and I anticipate a mortgage of below 30-50k left which I will use some lump sum and/or savings to pay off. 

cloud_dog

IAMIAM said:

Old Defined Benefit Company Pension
£4.5k per annum at age 60 or £5k at age 65. Current CETV Value of 100k. I am hoping to use this as 20k per annum between 60-65 instead of drawing it as a pension.

At a simplistic level the CETV works out at approx 20 to 22 times the pension, and is not appealing to me for a transfer out of the DB scheme.

At 40, you have plenty of time to make additional contributions in to possibly a private pension an or LISA to accommodate and early retirement time scale.

Albermarle

Old Defined Benefit Company Pension
£4.5k per annum at age 60 or £5k at age 65. Current CETV Value of 100k. I am hoping to use this as 20k per annum between 60-65 instead of drawing it as a pension.

On the surface the CETV looks pretty poor and you would probably lose up to another £5K in IFA fees to transfer .

One explanation for a low CETV is that the terms of the DB pension are unusually poor. Such as no spouse provision and/or no inflation link in payment . Is that the case ?

If you did take the DB then looks a good bet to take it at 60 instead of 65 . Only losing 10% for taking it 5 years early would be a very good deal .

Regarding the TPS , normally 2.5% is a figure to use for inflation calculations . Can only be an estimate though.

IAMIAM

I was under the impression the CETV is good based on the fact I get 100k up front or take 5k a year for 20 years?

cobson

For the TPS scheme, you get a 1.6% uplift per year above inflation, so assuming your salary just keeps pace with inflation you can use Excel's FV function to calculate its value after 20 years in today's terms:
=FV(1.6%,20,-750,-4000)
which gives £23009.
I think the actuarial reduction for 3 years for a deferred member is 0.851, which brings the £3000 additional pension down to £2553.

AlanP_2

IAMIAM said:

I was under the impression the CETV is good based on the fact I get 100k up front or take 5k a year for 20 years?

Take a look at what 100K will buy you as a guaranteed annuity, with say CPI uplift and 50% surviving spose benefits and then come back and tell us its good 

Seriously, there are loads of threads on here about taking the CETV from old DB schemes, some people are looking at multiples of 40x annual pension at 60/65, but as said above your scheme may not offer as generous inflation linking as some so CETV will be lower.

I have an old one that is offering ~24x annual pension at 65 (4 years time for me) but it has no automatic inflation increase at all so once in payment it will likely stay at the same level (or max 0.25 to 0.5% pa increase based on CPI of 2-2.5% as there is a small amount of GMP in there) until I die.

I do plan on taking that CETV even though the multiplier is not great.

Albermarle

IAMIAM said:

I was under the impression the CETV is good based on the fact I get 100k up front or take 5k a year for 20 years?

You are likely on average to live until about 85 and quite a good chance of being over 90 . So the DB pension has to last longer than 20years and if it is inflation linked then that costs more money than you probably think .