Police Pension- Stay or Withdraw?

GrubbyGirl_2

Like everyone else I agree that it would be the worst mistake of your life.  Public sector pensions are gold.  I was in the NHS from age 18 to retirement and I am eternally thankful that I had no idea you didn't have to be in a pension so never even thought about it.  I retired 3 years ago after paying in for 42 years and to say I am very comfortable is an understatement.  There are other benefits too:

• If you die then your partner gets a payout and/or pension
• You can retire early due to sickness

Another thing to consider is when you're looking for a mortgage you're considered to be a much better risk because you have these benefits. 

Don't do it, you'll kick yourself if you do, and don't think you'll be able to buy back via AVCs in the future.  One of people I worked for took out £750 in 1984 (4 years pension) to buy a car and ended up paying additional AVCs for 15 years to buy those 4 years back.  That worked out at around £1,500 a year for 15 years a total of £22,500 (30 times the original amount).  Ouch!

SpudGunPaul

jimi_man said:

SpudGunPaul said:

Universidad said:

The police pension is a really, really good pension.

It is worth more than you're paying in, by a LOT. If you work a full career with the police, you will get to retire earlier than most people, and every year you'll just get paid a pretty reasonable proportion of your annual salary for the rest of your life, without ever having to go to work again.

If you need extra money, it's a bad idea to take it from future you. But you don't. You just feel like you're wasting money on rent.

And you're kinda right, rent is like giving someone else money that you never see again, and I get that.

But giving up one of the best pensions in the country, when someone else is paying for most of it, is the worst act of throwing money away that I can think of - it makes paying rent look frugal.

By the time you're middle aged, you'll either be glad you stayed in the pension or hate yourself for not doing that.

The OP will probably have projecting figures with a retirement age of 67. Hardly younger than most and they'll still need 35 years and be 60 to retire. If they retire before 60 every year costs them 4%.

Actually the figures in the 2015 police CARE scheme show retirement at 60, which is seven years earlier. No requirement to do 35 years either, there is no maximum that has to be achieved any more. And yes it will cost them 4% a year but obviously they'll be taking it for longer. It is supposed to be actuarily neutral.

Yeah, you're right got confused with the deferred pension age. 

However with an accrual rate of 1/55.3ths is that 55 years to get a full pension?

hyubh

SpudGunPaul said:

Yeah, you're right got confused with the deferred pension age. 

However with an accrual rate of 1/55.3ths is that 55 years to get a full pension?

As jimi_man alluded to, the concept of a 'full pension' doesn't exist in the CARE scheme. Also remember active member revaluation is above inflation.

SpudGunPaul

hyubh said:

SpudGunPaul said:

Yeah, you're right got confused with the deferred pension age. 

However with an accrual rate of 1/55.3ths is that 55 years to get a full pension?

As jimi_man alluded to, the concept of a 'full pension' doesn't exist in the CARE scheme. Also remember active member revaluation is above inflation.

So after 30 years you get 30/155.3 of what?

A years pay based on your career average per year.

Getting_greyer

Based on pensionable pay for that year. If you earned £55300 you accrue a pension income of £1000. That is then his CPI revaluation added. Do that every year. So if did 30 years with no pay rises you have a pension of £30000 plus whatever the CPI adjustments. I think police is CPI+1.25 in acrual.

Obviously starting pay would most likely be lower but that's the mechanism.

SpudGunPaul

Getting_greyer said:

Based on pensionable pay for that year. If you earned £55300 you accrue a pension income of £1000. That is then his CPI revaluation added. Do that every year. So if did 30 years with no pay rises you have a pension of £30000 plus whatever the CPI adjustments. I think police is CPI+1.25 in acrual.

Obviously starting pay would most likely be lower but that's the mechanism.

So having paid the best part of £2700 in the first year their pot is worth less than £380.

Looking at some of the figures, if the OP has worked along side people on the 1987 scheme I can see why they’d think of leaving. After 30 years they get a third in value of that lump sum and 25% less a year. 

Silvertabby

SpudGunPaul said:

Getting_greyer said:

Based on pensionable pay for that year. If you earned £55300 you accrue a pension income of £1000. That is then his CPI revaluation added. Do that every year. So if did 30 years with no pay rises you have a pension of £30000 plus whatever the CPI adjustments. I think police is CPI+1.25 in acrual.

Obviously starting pay would most likely be lower but that's the mechanism.

So having paid the best part of £2700 in the first year their pot is worth less than £380.

Looking at some of the figures, if the OP has worked along side people on the 1987 scheme I can see why they’d think of leaving. After 30 years they get a third in value of that lump sum and 25% less a year. 

Classic misunderstanding of how DB pensions work.

Using your own figures, that one-off payment of £2,700 will buy an annual index linked pension of £380 (plus revaluations) for life.

Still not convinced?  Then try buying an annuity with this £2,700.  You'd be lucky to get £135 per year.

SpudGunPaul

Silvertabby said:

SpudGunPaul said:

Getting_greyer said:

Based on pensionable pay for that year. If you earned £55300 you accrue a pension income of £1000. That is then his CPI revaluation added. Do that every year. So if did 30 years with no pay rises you have a pension of £30000 plus whatever the CPI adjustments. I think police is CPI+1.25 in acrual.

Obviously starting pay would most likely be lower but that's the mechanism.

So having paid the best part of £2700 in the first year their pot is worth less than £380.

Looking at some of the figures, if the OP has worked along side people on the 1987 scheme I can see why they’d think of leaving. After 30 years they get a third in value of that lump sum and 25% less a year. 

Classic misunderstanding of how DB pensions work.

Using your own figures, that one-off payment of £2,700 will buy an annual index linked pension of £380 (plus revaluations) for life.

Still not convinced?  Then try buying an annuity with this £2,700.  You'd be lucky to get £135 per year.

I've no need to have a full understanding of it, after 30 years they get 66% less in a lump sum and 25% less a year. An 18 year old joining today needs to work a further 12 years to get a pension without penalty than one did who joined pre April 1992.

Along with other things it's no wonder there's a retention problem with officers. 

Silvertabby

SpudGunPaul said:

Silvertabby said:

SpudGunPaul said:

Getting_greyer said:

Based on pensionable pay for that year. If you earned £55300 you accrue a pension income of £1000. That is then his CPI revaluation added. Do that every year. So if did 30 years with no pay rises you have a pension of £30000 plus whatever the CPI adjustments. I think police is CPI+1.25 in acrual.

Obviously starting pay would most likely be lower but that's the mechanism.

So having paid the best part of £2700 in the first year their pot is worth less than £380.

Looking at some of the figures, if the OP has worked along side people on the 1987 scheme I can see why they’d think of leaving. After 30 years they get a third in value of that lump sum and 25% less a year. 

Classic misunderstanding of how DB pensions work.

Using your own figures, that one-off payment of £2,700 will buy an annual index linked pension of £380 (plus revaluations) for life.

Still not convinced?  Then try buying an annuity with this £2,700.  You'd be lucky to get £135 per year.

I've no need to have a full understanding of it, after 30 years they get 66% less in a lump sum and 25% less a year. An 18 year old joining today needs to work a further 12 years to get a pension without penalty than one did who joined pre April 1992.

Along with other things it's no wonder there's a retention problem with officers. 

All public sector pensions, not just the police, are now CARE schemes.  OK, the CARE schemes may have later retirement dates, but the pensions (and other benefits such as ill health enhancements and death benefits) far outweigh anything available to new entrants to private sector pension schemes.

hyubh

SpudGunPaul said:

I've no need to have a full understanding of it, after 30 years they get 66% less in a lump sum and 25% less a year. An 18 year old joining today needs to work a further 12 years to get a pension without penalty than one did who joined pre April 1992.

Along with other things it's no wonder there's a retention problem with officers. 

Now compare the 2015 scheme with the 2006 scheme (which was still final salary). That was the bigger change for new joiners (i.e. 1992 regs to 2006 ones, not 2006 regs to 2015 regs).

Along with other things it's no wonder there's a retention problem with officers. 

To head off into the private sector where pensions are far, far worse...?