Take Pension now or Wait till NRD Age 60?

Expotter

AndrewB22, you're right in thinking that the cap applies for a pension in payment and in deferment. The crucial difference though is how it is applied.
For a pension in payment the cap is applied on an annual basis, so if inflation is higher than the cap in any given year, then this cap will apply.
However, pension increases for deferred members before they retire depend on total inflation between when they leave and when they start to receive their benefits so there are no caps or floors in a given year (i.e. a 5% p.a. cap means members’ benefits cannot increase by more than 5% p.a. over the period as a whole but they could increase by more than 5% for a particular year or more). So given that up until this year inflation has been lower, a couple of years of high inflation (hopefully not any more) should not make inflation for the whole period higher than the cap.
So by delaying for a couple of years and assuming inflation will by then return to levels within the cap, the revaluation should include the high inflation period and still remain within the cap.
Of  course the individual calculations will vary and they are not that simplistic, but the principle should still apply.

Pensions_matter_2

This is why I am considering deferring till after I reach normal retirement date under the scheme (next year for me), as the smoothing effect you describe will hopefully iron out the worst of the high inflation (above the cap) this year. It doesnt work on deferring after reaching normal retirement date - they apply late retirement actuarial factors instead after that (Ive asked for figures). I havent quite got my head around how these factors are arrived at - are they worked out so as to try to give you the same value as you would have got if you had not deferred and is possible/guestimated future inflation taken account of in these factors? It may be a dark science us lay people dont have access to.

Thrugelmir

philng said:

Assuming inflation remains high for next couple of years the Early Retirement figure will be close to the NRD pension anyway.

The gap will widen over time as compounding kicks in. 

philng

The deferred pension goes up the same as if I draw it early. Both capped at 5%. Obviously a higher increase in £ value on the deferred pension up to NRD as the figure is higher.