Delay taking DB pension??

Shabbycat

Hi, I’m asking this on behalf of a friend, an ex colleague.
She worked as police civil staff and was in Classic for about 10 years. She has since worked for the post office for about 5 years and is in their pension. She will be turning 60 soon and has asked me if there is any advantage in delaying taking her Classic pension?? I think they are the only pensions she has but not sure??
Thanks

Dazed_and_C0nfused

I think they are the only pensions she has but not sure??

She will have the State Pension as well but being under transitional rules means it would be prudent for her to check her forecast on gov.uk.  In full. 

Then she will be better informed.  Chances are she will get the standard £185.15 but possibly only with further contributions.

Which month does she reach 60?

Shabbycat

She will be 60 in October. I’ll advice her to check her state pension forecast. It’s the DB pension which she’s asking about. I think because she plans to carry on working after 60, if there is an advantage to delaying it she will, if not she will take it and enjoy it!! 

Albermarle

All DB pensions have different rules about these sorts of issues, so she needs to find the rules for hers.
However you might be lucky, and a poster with specific knowledge of the classic pension will post some relevant info/links.

Brie

I'm assuming this is the one you are talking about below?  Which seems to say that she can get a full unreduced pension from age 60.  And if that is the case why would she wait?  

I would suggest that she get a quote based on her pension going into payment from November.  This will get her all the relevant information she needs to get an informed opinion of her options.  She should also ask if the amount will increase if she delays taking it and if so by how much (percentage per year).  It may be that she could delay until she's 65 and it will increase by 3% or something.  So then the trick would be to figure out if delaying will actually gain anything significant for her.  This would need to take into account that she has missed 5 years of pension payments.  

The other thing to do is think about what this does to her tax situation.  She might want to delay if it takes her into a higher tax bracket.  Or she might be ok taking it and paying more into her current scheme to keep her in the lower bracket.

Pension age retirement - Civil Service Pension Scheme

molerat

crb-1-april2016.pdf (civilservicepensionscheme.org.uk)  suggests that although the pension will increase with inflation during the extended deferment there will be no increase in the pension amount due to deferring beyond NRA.

Shabbycat

Thank you Brie and Molerat for your comments. I’ll let her know.

hugheskevi

She worked as police civil staff and was in Classic for about 10 years. She has since worked for the post office for about 5 years and is in their pension. She will be turning 60 soon and has asked me if there is any advantage in delaying taking her Classic pension?

Probably no advantage, more likely a disadvantage although it depends on her tax position.

If she delays taking it, as she will be a deferred member when she reaches age 60 she will receive arrears of payments due back to age 60 at such time as she does take it. Those arrears will all be taxable in the year received so may push her into a higher tax bracket. No interest will be paid on the arrears.

She should also ask if the amount will increase if she delays taking it and if so by how much (percentage per year).  It may be that she could delay until she's 65 and it will increase by 3% or something.  So then the trick would be to figure out if delaying will actually gain anything significant for her.  This would need to take into account that she has missed 5 years of pension payments.  

It doesn't receive any actuarial enhancement for late payment. In the Civil Service that was only introduced with the nuvos pension scheme in 2007.

Scrounger

AFAIK, if she were to delay taking her CS classic pension until the first Monday after 6 April 2023, she would also qualify for the CPI uplift on the tax free lump sum.

As we are in for a bumper CPI this year, maybe 10%, perhaps this could be a worthwhile reason to delay for a few months?

I'm thinking of doing something similar myself. 

Scrounger

Shabbycat

Scrounger said:

AFAIK, if she were to delay taking her CS classic pension until the first Monday after 6 April 2023, she would also qualify for the CPI uplift on the tax free lump sum.

As we are in for a bumper CPI this year, maybe 10%, perhaps this could be a worthwhile reason to delay for a few months?

I'm thinking of doing something similar myself. 

Scrounger

So the CPI isn’t added on a pro rata basis depending on when your birthday is?? 

Scrounger

Shabbycat said:

Scrounger said:

AFAIK, if she were to delay taking her CS classic pension until the first Monday after 6 April 2023, she would also qualify for the CPI uplift on the tax free lump sum.

As we are in for a bumper CPI this year, maybe 10%, perhaps this could be a worthwhile reason to delay for a few months?

I'm thinking of doing something similar myself. 

Scrounger

So the CPI isn’t added on a pro rata basis depending on when your birthday is?? 

Not for the tax free lump sum once it has been paid out.

[In my case could be an extra £4k tax free for just a 6 week delay.]

Anybody like to confirm?  @hugheskevi @Silvertabby

Scrounger