Redundancy / early retirement

Marcon

Bob2001 said:

I haven’t thought about not taking the DB pension straightaway, I believe there’s no penalty if you take it at 60 - but would need to clarify with Equnity if this is correct, and if I can defer once I leave the company (Equnity will not answer any questions over the phone and quote 10 working days to respond - absolutely shocking frankly).

If you've not reached the scheme's normal retirement age then yes, you'll be able to defer.

The timescales you are being quoted are perfectly reasonable. In a world where pension scheme administrators are having to learn new procedures and work remotely, they're pretty good. It's the unrealistic expectations of members which are frankly shocking.

Retireinten

It's late so you will probably need to check my very simplistic calculations here... but it looks like you're swapping an annual pension of £4,198 (£21,407-£17,209) for a lump sum of £114k.  It would take 27 years of increased annual pension to match that lump sum, so that would make you 82. Throw in the fact the lump sum is tax free whereas you will be paying basic rate tax on that extra £4,198, makes the lump sum option even more attractive.  I don't think you're being rash at all considering taking the lump and the reduced pension! 

NottinghamKnight

Retireinten said:

It's late so you will probably need to check my very simplistic calculations here... but it looks like you're swapping an annual pension of £4,198 (£21,407-£17,209) for a lump sum of £114k.  It would take 27 years of increased annual pension to match that lump sum, so that would make you 82. Throw in the fact the lump sum is tax free whereas you will be paying basic rate tax on that extra £4,198, makes the lump sum option even more attractive.  I don't think you're being rash at all considering taking the lump and the reduced pension! 

Depends on your position and opinion. The commutation rates implies a return of a little under 4%, which obviously isn't available risk free anywhere else. Probably more importantly you would expect some form of inflation protection, which would reduce the real value and so the ime to break even on the lump sum.

GSP

I’m talking over a decade ago, but when my brother was made redundant at a very early age (50), as part of the package they made no reductions from his db pension in lieu of some of the redundancy money. Could be things are too far down the road now, but if not worth having a conversation with HR to see if this can be done if this gives you other options.

Bob2001

Thanks All - there is the option to specify a lump sum amount, £114K is the maximum.
Still trying to work out what to do, preparing for redundancy is a full time job!

DT2001

The key is your requirements for income and your attitude to risk. All options have their merits but they each tie in better with different scenarios.
The lump sum options means there is potentially more in your OH pot if you die 1st. So that maybe a factor. You haven’t had details of OH pension? When you have you can fill in more pieces to the puzzle.
What rate does your pension in payment increase at, RPI, CPI, with a cap etc? Is knowing you’ll get £x p.m. every month important psychologically.
Will you use an IFA or are you happy to invest DIY?

More to think about but please come back to us when you have further information and we’ll think of more questions for you!

Bob2001

Not sure about using an IFA - the one I spoke to last week quoted 3.5% to advise on £100k pension, and 3.5% for £100k investment.
So £7,000 - that has put me off following up on this to be honest, are these sort of charges the norm?

AlanP_2

Bob2001 said:

Not sure about using an IFA - the one I spoke to last week quoted 3.5% to advise on £100k pension, and 3.5% for £100k investment.
So £7,000 - that has put me off following up on this to be honest, are these sort of charges the norm?

Sounds very hign compared to what I have read on here over the years.

1-1.5% initial and 0.5-1% annual ongoing is the ballpark I would have thought subject to pots being a sensible size (they won't work on a £10000 pot for £100/150)

Was it definitely an IFA as opposed to an FA?

Albermarle

Bob2001 said:

Not sure about using an IFA - the one I spoke to last week quoted 3.5% to advise on £100k pension, and 3.5% for £100k investment.
So £7,000 - that has put me off following up on this to be honest, are these sort of charges the norm?

Not the norm , probably the IFA did not want /need the work so quoted a very high price .

Henryk1

Redundancy v early retirement.
 I know that if I take a redundancy package the first £30k would be tax free, but does the same apply if its an early retirement instead?