Drawing a frozen pension

biscuit1_2

Turning 60 next month and was looking at drawing a pension that was frozen in 1990, not a biggie, paying £3600 per annum, not bad really, what i don't get is this only gives a lump sum of £3418 and reduced down to £3315 per annum, could this have anything to do with only just gaining GMP as i tried at 55 to draw and was told it hadn't achieved GMP. Your views would be appreciated. Thank You 

xylophone

frozen in 1990, 

"Deferred" in 1990.

It will have been revaluing in deferment.

https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/

https://www.barnett-waddingham.co.uk/comment-insight/blog/what-is-a-gmp/

was told it hadn't achieved GMP.

See

https://techzone.adviserzone.com/anon/public/pensions/Tech-guide-guaranteed-min-pen#:~:text=Because GMP is a promise,promise from age 60/65.

Have you obtained a State Pension Forecast?

https://www.gov.uk/check-state-pension

dunstonh

Are you sure it is frozen?  Frozen has a specific meaning but it is also frequently misused by people thinking it means something else.
What type of pension is it?   possible guess on what you have told us is a section 32 buy out bond.  On those you can only take tax free lump sum on the "excess" fund value.  If the rest of the fund is insufficient to cover the GMP then your tax free cash is reduced (or even totally eliminated depending on amounts).

Silvertabby

It's still to do with GMP.

Very briefly, when you contributed to this pension, you were contracted out of the additional State pension scheme.  This meant that both you and your employer paid reduced rates of NI, in return for which they had to promise to pay you a pension of at least the sum you gave up from your State pension entitlement.

GMP usually revalues at a faster rate than the excess pension in retirement, so now your pension scheme has to pay you a pension of at least £3315 from your GMP age ( still 60 for a woman, 65 for a man).  This then only left £285 available for commutation.  

This looks like a commutation rate of 1:12 - ie, you get £12 of tax free cash in return for £1 of annual pension given up. 

Nothing you can do about this, I'm afraid.  Not that it's any consolation, but it's very common with low(ish) pensions that have been deferred for many years.

biscuit1_2

I say frozen as I stopped paying into it in 1990 when I left the company who still hold the fund. Will leaving it till 65 improve the lump sum at all, it's not too important as I have other pension too, I'm just trying to project what funds I will actually have at the time. 

Marcon

Are you male or female (makes a difference to the answer)?

biscuit1_2

Really, male married 

Silvertabby

biscuit1_2 said:

I say frozen as I stopped paying into it in 1990 when I left the company who still hold the fund. Will leaving it till 65 improve the lump sum at all, it's not too important as I have other pension too, I'm just trying to project what funds I will actually have at the time. 

What is the scheme normal retirement age ?  If it's 60, or you have old reserved rights to access at 60, then deferring payment until 65 probably wouldn't be the best idea, as any pension increases won't make up for the loss of 5 years of pension payments.

The lump sum situation is unlikely to change much.

biscuit1_2

Normal retirement age for the scheme is 65 

Silvertabby

biscuit1_2 said:

Normal retirement age for the scheme is 65 

Is the pension reduced for early payment if taken before 65?  If so, then leaving it until 65/no reduction applies will increase both the pension and the lump sum.

But if it's payable in full from 60,  then there is no benefit in not taking it then. The lump sum will always be limited by the GMP.

biscuit1_2

Yes it's reduced for early payment  Many thanks