Accuracy of USS Benefit Figures using the Modeller

busymumof3

I left USS at the beginning of February 1996 after 7 or so years in the scheme and turn 59 later this month. I believe I have a final salary pension. Having looked at the modeller recently the results look somewhat inconsistent and I hoped someone may be able to clarify. My intention is to request a reduced annual pension alongside the maximum tax free lump sum which is circa £26,500.

The benefits modeller appears to show only a very minor increase in benefits between taking my benefits when I turn 59, at 60, or indeed waiting until I am 65 which curiously shows a slight decrease The difference is a few hundred pounds.

I wondered if I was missing anything crucial when comparing benefits at these varying retirement ages and would appreciate any clarification before I ask for definite figures from USS. Also I understand that USS has introduced more disadvantageous terms when taking early retirement and wanted to check if the figures reflected these.

Many thanks

Universidad

If you have a USS pension from 1996, it will be a Final Salary pension. 

The scheme rules used to differentiate between the "Normal Benefit Age" and "Normal Retirement Age". The latter was age 65 until 2020, when it rose in line with the rise in state pension age.

However, you may find that the "Normal Benefit Age" of your accrued benefits allows you to take your pension unreduced much earlier than age 65 - and if so there is zero reason not to do so as I understand it, because they won't apply late retirement factors if you take it after your benefit age but before your retirement age.

Effectively if you are entitled to take your pension unreduced at age 60, and you actually take it at age 65, then you simply lose 5 years of pension that would otherwise have been available to you!

See the below, taken from this document.

Retirement ages and calculation of pensionable salary - historic
Retirement ages • If an early retirement factor is applied to benefits, in most instances the following deductions will apply:
Service before 17 May 1990 (unless member’s contractual pension age is lower)
Men: 65
Women: 60
Service from 17 May 1990 to 31 March 1995
Men: 60
Women: 60
Service from 1 April 1995 to 30 September 2011 (unless member’s contractual pension age is lower)
Men: 63 ½
Women: 63 ½
Service from 1 October 2011
Men: 65
Women: 65
Service from 6 October 2020
Men: 66, increasing in line with State Pension age
Women: 66, increasing in line with State Pension age

busymumof3

Many thanks for signposting that *Universidad* 
I’ve now read the document you’ve linked to and as the majority of my employment falls pre 1995 with only 10 months after that, it would explain the figures I have from the modeller. I am very pleasantly surprised as I hadn’t picked that up from any of my earlier USS paperwork. I’m glad I hadn’t left things any longer!

Universidad

busymumof3 said:

Many thanks for signposting that *Universidad*

You're quite welcome, I'm glad you got the news in time!

Micrographia

It is possible that you might get your remaining 10 months worth of benefits unreduced as well. Though it says the NBA is 63 1/2, members who contributed during the 1995-2011 time period had conditions that said they were allowed to retire at 60 with no reduction in benefits "with employers consent". This is essentially never refused, so its an effective NBA of 60 as well. Not sure if this applies to deferred members, but your formal quote from USS will clear that up.

gwt1965

Micrographia said:

Not sure if this applies to deferred members, but your formal quote from USS will clear that up.

It doesn't. Once you you become a deferred member you lose the right to that protection. 

PJWindowframe

Can someone please direct me to the document explaining the ability to retire at 60 with "no reduction in benefits with the employers consent" and would this apply to someone who left the scheme in 2001 and then rejoined in 2003 ?

Micrographia

If you kept your paperwork it's in that. If you have lost it, historical rules can be downloaded from the USS website (I'm not allowed to post links yet).

The historical rules say this about permitted early retirement; 

Section 10.5 (b) (iii) the member has attained the age of 60 and retires with the consent of the employer such consent not to be unreasonably withheld. 

There is also information on the website. Bit of cut and paste;

Early retirement factors

The early retirement factors determine how much your benefits will be reduced if you take them before your NPA. Your pension (and associated lump sum) is reduced because we’ll be paying it for longer.

Because the NPA has changed over time the age from which your benefits are reduced depends on when you built them up:

• benefits built up before 1 October 2011 are reduced from different ages depending on when you built up your benefits, but reductions may not apply to these benefits if you retire from age 60 with employer consent
• benefits built up between 1 October 2011 and 5 October 2020 are reduced if you retire before age 65
• benefits built up since 6 October 2020 are reduced if you retire before age 66.

You should contact USS for the definitive answer to your question.