deferred DB pension Revaluation. Are the 5%, 2.5% limits compounded? Also partial years.

On-the-coast

This has been an eye-opening (for me) thread, as I have an occupational pension that ceased on 1 January 2022.  I’d resigned myself to losing forever the difference between CPI and the 2.5/5% elements of my scheme. Now I understand that unless there’s some very explicit wording to the contrary in my scheme, things could work out OK, in the event that CPI drops under the scheme revaluation maximums for enough years in the future before I retire. Correct?

Question: is there a similar attitude to the future capped annual uplifts once the pension is in payment?
thanks OP and all the responders. 

zagfles

On-the-coast said:

This has been an eye-opening (for me) thread, as I have an occupational pension that ceased on 1 January 2022.  I’d resigned myself to losing forever the difference between CPI and the 2.5/5% elements of my scheme. Now I understand that unless there’s some very explicit wording to the contrary in my scheme, things could work out OK, in the event that CPI drops under the scheme revaluation maximums for enough years in the future before I retire. Correct?

Question: is there a similar attitude to the future capped annual uplifts once the pension is in payment?
thanks OP and all the responders. 

I don't even think scheme wording can override the legislation, so it should be the overall inflation over deferment that counts.

Once in payment though it's on a year by year basis usually.

Pensions_matter_2

Yes, thats how my scheme works once in payment - the 5/2.5% caps on inflation operate annually - there is no balancing out of peaks and troughs where inflation is a bit below or a bit above the cap in certain years.

On-the-coast

Very good news - thanks - as my “starting year” certainly looks like a high inflation one!
I still don’t really understand the timing aspects of when in year it’s best to take pension.  With a deferment effective of 1 January will it make no difference in my case?

Pat38493

zagfles said:

Pat38493 said:

Pensions_matter_2 said:

Looks like latest revaluation Order is just out, for those who are interested.

https://www.legislation.gov.uk/uksi/2022/1229/article/2/made

On another thread, I remember reading that the exact date of deferral of the pension is relevant for this also but I didn't see that mentioned on this resurrected thread?

My understanding was for example if your pension was deferred on 1st June 2005, if you took your DB benefit on 1st Jan 2023, they would actually use the 62.8% number but if you took the benefit on 1st August 2023, they would use the 67.8% number or something like that?  Is that correct or did I misunderstood that at the time - the message seemed to be that you are almost always better to take your DB pension after the anniversary date of deferral?

In this thread is seems ot say that it just rolls over by year but this was contrary to the other thread I was using.

In my first reply: "Partial years usually are lost. You only get whole years, "

Did the rules change in the meantime then?  I found the thread I was referring to and it's actually older than this one not newer.  See the OP in this thread and follow up replies:


Rules on using Occupational Pensions Revaluation Orders — MoneySavingExpert Forum

zagfles

Pat38493 said:

zagfles said:

Pat38493 said:

Pensions_matter_2 said:

Looks like latest revaluation Order is just out, for those who are interested.

https://www.legislation.gov.uk/uksi/2022/1229/article/2/made

On another thread, I remember reading that the exact date of deferral of the pension is relevant for this also but I didn't see that mentioned on this resurrected thread?

My understanding was for example if your pension was deferred on 1st June 2005, if you took your DB benefit on 1st Jan 2023, they would actually use the 62.8% number but if you took the benefit on 1st August 2023, they would use the 67.8% number or something like that?  Is that correct or did I misunderstood that at the time - the message seemed to be that you are almost always better to take your DB pension after the anniversary date of deferral?

In this thread is seems ot say that it just rolls over by year but this was contrary to the other thread I was using.

In my first reply: "Partial years usually are lost. You only get whole years, "

Did the rules change in the meantime then?  I found the thread I was referring to and it's actually older than this one not newer.  See the OP in this thread and follow up replies:


Rules on using Occupational Pensions Revaluation Orders — MoneySavingExpert Forum

What do you think has changed? Reread them, there's no contradiction.

Pat38493

zagfles said:

Pat38493 said:

zagfles said:

Pat38493 said:

Pensions_matter_2 said:

Looks like latest revaluation Order is just out, for those who are interested.

https://www.legislation.gov.uk/uksi/2022/1229/article/2/made

On another thread, I remember reading that the exact date of deferral of the pension is relevant for this also but I didn't see that mentioned on this resurrected thread?

My understanding was for example if your pension was deferred on 1st June 2005, if you took your DB benefit on 1st Jan 2023, they would actually use the 62.8% number but if you took the benefit on 1st August 2023, they would use the 67.8% number or something like that?  Is that correct or did I misunderstood that at the time - the message seemed to be that you are almost always better to take your DB pension after the anniversary date of deferral?

In this thread is seems ot say that it just rolls over by year but this was contrary to the other thread I was using.

In my first reply: "Partial years usually are lost. You only get whole years, "

Did the rules change in the meantime then?  I found the thread I was referring to and it's actually older than this one not newer.  See the OP in this thread and follow up replies:


Rules on using Occupational Pensions Revaluation Orders — MoneySavingExpert Forum

What do you think has changed? Reread them, there's no contradiction.

I must be missing something because they way I read your comments, if I retire in 2023 for example, I would get the exact same starting pension no matter whether I retired any day from 1st January to 31st December (which I think is what most people would assume at first)

However in the other thread it implies you will almost always get a higher pension if you retire after the anniversary date of your pension deferral.

I guess maybe the issue is that by “whole years” you mean years from date of deferral?

zagfles

On-the-coast said:

Very good news - thanks - as my “starting year” certainly looks like a high inflation one!
I still don’t really understand the timing aspects of when in year it’s best to take pension.  With a deferment effective of 1 January will it make no difference in my case?

Well, you lose part years so for instance if you took the pension in July you'd lose half a year's inflation, or if in Dec you'd lose almost a year, but you won't have the saw-tooth issue described in the other thread as that happens when you go deferred part way through the year.

zagfles

Pat38493 said:

zagfles said:

Pat38493 said:

zagfles said:

Pat38493 said:

Pensions_matter_2 said:

Looks like latest revaluation Order is just out, for those who are interested.

https://www.legislation.gov.uk/uksi/2022/1229/article/2/made

On another thread, I remember reading that the exact date of deferral of the pension is relevant for this also but I didn't see that mentioned on this resurrected thread?

My understanding was for example if your pension was deferred on 1st June 2005, if you took your DB benefit on 1st Jan 2023, they would actually use the 62.8% number but if you took the benefit on 1st August 2023, they would use the 67.8% number or something like that?  Is that correct or did I misunderstood that at the time - the message seemed to be that you are almost always better to take your DB pension after the anniversary date of deferral?

In this thread is seems ot say that it just rolls over by year but this was contrary to the other thread I was using.

In my first reply: "Partial years usually are lost. You only get whole years, "

Did the rules change in the meantime then?  I found the thread I was referring to and it's actually older than this one not newer.  See the OP in this thread and follow up replies:


Rules on using Occupational Pensions Revaluation Orders — MoneySavingExpert Forum

What do you think has changed? Reread them, there's no contradiction.

I must be missing something because they way I read your comments, if I retire in 2023 for example, I would get the exact same starting pension no matter whether I retired any day from 1st January to 31st December (which I think is what most people would assume at first)

However in the other thread it implies you will almost always get a higher pension if you retire after the anniversary date of your pension deferral.

I guess maybe the issue is that by “whole years” you mean years from date of deferral?

Yes, so if you went deferred on 20/6/2015 and took the pension on 15/6/2022 you'd only get 6 years (1/1/2016-31/12/2021 inflation), because it's only 6 whole years despite being nearly 7.

But if you waited till 21/6/2022 you get 7 years (1/1/2015 - 31/12/2021).

If you waited a bit longer till 10/1/2023, it's still 7 whole years but different years (1/1/2016-31/12/2022).

Particularly relevant now - if you're thinking about taking a DB pension now it could be worth delaying till the the new year! 

Pensions_matter_2

This is simIlar to my position - waiting to 2023 allows for the Sept cpi inflation figure to be factored in. I still get only 9 full years (but ending 31 Dec 2022 and not 31Dec 2021), but the factors are higher.