CS Alpha early retirement factors

chubsta

kassy64 said:

NedS said:

kassy64 said:

You make it sound like a 'gain', its still a loss on what you would have if stayed on for that extra month (albeit tiny and less than any loss over 1 month). I retired from CS 2 years early and took a hit factor of 0.910. I had a decent pension though after 41 years service and its been worth every penny to be able to retire on a comfortable pension at 58 years old. Those extra 2 years have been worth every penny !

How so?

In my example, I would lose out on £2 per month by taking actuarial reduction from £1000/month down to £998/month BUT I've had an extra £998 payment by taking the pension one month early so I have an extra £998 in my pocket.

At a reduction of £2/month, it would take 998/2 = 499 months (or 41.5 years) to give back the £998 pounds I have received upfront. If I die before 108.5 years old, I'm in pocket (ignoring any effects of inflation and indexation)

Not really, as your not accounting for your additional 1 months full salary you would have received by staying on.

I look upon it an 'what is the hourly rate for that particular month?'

If you are working and getting say £3000 for a total of 160 hours that month, or retired and getting £2000 for no hours, then you are working 160 hours for the difference of £1000, which makes your effective hourly rate £6.25! So, a definite 'gain' in my eyes.

....Just another way I justify my early retirement to myself!

(of course, it is all just games, and the only really important thing is how much you want/need, but that is another reason why discussing it with different people is so interesting, both here and at work.)

NedS

kassy64 said:

NedS said:

kassy64 said:

You make it sound like a 'gain', its still a loss on what you would have if stayed on for that extra month (albeit tiny and less than any loss over 1 month). I retired from CS 2 years early and took a hit factor of 0.910. I had a decent pension though after 41 years service and its been worth every penny to be able to retire on a comfortable pension at 58 years old. Those extra 2 years have been worth every penny !

How so?

In my example, I would lose out on £2 per month by taking actuarial reduction from £1000/month down to £998/month BUT I've had an extra £998 payment by taking the pension one month early so I have an extra £998 in my pocket.

At a reduction of £2/month, it would take 998/2 = 499 months (or 41.5 years) to give back the £998 pounds I have received upfront. If I die before 108.5 years old, I'm in pocket (ignoring any effects of inflation and indexation)

Not really, as your not accounting for your additional 1 months full salary you would have received by staying on.

The pension will be in deferment - I will have finished working 10 years prior. I don't plan nor need to take the pension early, I'm simply observing that the reduction factor looks extremely generous for taking the pension 1 month early as opposed to at NRA.

kassy64

NedS said:

kassy64 said:

NedS said:

kassy64 said:

You make it sound like a 'gain', its still a loss on what you would have if stayed on for that extra month (albeit tiny and less than any loss over 1 month). I retired from CS 2 years early and took a hit factor of 0.910. I had a decent pension though after 41 years service and its been worth every penny to be able to retire on a comfortable pension at 58 years old. Those extra 2 years have been worth every penny !

How so?

In my example, I would lose out on £2 per month by taking actuarial reduction from £1000/month down to £998/month BUT I've had an extra £998 payment by taking the pension one month early so I have an extra £998 in my pocket.

At a reduction of £2/month, it would take 998/2 = 499 months (or 41.5 years) to give back the £998 pounds I have received upfront. If I die before 108.5 years old, I'm in pocket (ignoring any effects of inflation and indexation)

Not really, as your not accounting for your additional 1 months full salary you would have received by staying on.

The pension will be in deferment - I will have finished working 10 years prior. I don't plan nor need to take the pension early, I'm simply observing that the reduction factor looks extremely generous for taking the pension 1 month early as opposed to at NRA.

Out of interest have you also calculated how long it will take you to recoup the losses if you take the reduction factor at 2, 3, 4 months early? 

NedS

kassy64 said:

NedS said:

kassy64 said:

NedS said:

kassy64 said:

You make it sound like a 'gain', its still a loss on what you would have if stayed on for that extra month (albeit tiny and less than any loss over 1 month). I retired from CS 2 years early and took a hit factor of 0.910. I had a decent pension though after 41 years service and its been worth every penny to be able to retire on a comfortable pension at 58 years old. Those extra 2 years have been worth every penny !

How so?

In my example, I would lose out on £2 per month by taking actuarial reduction from £1000/month down to £998/month BUT I've had an extra £998 payment by taking the pension one month early so I have an extra £998 in my pocket.

At a reduction of £2/month, it would take 998/2 = 499 months (or 41.5 years) to give back the £998 pounds I have received upfront. If I die before 108.5 years old, I'm in pocket (ignoring any effects of inflation and indexation)

Not really, as your not accounting for your additional 1 months full salary you would have received by staying on.

The pension will be in deferment - I will have finished working 10 years prior. I don't plan nor need to take the pension early, I'm simply observing that the reduction factor looks extremely generous for taking the pension 1 month early as opposed to at NRA.

Out of interest have you also calculated how long it will take you to recoup the losses if you take the reduction factor at 2, 3, 4 months early? 

1 Month = 998/2 = 499 months = 41.58 years

2 Months = £993*2/7 = 284 months = 23.64 years

3 Months = £988*3/12 = 247 months = 20.58 years

4 Months = £983*4/17 = 231 months = 19.27 years

...

12 Months = £945*12/55 = 206 months = 17.18 years

...

60 Months = £760*60/240 = 190 months = 15.83 years

I haven't factored in the compounding of interest/inflation upon taking early payments (as an actuary would), but clearly the early retirement factor is almost twice as generous at one month than at two or three months. It's small potatoes, but it's still an anomaly. Someone with a £10,000 CS DB pension taking it 1 month early and average life expectancy could end up around £600 better off over their lifetime.

kassy64

NedS said:

kassy64 said:

NedS said:

kassy64 said:

NedS said:

kassy64 said:

You make it sound like a 'gain', its still a loss on what you would have if stayed on for that extra month (albeit tiny and less than any loss over 1 month). I retired from CS 2 years early and took a hit factor of 0.910. I had a decent pension though after 41 years service and its been worth every penny to be able to retire on a comfortable pension at 58 years old. Those extra 2 years have been worth every penny !

How so?

In my example, I would lose out on £2 per month by taking actuarial reduction from £1000/month down to £998/month BUT I've had an extra £998 payment by taking the pension one month early so I have an extra £998 in my pocket.

At a reduction of £2/month, it would take 998/2 = 499 months (or 41.5 years) to give back the £998 pounds I have received upfront. If I die before 108.5 years old, I'm in pocket (ignoring any effects of inflation and indexation)

Not really, as your not accounting for your additional 1 months full salary you would have received by staying on.

The pension will be in deferment - I will have finished working 10 years prior. I don't plan nor need to take the pension early, I'm simply observing that the reduction factor looks extremely generous for taking the pension 1 month early as opposed to at NRA.

Out of interest have you also calculated how long it will take you to recoup the losses if you take the reduction factor at 2, 3, 4 months early? 

1 Month = 998/2 = 499 months = 41.58 years

2 Months = £993*2/7 = 284 months = 23.64 years

3 Months = £988*3/12 = 247 months = 20.58 years

4 Months = £983*4/17 = 231 months = 19.27 years

...

12 Months = £945*12/55 = 206 months = 17.18 years

...

60 Months = £760*60/240 = 190 months = 15.83 years

I haven't factored in the compounding of interest/inflation upon taking early payments (as an actuary would), but clearly the early retirement factor is almost twice as generous at one month than at two or three months. It's small potatoes, but it's still an anomaly. Someone with a £10,000 CS DB pension taking it 1 month early and average life expectancy could end up around £600 better off over their lifetime.

Interesting, why not 3 months then? Still gives you 20+ years. 

NedS

kassy64 said:

NedS said:

kassy64 said:

NedS said:

kassy64 said:

NedS said:

kassy64 said:

You make it sound like a 'gain', its still a loss on what you would have if stayed on for that extra month (albeit tiny and less than any loss over 1 month). I retired from CS 2 years early and took a hit factor of 0.910. I had a decent pension though after 41 years service and its been worth every penny to be able to retire on a comfortable pension at 58 years old. Those extra 2 years have been worth every penny !

How so?

In my example, I would lose out on £2 per month by taking actuarial reduction from £1000/month down to £998/month BUT I've had an extra £998 payment by taking the pension one month early so I have an extra £998 in my pocket.

At a reduction of £2/month, it would take 998/2 = 499 months (or 41.5 years) to give back the £998 pounds I have received upfront. If I die before 108.5 years old, I'm in pocket (ignoring any effects of inflation and indexation)

Not really, as your not accounting for your additional 1 months full salary you would have received by staying on.

The pension will be in deferment - I will have finished working 10 years prior. I don't plan nor need to take the pension early, I'm simply observing that the reduction factor looks extremely generous for taking the pension 1 month early as opposed to at NRA.

Out of interest have you also calculated how long it will take you to recoup the losses if you take the reduction factor at 2, 3, 4 months early? 

1 Month = 998/2 = 499 months = 41.58 years

2 Months = £993*2/7 = 284 months = 23.64 years

3 Months = £988*3/12 = 247 months = 20.58 years

4 Months = £983*4/17 = 231 months = 19.27 years

...

12 Months = £945*12/55 = 206 months = 17.18 years

...

60 Months = £760*60/240 = 190 months = 15.83 years

I haven't factored in the compounding of interest/inflation upon taking early payments (as an actuary would), but clearly the early retirement factor is almost twice as generous at one month than at two or three months. It's small potatoes, but it's still an anomaly. Someone with a £10,000 CS DB pension taking it 1 month early and average life expectancy could end up around £600 better off over their lifetime.

Interesting, why not 3 months then? Still gives you 20+ years. 

Because 1 month early gives the best return, at zero risk (assuming I don't live to 109), whereas 3 months gives a lower overall return and a longevity risk of being worse off should I live to 88 or more.

In other words, at 3 months the factor is doing what it is designed to do - be cost neutral to both the member and the scheme. Again, at one month early there appears to be an anomaly where the factor is massively skewed in favour of the member at an overall cost to the scheme. If everyone took their pension one month early on a factor of 0.998, the scheme would lose. I really don't know how else to put my point across, but you don't seem to be getting it?

kassy64

NedS said:

kassy64 said:

NedS said:

kassy64 said:

NedS said:

kassy64 said:

NedS said:

kassy64 said:

You make it sound like a 'gain', its still a loss on what you would have if stayed on for that extra month (albeit tiny and less than any loss over 1 month). I retired from CS 2 years early and took a hit factor of 0.910. I had a decent pension though after 41 years service and its been worth every penny to be able to retire on a comfortable pension at 58 years old. Those extra 2 years have been worth every penny !

How so?

In my example, I would lose out on £2 per month by taking actuarial reduction from £1000/month down to £998/month BUT I've had an extra £998 payment by taking the pension one month early so I have an extra £998 in my pocket.

At a reduction of £2/month, it would take 998/2 = 499 months (or 41.5 years) to give back the £998 pounds I have received upfront. If I die before 108.5 years old, I'm in pocket (ignoring any effects of inflation and indexation)

Not really, as your not accounting for your additional 1 months full salary you would have received by staying on.

The pension will be in deferment - I will have finished working 10 years prior. I don't plan nor need to take the pension early, I'm simply observing that the reduction factor looks extremely generous for taking the pension 1 month early as opposed to at NRA.

Out of interest have you also calculated how long it will take you to recoup the losses if you take the reduction factor at 2, 3, 4 months early? 

1 Month = 998/2 = 499 months = 41.58 years

2 Months = £993*2/7 = 284 months = 23.64 years

3 Months = £988*3/12 = 247 months = 20.58 years

4 Months = £983*4/17 = 231 months = 19.27 years

...

12 Months = £945*12/55 = 206 months = 17.18 years

...

60 Months = £760*60/240 = 190 months = 15.83 years

I haven't factored in the compounding of interest/inflation upon taking early payments (as an actuary would), but clearly the early retirement factor is almost twice as generous at one month than at two or three months. It's small potatoes, but it's still an anomaly. Someone with a £10,000 CS DB pension taking it 1 month early and average life expectancy could end up around £600 better off over their lifetime.

Interesting, why not 3 months then? Still gives you 20+ years. 

Because 1 month early gives the best return, at zero risk (assuming I don't live to 109), whereas 3 months gives a lower overall return and a longevity risk of being worse off should I live to 88 or more.

In other words, at 3 months the factor is doing what it is designed to do - be cost neutral to both the member and the scheme. Again, at one month early there appears to be an anomaly where the factor is massively skewed in favour of the member at an overall cost to the scheme. If everyone took their pension one month early on a factor of 0.998, the scheme would lose. I really don't know how else to put my point across, but you don't seem to be getting it?

Haha, no need to be rude !!!
I get it completely and with the male UK life expectancy at around 79-80 years why would you not take it 3 months earlier then, as the odds are in favour that it would be beneficial to you, I don't know how else to put my point across, but you don't seem to be getting it !!! 

QrizB

... with the male UK life expectancy at around 79-80 years ...

Life expectancy at SPA for a UK male is something like 85.

See

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

Universidad

QrizB said:

Life expectancy at SPA for a UK male is something like 85.

Yes, it's a curious facet of calculating averages, but "life expectancy from age X" goes up with age, not down, because all the people who died younger have stopped bringing the average down.

So average life expectancy isn't super helpful for retirement planning. For an extreme example, you can absolutely discount the effects of infant mortality on average life expectancy, if you're already paying into a pension scheme!

kassy64

My point still stands regardless of the UK life expectancy that google returns. Whatever way you look at it, it is significantly less than the 88 years that was previously mentioned by previous poster regarding taking pension 1,2 or 3 months early (unless he/she has a crystal ball) !