DB Pension Statement - Did We Miss The Train?

Secret2ndAccount

I helped my friend to track down an old DB pension. Looks like we should have done it sooner, but I’d like to check my understanding. Here’s the statement:

 

So, as I read it, they could have taken the pension at age 60, and would now (age ~64) be about 7k richer, with no difference in pension payments going forward. Have I got that right?

Is there any chance the trustees will write a big cheque to backdate my friend’s retirement date to 60?

Is there any reason not to take the pension at 60 or now 64 when there appears to be no actuarial reduction? I guess the lump sum gets bigger each year, but the annual increases don’t look that great. MPAA is not a concern

Thanks for your help.

p00hsticks

I suspect that it might be a typo, and 60 should read 65, given that they also say that the NRA is the 65th birthday. It makes no sense to offer an identical pension whenever you take it over a five year span.

I'd ask for them to confim.

Secret2ndAccount

p00hsticks, try googling  'pension at 60 without reduction' or 'lgps 85 year rule'

xylophone

p00hsticks, try googling  'pension at 60 without reduction' or 'lgps 85 year rule'

Try a PM to Silvertabby who is a retired LGPS administrator.

https://forums.moneysavingexpert.com/profile/Silvertabby

Thrugelmir

NRA is 65. Taking the pension earlier will suffer an actuarial reduction. 

molerat

One of my pensions from the 90s was NRA 65 with no reduction from 60 so it was a thing back in the day, likely to bring a bit of equality to us boys as a very large percentage of the workforce was female.

Silvertabby

It's quite possible that this scheme has a NRA of 65 but that the member could qualify for unreduced benefits from an earlier date.  It is also likely that the scheme rules only require that they contact deferred members by NRA, and that the onus to apply for payment from an earlier date rests with the member.

This doesn't sound like the LGPS, as you don't need trustee/employer permission to take reduced benefits from 55.

That said, there is a typo somewhere in there - the GMP is given as Post 88, but the date of leaving is given as 1985.

Notepad_Phil

Secret2ndAccount said:

So, as I read it, they could have taken the pension at age 60, and would now (age ~64) be about 7k richer, with no difference in pension payments going forward. Have I got that right?

Maybe not quite right. I too am in a NRA 65 pension and allowed to take that pension from age 60 with no reduction in pension, but by deferring the pension has been revalued each year, whereas it depends on how the company revalues the pension whilst in payment as to how much it would be worth now if they had taken it at age 60.

Secret2ndAccount said:

Is there any chance the trustees will write a big cheque to backdate my friend’s retirement date to 60?

Realistically I'd say there's very little chance, especially as it has been revalued upwards every year.

Secret2ndAccount said:

Is there any reason not to take the pension at 60 or now 64 when there appears to be no actuarial reduction? I guess the lump sum gets bigger each year, but the annual increases don’t look that great. MPAA is not a concern

What increases does it receive post-65? Maybe if that's a good percentage then it might be worthwhile delaying further, but I suspect that your friend would have been better off if he'd taken the pension from age 60. It's what I'm intending to do even although my pension income then won't receive any increases until I hit 65.

Secret2ndAccount

Thank you Notepad_Phil. I looked up the revaluation methods they talked about. They are not the nice 7 or 8% annually that some people are getting. Maybe 1% above inflation if they're lucky.
I've asked for the claim forms. I think we need to send them in ASAP. I've also asked for a scheme rulebook. It's like pulling teeth.

Notepad_Phil

Secret2ndAccount said:

Thank you Notepad_Phil. I looked up the revaluation methods they talked about. They are not the nice 7 or 8% annually that some people are getting. Maybe 1% above inflation if they're lucky.
I've asked for the claim forms. I think we need to send them in ASAP. I've also asked for a scheme rulebook. It's like pulling teeth.

If you feel able to mention the company then people might have some experience of the rules they operate.

hyubh

Secret2ndAccount said:

Thank you Notepad_Phil. I looked up the revaluation methods they talked about. They are not the nice 7 or 8% annually that some people are getting. Maybe 1% above inflation if they're lucky.
I've asked for the claim forms. I think we need to send them in ASAP. I've also asked for a scheme rulebook. It's like pulling teeth.

The line about S148 orders for GMP and 'official pensions' for excess implies a public-sector style approach - so the whole pension increases by CPI (previously RPI) from exit, before a check is done when the GMP comes into payment to ensure the revalued GMP is covered. The '7% or 8% annually' you allude to (more exactly 8.5%) would be fixed rate GMP revaluation depending on date of exit (most, though not all, private sector schemes use fixed rate for GMP). Revaluation on excess would almost always be less in a private sector scheme however, and typically less than 'official pensions' as well given statutory excess revaluation is CPI (previously RPI) too, but capped to 5% (or 2.5% depending on service dates). So the 'nice 7 or 8% annually' is at best an incomplete understanding.

That said, what you have quoted does not mention what happens when the pension comes into a payment. A public sector style approach would continue to increase excess by uncapped CPI. In addition, for actual public sector schemes, if the member reaches state pension age (SPA) under the 'single tier' state pension (so during the 2016/17 tax year or later), GMP is considered effectively like excess (which is preferential - pre-88 GMP would otherwise have no increases, and post-88 GMP the same as 'official pensions' but capped to 3%). A private sector scheme would typically not 'equalise' GMP in that way however, and frequently have less generous scheme increases (though not necessarily - 'back in the day' there were such things as 'RPI min 3% max 5%' on the expectation of much higher inflation than has actually happened over the past 20 years).

This is all a longwinded way of saying, I agree with others that you need to be more specific about the scheme if you'd like more focused answers. My first guess was a scheme with an LGPS mirror section (so when a local authority privatised/outsourced a function, and employees were bulk transferred into the new company's own final salary scheme, which got a special section mirroring the LGPS rules of the time). But that's just a guess that I'm less sure about now...