DB Pension quote....

Tedlad123

Today received my 'quote' for putting my deferred DB pension into payment in September, admittedly it is 10yrs before my NRA of 65 but want to pay off my smallish mortgage etc etc.
I also have a current DC pension with my current employer currently valued at £220K and contributing 7%/7% but with my mortgage paid looking to increase this to 15%/7%.

Not sure whether my 'quote' represents good value or not ot whether to draw a lump from the DC scheme to pay the mortgage in September.

Pension was deferred back in 2011 with my then employer

Option 1 - Full Pension 

Total Pension £10,090.12 p.a.

This pension shown above is made up of the following elements: 

	Benefits in <excess of GMP in> respect of employment before 06/04/1997 £1,197.92 p.a.
	Benefits in respect of employment after 06/04/1997 to 31/08/2005 £5,684.25 p.a.
	Benefits in respect of employment after 01/09/2005 subject to LPI increases at 2.5%      £3,207.96 p.a.                                                                                                                                                OR A residual pension and a maximum pension commencement lump sum Maximum Pension Commencement Lump Sum £51,402.50 Plus Total Residual Pension   £7,710.37 p.a. .

Dazed_and_C0nfused

Are they the figures after any actuarial reduction?

Tedlad123

Yes.

My last pension statement stated that if it run until NRA it would be £15K per year, not including a pension lump sum.

kempiejon

Hmm, I have DC and DB pensions and in my plan I value the DB income so much more than the DC pot so if looking for a lump sum prefer to cash the DC. I'm guessing DB is inflation linked is the increase capped? Also no reduction for taking DC at 55 and 25% is tax free and doesn't necessarily trigger MPAA.
My actuarial reduction would be about 50% for 10 years early, I'm not keen on taking a cash lump, again I value the income.

Pat38493

kempiejon said:

Hmm, I have DC and DB pensions and in my plan I value the DB income so much more than the DC pot so if looking for a lump sum prefer to cash the DC. I'm guessing DB is inflation linked is the increase capped? Also no reduction for taking DC at 55 and 25% is tax free and doesn't necessarily trigger MPAA.
My actuarial reduction would be about 50% for 10 years early, I'm not keen on taking a cash lump, again I value the income.

When looking at these actuarial reductions you need a degree in both finance and clairvoyance to fully understand how and why they are working them out.  50% reduction for 10 years seems unreasonably high, but, if they are using 50%, my guess is that the 50% reduction is applied after forward relvauating  the pension to normal retirement age using specific inflation rates for unknown periods.  There is a whole thread on this where I was challenging my DB pension admins on how they were doing this (for different reasons than the actuarial reduction) and this is how they are doing the revaluation - it’s hard to wrap your head around but if that’s the case it is not a 50% reduction on todays’ value of the pension in real terms.

OP - looks like your commutation factor for tax free cash is about 21.5 which I think is in the typical ballpark for a DB scheme taken 10 years early.  Depends in the end how much you value the guaranteed long term indexed income.

Tedlad123

Thanks both for the comments. The longer I leave the DB pension start date, obviously an increase in annual payment but would the lump sum increase over time if I held off for say another 5 years.

xylophone

Do you by any chance have your statement of deferred benefits from when your pension became deferred?

If so, what is shown as post 88 GMP and excess over GMP?  Your quote refers to Benefits in <excess of GMP 

Does the quote not  include the GMP?

What does your Scheme Booklet have to say concerning revaluation of GMP in deferment?


Can you explain the significance of  the dates

06/04/1997 to 31/08/2005

after 01/09/2005 

See

https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/

How are pensions in payment increased?

How will the  revalued GMP be treated at age 65?

MX5huggy

Why do you want to use your pension to pay off your mortgage? Especially while still working? 

It’s the suboptimal strategy in most circumstances. Keep pouring money into the pension.