Deferred Pension from the 90s - take before 55?

jasser1492

I have a deferred DB pension from the 1990s. At age 60 it will be worth c. £2.2k per annum and a lump sum of £6.6k.

The scheme rules allowed it to be taken early (but reduced) from age 50. However, I understand the law now says it cannot be taken before 55 (other than ill health which does not apply).

is there any exemption for very old pensions such as this, that might allow me to take it before 55?

Thank you for any advice.

Secret2ndAccount

Yes. Many schemes that offered earlier-than-55 retirement were protected when the law changed.
Some info here: https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/protected-early-pension-age

jasser1492

Secret2ndAccount said:

Yes. Many schemes that offered earlier-than-55 retirement were protected when the law changed.
Some info here: https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/protected-early-pension-age

Thank you, that’s really helpful. I think my pension could be eligible. I’ll email the scheme administrators.

Albermarle

At age 60 it will be worth c. £2.2k per annum and a lump sum of £6.6k.

Normally you get offered the alternative which is to take no lump sum and a bigger pension. Should be the same if you take it early except the numbers will be smaller of course. If you divide the lump sum by the 'lost ' pension income you get the commutation factor . Below 20 is not great. 25 is good. 

jasser1492

Albermarle said:

At age 60 it will be worth c. £2.2k per annum and a lump sum of £6.6k.

Normally you get offered the alternative which is to take no lump sum and a bigger pension. Should be the same if you take it early except the numbers will be smaller of course. If you divide the lump sum by the 'lost ' pension income you get the commutation factor . Below 20 is not great. 25 is good. 

Great advice, thank you, I’ll ask the administrators about that too.

Albermarle

jasser1492 said:

Albermarle said:

At age 60 it will be worth c. £2.2k per annum and a lump sum of £6.6k.

Normally you get offered the alternative which is to take no lump sum and a bigger pension. Should be the same if you take it early except the numbers will be smaller of course. If you divide the lump sum by the 'lost ' pension income you get the commutation factor . Below 20 is not great. 25 is good. 

Great advice, thank you, I’ll ask the administrators about that too.

I have just reread your original post.
A deferred DB pension will be revalued each year, in line with inflation ( how this is done can vary ) . So how do you/they  know what the pension will be worth when you are 60 ( in a few years presumably) Normally there are three important figures.
1) What the pension was worth when you left that employment. You should have been given a letter stating this clearly.
2) What the pension is worth today , following years of inflation linked increases. Some schemes seem more keen to supply these figures than others.
3) What the pension will actually be worth when you are 60. This has to be unknown.

I assume the figure you have is '2' ?

jasser1492

Albermarle said:

jasser1492 said:

Albermarle said:

At age 60 it will be worth c. £2.2k per annum and a lump sum of £6.6k.

Normally you get offered the alternative which is to take no lump sum and a bigger pension. Should be the same if you take it early except the numbers will be smaller of course. If you divide the lump sum by the 'lost ' pension income you get the commutation factor . Below 20 is not great. 25 is good. 

Great advice, thank you, I’ll ask the administrators about that too.

I have just reread your original post.
A deferred DB pension will be revalued each year, in line with inflation ( how this is done can vary ) . So how do you/they  know what the pension will be worth when you are 60 ( in a few years presumably) Normally there are three important figures.
1) What the pension was worth when you left that employment. You should have been given a letter stating this clearly.
2) What the pension is worth today , following years of inflation linked increases. Some schemes seem more keen to supply these figures than others.
3) What the pension will actually be worth when you are 60. This has to be unknown.

I assume the figure you have is '2' ?

Yes, option 2 I think. I asked them for a benefits statement and these are the figures they gave me as of now (but assuming I don’t take early and not reduced).

Marcon

Albermarle said:

At age 60 it will be worth c. £2.2k per annum and a lump sum of £6.6k.

Normally you get offered the alternative which is to take no lump sum and a bigger pension. Should be the same if you take it early except the numbers will be smaller of course. If you divide the lump sum by the 'lost ' pension income you get the commutation factor . Below 20 is not great. 25 is good. 

Depends what age you are. If commutation factors aren't linked to age, then you get a better deal the older you get. Also worth double checking what increases the scheme offers to pensions in payment (if better than statutory, you'd expect the commutation factor to be higher to reflect this).

Secret2ndAccount said:

Yes. Many schemes that offered earlier-than-55 retirement were protected when the law changed.
Some info here: https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/protected-early-pension-age

Remember that there had to be an 'unqualified right' to draw benefits at this earlier age. This was far less common than might be supposed - virtually all schemes would only allow such early retirements with the consent of the trustee, even with a reduction factor applied. Sometimes consent would need to be trustee and/or employer. If consent was required from either or both, the scheme did not have an 'unqualified right', so the minimum age is now 55 (other than ill health grounds), rising to 57 in 2028.

jasser1492

Marcon said:

Albermarle said:

At age 60 it will be worth c. £2.2k per annum and a lump sum of £6.6k.

Normally you get offered the alternative which is to take no lump sum and a bigger pension. Should be the same if you take it early except the numbers will be smaller of course. If you divide the lump sum by the 'lost ' pension income you get the commutation factor . Below 20 is not great. 25 is good. 

Depends what age you are. If commutation factors aren't linked to age, then you get a better deal the older you get. Also worth double checking what increases the scheme offers to pensions in payment (if better than statutory, you'd expect the commutation factor to be higher to reflect this).

Secret2ndAccount said:

Yes. Many schemes that offered earlier-than-55 retirement were protected when the law changed.
Some info here: https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/protected-early-pension-age

Remember that there had to be an 'unqualified right' to draw benefits at this earlier age. This was far less common than might be supposed - virtually all schemes would only allow such early retirements with the consent of the trustee, even with a reduction factor applied. Sometimes consent would need to be trustee and/or employer. If consent was required from either or both, the scheme did not have an 'unqualified right', so the minimum age is now 55 (other than ill health grounds), rising to 57 in 2028.

Thank you, yes I shouldn’t get too excited, I suspect as you say the trustees may have had to approve. I’ll write to them and not hold my breath. If not I’ll have to wait out the next couple of years till hitting 55…..

Albermarle

Albermarle said:

» show previous quotes

Normally you get offered the alternative which is to take no lump sum and a bigger pension. Should be the same if you take it early except the numbers will be smaller of course. If you divide the lump sum by the 'lost ' pension income you get the commutation factor . Below 20 is not great. 25 is good. 

Depends what age you are. If commutation factors aren't linked to age, then you get a better deal the older you get. Also worth double checking what increases the scheme offers to pensions in payment (if better than statutory, you'd expect the commutation factor to be higher to reflect this)

You are right the comments in bold are only a very rough guideline.