USS - Effect of Becoming a Deferred Member for a Month

WomenOfACertainAge

If I am interpreting this correctly, this appears to be a problem affecting WOMEN who find themselves having to leave active service slightly earlier than age 60.  The benefits they built up over the years when the normal retirement age for women was 60 are being recalibrated to the level they would have been if it had been 63.5, essentially robbing them of some of their investment. For men, 65 was always the NRA during this period, so there should be no reason to recalibrate. Has anyone looked at this as a sex discrimination issue, as well an age discrimination issue?  Many of these (pseudo-) voluntary severance schemes seem to be targetng #WomenOfACertainAge who are likely to be the worst hit over the long term.

swindiff

You are not interpreting this correctly.

Asimovs_nightfall

I wonder if anyone can clarify a couple of questions relating to the original post, please.

1. Are we saying that if you defer three months before reaching 60, then begin to take the pension four months after the 60th birthday, there are additional penalties (for want of a better word) to calculate? 

2. Can you defer when you have reached NPA, ie 66 if you leave the institution and if so, are there any factors to consider?

Thanks

Barralad77

I can take a stab at Q1. For the NPA of 60 to be ‘valid’ (i.e., not subject to any ERF) then you need to still be working when you turn 60. If you finish work any time before then (be it 3 months or 3 days) then the NPA will be taken as being 63.5. Put another way, if you finish before turning 60 but defer taking the pension until shortly after you’ve turned 60 you will still get hit by the ERF (because you will be taking it before reaching 63.5). Put yet one more way, if you don’t defer taking your pension until you’re 63.5 then that portion of your pension (the one where the NPA was set at 60) will be subjected to the relevant ERF. At least that’s what USS told me.

Scenario 1: Turn 60 then finish - no ‘penalty’ applied.
Scenario 2: Finish before turning 60 then the NPA will be taken as being 63.5 and a ‘penalty’ will be applied if you take the pension before reaching 63.5. 

In short, deferring taking the pension until after turning 60 probably doesn’t do what you think it does.

WomenOfACertainAge

Correct.  It is "leaving active service" before age 60 which leads to the cut in payout.  For a typical senior lecturer that amounts to a difference of about £4,000 per year for the rest of your life if you leave aged 59 years 11 months compared to doing so only one month later. The penalty is unavoidable, unlike those for early retirement, which can be sidestepped if you can afford to delay drawing your pension before NRA. The employers have the option to compensate for this by paying USS for the difference, but they are determined not to do so.  This leaves employees in their late 50s at a considerable disadvantage when facing redundancy, which - I'm told - is also the demographic most likely to be applying for voluntary severance. It surprises me that this is not being more widely spoken about and I suspect that many people taking these packages don't realise just how much they will be losing on their future income.

ussdave

WomenOfACertainAge said:

Correct.  It is "leaving active service" before age 60 which leads to the cut in payout.  For a typical senior lecturer that amounts to a difference of about £4,000 per year for the rest of your life if you leave aged 59 years 11 months compared to doing so only one month later. The penalty is unavoidable, unlike those for early retirement, which can be sidestepped if you can afford to delay drawing your pension before NRA. The employers have the option to compensate for this by paying USS for the difference, but they are determined not to do so.  This leaves employees in their late 50s at a considerable disadvantage when facing redundancy, which - I'm told - is also the demographic most likely to be applying for voluntary severance. It surprises me that this is not being more widely spoken about and I suspect that many people taking these packages don't realise just how much they will be losing on their future income.

Swings and roundabouts really.  Plenty of younger staff don't even have that option and the NRA is only going up.

It's certainly unfortunate that someone could be targeted for redundancy and therefore miss out on the reduction in ERFs that retiring directly from service at 60 offers those with significant pre 2011 service.  I don't believe this is a new thing though - the terms for that early retirement were set out quite some time ago.

I have an older pension where the rules were poorly worded (now updated on the website) that means I have to wait until 65 for that payment rather than 60 (or suffer ERFs).  It sucks, but it's not something brought into to target me or my demographic particularly.

gwt1965

WomenOfACertainAge said:

Correct.  It is "leaving active service" before age 60 which leads to the cut in payout.  For a typical senior lecturer that amounts to a difference of about £4,000 per year for the rest of your life if you leave aged 59 years 11 months compared to doing so only one month later. The penalty is unavoidable, unlike those for early retirement, which can be sidestepped if you can afford to delay drawing your pension before NRA. The employers have the option to compensate for this by paying USS for the difference, but they are determined not to do so.  This leaves employees in their late 50s at a considerable disadvantage when facing redundancy, which - I'm told - is also the demographic most likely to be applying for voluntary severance. It surprises me that this is not being more widely spoken about and I suspect that many people taking these packages don't realise just how much they will be losing on their future income.

As you’ll see from my original post, the difference for me was nowhere near £4,000. Not sure how you worked that out. I retired as a professor with c27 years in USS. 

Maybe you underestimate people taking such packages. It was taking the package that helped me to understand the significance of deferral.