Late Retirement Factor

SarahB16

I have deliberately tried to keep this brief but please let me know if you need any more information.

I’m happy to share the forecasts too re an old DB pension I have.   

Current forecast is taking it in five years’ time aged 56:

Pre-2006 tranche normal retirement age is 60:  £4,034 

Post 2006 tranche normal retirement age is 65: £1,167

A temporary pension of £549 will be deducted from the £4,034 when I reach state pension age at 67. 

The above increases by RPI subject to a 5% cap whilst in deferment.

 

Retirement plans

I think I will likely retire aged 61 or 62 (God willing) so this DB pension will have an actuarial reduction applied to the post 2006 tranche (appears to be c.5%) and for the pre-2006 tranche it says in the letter I have received:

If you retire after age 60, your pre-2006 scheme pension will be increased by a late retirement factor.

Late retirement: If you choose to retire after the Scheme’s Normal Retirement Age, your pension  will be increased for late payment.  The amount of increase will depend on the applicable late retirement factors at the point you retire.  Please note that these change on a regular basis to account for a number of variables such as inflation and longevity.

I wondered if there were any questions I should be asking my pension provider regarding the above.  Perhaps what the actuarial reduction is for taking the post 2006 early, i.e. is the reduction 5% a year?

I also wondered how best to enquire about the late retirement factor as it would be good to see how much this may increase by from taking it a year of two after 60.

I would of course get more up to date figures nearer to retirement too.  

Very grateful for your opinions please.  

Tommyjw

SarahB16 said:

I wondered if there were any questions I should be asking my pension provider regarding the above.  Perhaps what the actuarial reduction is for taking the post 2006 early, i.e. is the reduction 5% a year?

I also wondered how best to enquire about the late retirement factor as it would be good to see how much this may increase by from taking it a year of two after 60.

I would of course get more up to date figures nearer to retirement too.  

Very grateful for your opinions please.  

You should be able to just ask for them  both, it may be a fixed amount (e.g. 5% per year) or a table that isnt a fixed increase per year.

That said, as you highlight, just how useful this is so far in advance is debatable. I work on a Scheme that just increased Late Retirement factors from ~3% per year to 8% per year, i've previously had a Scheme increase Early Retirement reductions by like 50% extra, so i'm not sure getting factors for such advance planning realy does too much.

Factors tend to, on average, change roughly around every 3 years 

MarkCarnage

Factor review is tending to become more frequent....that doesn't mean they will always change on review, but in recent years they have due to the volatility in the gilt market. It's a balance between fairness and administrative workload. 
Late and early retirement factors may not be the same either, as it will depend in large part on what gilt yields are at different durations. 
5% a year reduction is probably a little higher than most but still ballpark. 
They will also not tend to publicise changes arising from factor reviews in advance for obvious reasons, but in many cases will honour the factors applying for cases in progress. 

Marcon

SarahB16 said:

I have deliberately tried to keep this brief but please let me know if you need any more information.

I’m happy to share the forecasts too re an old DB pension I have.   

Current forecast is taking it in five years’ time aged 56:

Has the scheme got a protected pension age? If not, the earliest you can take it will be age 57 (rises from 55 to 57 in 2028).

If you are only 51 at present, there's little point asking for factors when you have at least another six years to go to hit 57, never mind your early 60s! The danger is that you do what we all tend to do - take them as gospel and forget they change....and of course the pension is revaluing each year it is in deferment, just to add another moving part to the picture!

SarahB16

Marcon said:

SarahB16 said:

I have deliberately tried to keep this brief but please let me know if you need any more information.

I’m happy to share the forecasts too re an old DB pension I have.   

Current forecast is taking it in five years’ time aged 56:

Has the scheme got a protected pension age? If not, the earliest you can take it will be age 57 (rises from 55 to 57 in 2028).

If you are only 51 at present, there's little point asking for factors when you have at least another six years to go to hit 57, never mind your early 60s! The danger is that you do what we all tend to do - take them as gospel and forget they change....and of course the pension is revaluing each year it is in deferment, just to add another moving part to the picture!

Good point.  However, the only reason I ask for the forecasts is to give me an idea of what I may receive and I definitely won't be retiring before 60 which is the normal retirement age for the pre-2006 tranche. 

Thank you for highlighting this though. 

Hoenir

SarahB16 said:

Marcon said:

SarahB16 said:

I have deliberately tried to keep this brief but please let me know if you need any more information.

I’m happy to share the forecasts too re an old DB pension I have.   

Current forecast is taking it in five years’ time aged 56:

Has the scheme got a protected pension age? If not, the earliest you can take it will be age 57 (rises from 55 to 57 in 2028).

If you are only 51 at present, there's little point asking for factors when you have at least another six years to go to hit 57, never mind your early 60s! The danger is that you do what we all tend to do - take them as gospel and forget they change....and of course the pension is revaluing each year it is in deferment, just to add another moving part to the picture!

Good point.  However, the only reason I ask for the forecasts is to give me an idea of what I may receive and I definitely won't be retiring before 60 which is the normal retirement age for the pre-2006 tranche. 

Assume that the value today will have the same buying power as at your normal retirement date. As there'll be no investment growth to speak of.