Deferred pension lump sum question

Andrewsmith2261

Hi all, i have a deferred pension that i stopped paying into in 1989. I am 63 and was looking at maybe drawing this one a little early, i requested my figures for drawing early May and they have come back at £4944 annum or £3660 with £15,000 lump sum, does this lump sum seem a little low or am i missing something. Many thanks 

xylophone

Is this a public service pension scheme?

Dazed_and_C0nfused

Andrewsmith2261 said:

Hi all, i have a deferred pension that i stopped paying into in 1989. I am 63 and was looking at maybe drawing this one a little early, i requested my figures for drawing early May and they have come back at £4944 annum or £3660 with £15,000 lump sum, does this lump sum seem a little low or am i missing something. Many thanks 

Yes.  You get a nice, one off, £15k (tax free).

But that costs you ~£100/month of your pension.  Forever.  And next year it will ~£100 plus the annual inflation increase, possibly 6.7%.

And so on until that £15k becomes very expensive.

Dukes_of_hazard

It seems a bit low to me !

Marcon

Dukes_of_hazard said:

It seems a bit low to me !

Assuming this is a private sector scheme (dangerous things, assumptions!) with statutory minimum increases only...

Look at two things:

1. OP's age. Commutation rates normally dwindle as you get older, because the pension you are giving up will be paid for fewer years, so what you are giving up is reducing in value; and
2. the date they left their scheme: 1989. If there's a GMP in there, that will revalue, but the excess over GMP didn't have to be increased during the period of deferment; and there are no guaranteed increases once the pension comes into payment.

biscuit1_2

xylophone said:

Is this a public service pension scheme?

No it's private sector, a food company 

biscuit1_2

Dazed_and_C0nfused said:

Andrewsmith2261 said:

Hi all, i have a deferred pension that i stopped paying into in 1989. I am 63 and was looking at maybe drawing this one a little early, i requested my figures for drawing early May and they have come back at £4944 annum or £3660 with £15,000 lump sum, does this lump sum seem a little low or am i missing something. Many thanks 

Yes.  You get a nice, one off, £15k (tax free).

But that costs you ~£100/month of your pension.  Forever.  And next year it will ~£100 plus the annual inflation increase, possibly 6.7%.

And so on until that £15k becomes very expensive.

Not to worried about that, it's one of 3 pensions i have acquired through my whole working life, 

biscuit1_2

Marcon said:

Dukes_of_hazard said:

It seems a bit low to me !

Assuming this is a private sector scheme (dangerous things, assumptions!) with statutory minimum increases only...

Look at two things:

1. OP's age. Commutation rates normally dwindle as you get older, because the pension you are giving up will be paid for fewer years, so what you are giving up is reducing in value; and
2. the date they left their scheme: 1989. If there's a GMP in there, that will revalue, but the excess over GMP didn't have to be increased during the period of deferment; and there are no guaranteed increases once the pension comes into payment.

Yes it's a public sector pension and yes there is a GMP, i've currently just turned 63. i'm aware the value of the pension reduces if taken early but not that the lump sum calculation is affected, the figures quoted are based on my taking it in May this year.

Marcon

biscuit1_2 said:

Marcon said:

Dukes_of_hazard said:

It seems a bit low to me !

Assuming this is a private sector scheme (dangerous things, assumptions!) with statutory minimum increases only...

Look at two things:

1. OP's age. Commutation rates normally dwindle as you get older, because the pension you are giving up will be paid for fewer years, so what you are giving up is reducing in value; and
2. the date they left their scheme: 1989. If there's a GMP in there, that will revalue, but the excess over GMP didn't have to be increased during the period of deferment; and there are no guaranteed increases once the pension comes into payment.

Yes it's a public sector pension and yes there is a GMP, i've currently just turned 63. i'm aware the value of the pension reduces if taken early but not that the lump sum calculation is affected, the figures quoted are based on my taking it in May this year.

biscuit1_2 said:

xylophone said:

Is this a public service pension scheme?

No it's private sector, a food company 

It can't be both public and private. If it's a food company then private looks probable!

The lump sum would be affected if your 'commutation factors' (the amount of cash you get per £1 of pension exchanged for cash) are age related. Have you checked? It's scheme-specific so you'd need to ask the administrators of the scheme.

Dazed_and_C0nfused

Marcon said:

biscuit1_2 said:

Marcon said:

Dukes_of_hazard said:

It seems a bit low to me !

Assuming this is a private sector scheme (dangerous things, assumptions!) with statutory minimum increases only...

Look at two things:

1. OP's age. Commutation rates normally dwindle as you get older, because the pension you are giving up will be paid for fewer years, so what you are giving up is reducing in value; and
2. the date they left their scheme: 1989. If there's a GMP in there, that will revalue, but the excess over GMP didn't have to be increased during the period of deferment; and there are no guaranteed increases once the pension comes into payment.

Yes it's a public sector pension and yes there is a GMP, i've currently just turned 63. i'm aware the value of the pension reduces if taken early but not that the lump sum calculation is affected, the figures quoted are based on my taking it in May this year.

biscuit1_2 said:

xylophone said:

Is this a public service pension scheme?

No it's private sector, a food company 

It can't be both public and private. If it's a food company then private looks probable!

The lump sum would be affected if your 'commutation factors' (the amount of cash you get per £1 of pension exchanged for cash) are age related. Have you checked? It's scheme-specific so you'd need to ask the administrators of the scheme.

And the poster who posed the question was actually @Andrewsmith2261

biscuit1_2

Marcon said:

biscuit1_2 said:

Marcon said:

Dukes_of_hazard said:

It seems a bit low to me !

Assuming this is a private sector scheme (dangerous things, assumptions!) with statutory minimum increases only...

Look at two things:

1. OP's age. Commutation rates normally dwindle as you get older, because the pension you are giving up will be paid for fewer years, so what you are giving up is reducing in value; and
2. the date they left their scheme: 1989. If there's a GMP in there, that will revalue, but the excess over GMP didn't have to be increased during the period of deferment; and there are no guaranteed increases once the pension comes into payment.

Yes it's a public sector pension and yes there is a GMP, i've currently just turned 63. i'm aware the value of the pension reduces if taken early but not that the lump sum calculation is affected, the figures quoted are based on my taking it in May this year.

biscuit1_2 said:

xylophone said:

Is this a public service pension scheme?

No it's private sector, a food company 

It can't be both public and private. If it's a food company then private looks probable!

The lump sum would be affected if your 'commutation factors' (the amount of cash you get per £1 of pension exchanged for cash) are age related. Have you checked? It's scheme-specific so you'd need to ask the administrators of the scheme.

It is Private sector. Right that makes sense now, i didn't know commutation factors were age related. Many thanks