Best month to start DB pension (is there one?)

leosayer

I'm planning to start my private sector DB pension in April 2025 at the start of the new tax year. It comes with a large protected tax free lump sum.

My normal retirement date is November 2029 so I'll be taking it over 4 years early and am aware of the reduction factors - around 5% per year. I also have DC savings that I could draw from so have the flexibility to start it months or even years later if that is worthwhile.

Is there a particular month when it is better to start it eg. the anniversary of me joining the scheme (November), the anniversary of it becoming deferred (April), my birthday (November), the tax year  or something else?

If it's any help these are the inflation increases that apply:

Mark_d

I would take the pension a whole number of years early eg. November 2025

Phossy

I am tentatively planning mine for the beginning of the Tax year (or the first three months thereafter) as it maximises the tax position for me. In the grand scheme of things I realise it makes a minor difference over the long term, but every little helps..

RogerPensionGuy

Ask pension provider is there a better or worse year, month or date in the month?

In my experience I thought definitely do on date of your birthday in any month. 

Tommyjw

Purely in terms of the final amount you would be getting it would be on/after your leave date anniversary (in November). 

If you retire in/up to October 2024, your excess pension benefits (all but the top GMP row in your table) are increased based upon statutory orders using the number of complete years between leave date & retirement. Lets say that is 18 years now, and November anniversary = 19 years, you'd be gaining an extra revaluation amount which is likely to be a several % increase. In a rush so can explain more later if needed but the links mentioned above will likely do this.

Alongside this, as you noted, you'll see a slight decrease in the Early Retirement reduction (likely - most commonly) oon a monthly basis so each month will be a slightly lower reduction.

That said, there are more intricate parts to it. Get it paid earlier =
- Pension is in payment earlier = more pension payments.
- If Cash being put towards mortgage/debt etc, earlier payment and less interest paid
- (usually, not always) a larger annual increase at your next pension increase date, as most Schemes do it based proportionally based on the number of complete months from retirement date to 1st anniversary date. E.g. if due a 5% increase, but retired half way through the year you'd only get a 2.5% increase.

Somebody

leosayer said:

I'm planning to start my private sector DB pension in April 2025 at the start of the new tax year.

I've been through this i.e. commencing a DB pension at the start of a new tax year.  You need to find out when the pay date is.  I have 2 DB pensions in payment - one is paid on the 1st of each month, and the other 1 day before the last day of the month, so usually 29th or 30th of the month.

So be careful with the April pay date - if 1 April then it will commence in the previous tax year and not the new one. Mine were first paid on 29th April and 1 May, so 12 monthly payments in the tax year for each.

leosayer

Thanks, looks like starting in May (ie. the month after the anniversary of my leave date) makes the most sense. 

This results in a revaluation rate of 39.9% instead of 36.9% which is not insignificant.