Benefits of Local Gov Pension Scheme vs Private Pensions

Nebulous2

Secret2ndAccount said:

Thanks for the numbers. I like numbers, so I took them and played with them. Here's an example of a person who was offered a 20k pension at age 65, but opted to take it early.

Obviously it doesn't really matter that the amount was 20k. The break even times are the same irrespective of the amount.
So, if you consider an average lifetime to be 85, then you are paying a small fee for taking the pension early. However, if you want or need the money when you are younger, and have enough provision for your later years once SP kicks in, the option to go early could be very attractive.
This calculation doesn't account for personal circumstances of tax or inflation, but I think it remains representative for most people.

I left work at 59 and by a quirk of transferring my pension in, I didn't have any protection, so there was no advantage in waiting until I was 60. I had two different actuarial reductions, my 2009 scheme was reduced from 65 to 59, but my 2015 scheme was reduced from 67 to 59. I could have afforded to defer, but did a similar calculation to yours and decided I wouldn't break even until I was 84. I had had a regular income almost every month for 40 years and struggled with the idea of eroding my capital, so from both pragmatic and psychological reasons drawing my pension worked for me. 

However there is a double whammy in taking it early, which isn't reflected in your figures. Your figures work for someone who leaves employment and has a choice to defer or draw their pension, but they don't reflect the situation for someone who has a choice between leaving and drawing their pension or continuing in their job. I was adding over £900 of care pension a year to my total, and by a happy chance in my last year we had a long awaited regrading which increased the final salary calculation for me. Your figures don't reflect the increase in pension that occurs each year, meaning the figure the actuarial reduction is applied to will be higher, in addition to the reduction being smaller.