DB pensions levelling up and TFLS ?

C_Mababejive

Hi ll,

Think i have my terminology a bit mixed up with Conservatives party (failed) policy but what i mean is that i can take my DB pension from age 55 at a reduced rate or my full DB pension from age 60 .

There is also an option for them to give me extra money to bridge the gap to my state pension at age 67 then they claw it back with a reduced DB pension from 67.

Maths is not my strong point but it seems to me that it would be better not to take that bridging amount upto 67 and it would be better not to take any TFLS.

My logic says that this would mean that the max amount would be available for progressive annual index linked pension increases?

Thoughts anyone ??

Dazed_and_C0nfused

Maths is not my strong point but it seems to me that it would be better not to take that bridging amount upto 67 and it would be better not to take any TFLS.

My logic says that this would mean that the max amount would be available for progressive annual index linked pension increases?

Thoughts anyone ??

Knowing what you are getting for giving up the TFLS (PCLS) would help as these things tend to depend on the financial benefits.

Not taking say £100k TFLS in return for £2k inflation proofed pension isn't nearly as attractive as say £5k would be.

What is the index linking based on and does it have a cap?

marlot

>> There is also an option for them to give me extra money to bridge the gap to my state pension at age 67 then they claw it back with a reduced DB pension from 67.

If there's any chance that you'll be hitting the LTA, beware taking this option.

Milltir

There is also an option for them to give me extra money to bridge the gap to my state pension at age 67 then they claw it back with a reduced DB pension from 67.

I looked at this option in one of my old DB schemes before I transferred out of it. I seem to remember the additional pension also had a big impact on Annual Allowance.

Marcon

C_Mababejive said:

Hi ll,

Think i have my terminology a bit mixed up with Conservatives party (failed) policy but what i mean is that i can take my DB pension from age 55 at a reduced rate or my full DB pension from age 60 .

There is also an option for them to give me extra money to bridge the gap to my state pension at age 67 then they claw it back with a reduced DB pension from 67.

Maths is not my strong point but it seems to me that it would be better not to take that bridging amount upto 67 and it would be better not to take any TFLS.

My logic says that this would mean that the max amount would be available for progressive annual index linked pension increases?

Thoughts anyone ??

If you don't have any immediate use for tax free cash (e.g. paying off high-interest debts), then where would you invest it to match the benefits being offered by your scheme? There are very real attractions in having a guaranteed income stream in retirement, so it depends what other assets you have and what your objectives are.

C_Mababejive

This is the information that my DB scheme gives about pension increases which i find quite confusing ! I was under the seemingly false impression that my DB pension would be subject to annual RPI increases ie a very simple calculation.

Quote

Many defined benefit pension schemes were contracted out of the State Earning Related Pension Scheme (SERPS) between 6 April 1978 and 5 April 2002. SERPS provided a top-up to the Basic State Pension. As a result, both members and participating employers paid lower National Insurance contributions. In exchange, the schemes took on responsibility for paying the equivalent ‘top-up’ pension their members would have earned through SERPS.

If you had contracted-out service between 6 April 1978 and 5 April 1997, when you were a member of the Pension Scheme , this part of your pension is called GMP. GMP is the guaranteed minimum pension the scheme had to provide to you if you had contracted-out membership during this period, once you reach GMP age. GMP age is 65 for men and 60 for women.

Under the scheme Rules , you would receive 1/60 of your pensionable salary for every year you were a contributing member of the Scheme. Your pension is made up of three elements:

• GMP built up between 6 April 1978 and 5 April 1988 (pre-88 GMP);
• GMP built up between 6 April 1988 and 5 April 1997 (post-88 GMP); and
• the non-GMP excess, which is the amount of your Scheme pension above the GMP.

The GMP notionally increases in line with the Retail Prices Index (RPI) from the date you leave the Scheme until you reach GMP age. However, the Department for Work and Pensions (DWP) has agreed that pension schemes like ours can revalue your GMP at a fixed rate for each complete tax year between when you left the Scheme and your GMP age. The rate we apply as an increase to your GMP depends on when you left the Scheme, as the following table shows:

Fixed-rate GMP revaluation

Date of leaving the Scheme	Fixed rate of revaluation
6 April 2017 – 5 April 2022	3.5%
6 April 2012 – 5 April 2017	4.75%
6 April 2007 – 5 April 2012	4.0%
6 April 2002 – 5 April 2007	4.5%
6 April 1997 – 5 April 2002	6.25%
6 April 1993 – 5 April 1997	7.0%
6 April 1988 – 5 April 1993	7.5%
Before 6 April 1988	8.5%

When you reach GMP age, we do a test to give you the better of the notional RPI increase and the fixed-rate revaluation, from the date you left the Scheme. If the fixed-rate increase on the GMP is higher than RPI, your pension will be increased. This is known as an ‘uplift’ and will be equal to the difference between the RPI and fixed-rate increases.

Example

GMP at exit x RPI increases	£1,400.00 a year
GMP at exit x 7% increases	£2,000.00 a year
Uplift to pension at GMP age	£600.00 (£2,000.00 - £1,400.00) a year

Once you reach GMP age, the Scheme will apply the following annual increases to your pension:

Pre-88 GMP	0%
Post-88 GMP	Consumer Prices Index (CPI), up to a maximum of 3%
Pension (Not GMP)	Retail Prices Index (RPI) for September of the previous year

Finally, please note that a recent High Court decision means that GMPs for some members may need to be adjusted to remove inequalities arising from the way GMPs were calculated for men and women. The Trustee has not yet finalised how this adjustment will be calculated, so this has not been included in your estimated figures. Any top-up is expected to be relatively small.

UNQUOTE

Just to add, there are some pension tools on the website to play with. One is about bridging the gap to SPA (67). It says that at age 58 i could get a pension of 23,100 now or 28600 reducing by 7,300 at SPA.. 

kidmugsy

How much tax-free lump sum will you get for every £1 of annual pension given up?

By how much will your annual pension be reduced for every year early that you take it?

How do you foresee tax rates changing over the next 20 or 30 years?  

How keen are you to have money at 55 rather than 60, or 67, or 75, ...