Deferred USS pension taken early - calculated based on 65 or 67 retirement age?

ademanuele

I am a deferred member of the USS pension scheme and do not get to retirement age for another 10 years (67). I left my post in 2014 to become a deferred member and my contract stated that "You will be required to retire at the age of 65."  If I retire early and take an actuarially reduced pension, should it be based on me retiring at 65 or 67 given what was stated on my contract? 

Dazed_and_C0nfused

A quick look at the USS site doesn't show any obvious reference to NPA of 67.

Where are you getting that from?

Tomatillo

Dazed and Confused - the NPA for the scheme is currently 66 but it is due to increase with state pension age and so when the OP retires it will presumably be 67 https://www.uss.co.uk/glossary#Glossary_NormalPensionAge 

Depending on when the OP was employed it's likely that they have contributions made when the pension age was 63 1/2, 65 and 66. 

Tomatillo

My understanding is that the increase in the NPA only applies to benefits built up after the date of the change so that your existing contributions will only be reduced below the age that applied when they were built up https://www.uss.co.uk/for-members/articles-for-members/2020/09/09162020_your-normal-pension-age-is-changing 

You don't say how long you were a member of the scheme for but if you look at the guide for financial advisers https://www.uss.co.uk/financial-advisers then on page 3 it has a table setting out the historic pension ages. For 1995-2011 it was 63.5. My understanding is that if you retire early then any portion of your pension built up between those dates will be reduced using that age and then those between 2011 and you leaving the scheme will be at age 65.

BUT I am just a random person on the internet and am not 100% sure that I am right!

Marcon

ademanuele said:

I am a deferred member of the USS pension scheme and do not get to retirement age for another 10 years (67). I left my post in 2014 to become a deferred member and my contract stated that "You will be required to retire at the age of 65."  If I retire early and take an actuarially reduced pension, should it be based on me retiring at 65 or 67 given what was stated on my contract? 

Your contract isn't relevant - it refers to retiring from service (although an employer's ability to stipulate a retirement age went out of the window long ago for almost all occupations).

Your pension will be based on whatever a scheme's Normal Retirement Date was at the time you left active membership of the scheme.

Tomatillo

Your pension will be based on whatever a scheme's Normal Retirement Date was at the time you left active membership of the scheme.

My reading is that it is based on the normal pension age at the date that the benefits were accrued (not the date of leaving) so that of the OP was employed prior to 2011 this could be taken at 63.5 without reduction. But it would be good to have clarity on that. 

2nd_time_buyer

Tomatillo said:

Your pension will be based on whatever a scheme's Normal Retirement Date was at the time you left active membership of the scheme.

My reading is that it is based on the normal pension age at the date that the benefits were accrued (not the date of leaving) so that of the OP was employed prior to 2011 this could be taken at 63.5 without reduction. But it would be good to have clarity on that. 

Yes, you are right

* I have a feeling that the benefit illustrator modeller on the USS site takes this into account (the reductions seem about right). 

Tomatillo

Thanks very much 2nd time buyer.

The reason I find it confusing is that the USS website is very superficial especially on the consequences of having built up entitlement under the various different rules. I appreciate that many people haven't got the first clue about what they are building up and USS are trying not to put them off but it is furstrating if you are trying to get a handle on the detail. 

Actually having just looked further, whilst the page on early retirement https://www.uss.co.uk/for-members/calculate-your-benefits/factors-used-by-uss doesn't mention the changing NPA in their explanation, their example is clear that the erf is dependent on the pension age at the time you built up the entitlement. That example might be useful for you OP. 

ademanuele

I have the equivalent of 30 years in the scheme (with AVCs), and Tomatillo's response has made my day! It is very hard finding out where you are with USS. I am currently with TPS and you can go online and find out what the value of your pension is in effectively real-time. I request a statement each year but how the pension is calculated is beyond me...  I will call USS to get clarity.

2nd_time_buyer

Yes, the rules are not obvious and in some cases better than you might assume. People are also often not aware of the rule which allows them to claim the 25% tax-free lump sum from the combined value of the DB and DC elements. 

Worth mentioned that you can get one free formal valuation/quotation per year from USS. Which might be worth considering to get official confirmation. 

Tomatillo

Tomatillo's response has made my day!

So pleased to hear that!