No reduction for taking pension early

Aylesbury_Duck

I have a small, old final-salary scheme that's been deferred for about 25 years.  When I left the business it was worth £900 at retirement and with RPI-linked inflation it's currently forecast to pay me £3k p.a.  I've dug out the scheme documentation which says that retirement age is 65, but there's a table showing the reductions for retiring early.  The table and an accompanying paragraph state that there's no reduction applied if you take your pension between the ages of 60 and 65.  

Why would anyone not begin drawing that pension at 60, unless they're still an employee of the business?  

I'm pretty diligent when it comes to reading the annual newsletters and any other occasional correspondence, so I'm pretty sure I haven't missed anything that's changed the rules, and I can't see anything on the site that refers to any historical changes.  I'll contact the scheme administrators this week to check, but just curious to see if anyone has a theory about why it's structured like this.

Dazed_and_C0nfused

Aylesbury_Duck said:

I have a small, old final-salary scheme that's been deferred for about 25 years.  When I left the business it was worth £900 at retirement and with RPI-linked inflation it's currently forecast to pay me £3k p.a.  I've dug out the scheme documentation which says that retirement age is 65, but there's a table showing the reductions for retiring early.  The table and an accompanying paragraph state that there's no reduction applied if you take your pension between the ages of 60 and 65.  

Why would anyone not begin drawing that pension at 60, unless they're still an employee of the business?  

I'm pretty diligent when it comes to reading the annual newsletters and any other occasional correspondence, so I'm pretty sure I haven't missed anything that's changed the rules, and I can't see anything on the site that refers to any historical changes.  I'll contact the scheme administrators this week to check, but just curious to see if anyone has a theory about why it's structured like this.

Total guess really but could it hark back to when State Pension ages were 60 (women) and 65 (men) and some forward thinking person decided it would prudent to allow a man to take their pension unreduced if they could afford to retire early?

A sort of anti discrimination clause.

Aylesbury_Duck

Dazed_and_C0nfused said:

Aylesbury_Duck said:

I have a small, old final-salary scheme that's been deferred for about 25 years.  When I left the business it was worth £900 at retirement and with RPI-linked inflation it's currently forecast to pay me £3k p.a.  I've dug out the scheme documentation which says that retirement age is 65, but there's a table showing the reductions for retiring early.  The table and an accompanying paragraph state that there's no reduction applied if you take your pension between the ages of 60 and 65.  

Why would anyone not begin drawing that pension at 60, unless they're still an employee of the business?  

I'm pretty diligent when it comes to reading the annual newsletters and any other occasional correspondence, so I'm pretty sure I haven't missed anything that's changed the rules, and I can't see anything on the site that refers to any historical changes.  I'll contact the scheme administrators this week to check, but just curious to see if anyone has a theory about why it's structured like this.

Total guess really but could it hark back to when State Pension ages were 60 (women) and 65 (men) and some forward thinking person decided it would prudent to allow a man to take their pension unreduced if they could afford to retire early?

A sort of anti discrimination clause.

Thanks.  Yes, the scheme booklet makes a point about the 60/65 difference and how it will become equalised between 2010 and 2020.  That's perhaps it.

molerat

My pension had that clause but they have since removed it.  Is your documentation the up to date version ?

Marcon

Aylesbury_Duck said:

I have a small, old final-salary scheme that's been deferred for about 25 years.  When I left the business it was worth £900 at retirement and with RPI-linked inflation it's currently forecast to pay me £3k p.a.  I've dug out the scheme documentation which says that retirement age is 65, but there's a table showing the reductions for retiring early.  The table and an accompanying paragraph state that there's no reduction applied if you take your pension between the ages of 60 and 65.  

Why would anyone not begin drawing that pension at 60, unless they're still an employee of the business?  

I'm pretty diligent when it comes to reading the annual newsletters and any other occasional correspondence, so I'm pretty sure I haven't missed anything that's changed the rules, and I can't see anything on the site that refers to any historical changes.  I'll contact the scheme administrators this week to check, but just curious to see if anyone has a theory about why it's structured like this.

Some schemes were quite forward looking when it came to equalising retirement ages for men and women, and had already done so even before it became a legal requirement: https://dnbpensionplan.co.uk/news/what-is-the-barber-ruling.  

Schemes had to equalise retirement ages following the infamous 'Barber' ruling, which is now over 35 years ago, so it's possible your scheme rules had been amended before you ever joined the scheme. It sounds as if the scheme might have adopted a fairly simple approach to 'equalisation' - ie let men retire from 60 with no reduction, which would effectively give them similar benefits to women (although in many cases there was still the knotty little issue of GMPs to grapple with...).

Aylesbury_Duck

molerat said:

My pension had that clause but they have since removed it.  Is your documentation the up to date version ?

Thanks.  No, the scheme booklet is about 25 years old.  I can't see anything in the correspondence I've kept over the years, but it's possible I've missed something. I'll drop them a line tomorrow and get an official answer.

Marcon

Aylesbury_Duck said:

Why would anyone not begin drawing that pension at 60, unless they're still an employee of the business?  

If a scheme has been closed to future accrual, it wouldn't matter if the member is still an employee of the business, unless there's some sort of continued salary linkage. There are three likely reasons for not drawing the pension at 60:

1. blissful ignorance of the fact that they have benefits at all in the scheme(!)
2. unaware that they can take their pension at 60 without reduction, or they know that but don't understand the implications
3. (most common) still working and earning and think that the impact on their tax position means it's not a good idea.

katejo

I am still in employment. My final salary pension came to an end in 2016 (changed to career average CARE)  and we were told that we would be able to take the final salary part in full with no penalty as long as we continued working until 60. I have now dropped to working 4 days a week but have not yet taken the final salary part at all because I don't need the income at the moment and assumed it would be better to wait longer? Am I wrong to think this? I am nearly 62 and am deciding whether to drop to 3 days a week before stopping completely. 

Dazed_and_C0nfused

katejo said:

I am still in employment. My final salary pension came to an end in 2016 (changed to career average CARE)  and we were told that we would be able to take the final salary part in full with no penalty as long as we continued working until 60. I have now dropped to working 4 days a week but have not yet taken the final salary part at all because I don't need the income at the moment and assumed it would be better to wait longer? Am I wrong to think this? I am nearly 62 and am deciding whether to drop to 3 days a week before stopping completely. 

What do the scheme rules say?

AIUI it's entirely possible you will get back payments when you eventually come to put the final salary pension into payment.

You may also find they are inflation proofed back payments.

Or you might have lost all that money by not taking it.

Surely the time to think about this was before you decided not to put the pension into payment?

hugheskevi

Marcon said:

Aylesbury_Duck said:

Why would anyone not begin drawing that pension at 60, unless they're still an employee of the business?  

If a scheme has been closed to future accrual, it wouldn't matter if the member is still an employee of the business, unless there's some sort of continued salary linkage. There are three likely reasons for not drawing the pension at 60:

1. blissful ignorance of the fact that they have benefits at all in the scheme(!)
2. unaware that they can take their pension at 60 without reduction, or they know that but don't understand the implications
3. (most common) still working and earning and think that the impact on their tax position means it's not a good idea.

I often encounter a fourth reason - an unfounded assumption that not claiming the pension will mean they either get arrears when they do claim, or the pension will be increased over and above the accrual of new pension in some way to reflect they did not claim the pension. This could of course be easily checked, but a surprisingly large amount of members don't bother to do so.

katejo

Dazed_and_C0nfused said:

katejo said:

I am still in employment. My final salary pension came to an end in 2016 (changed to career average CARE)  and we were told that we would be able to take the final salary part in full with no penalty as long as we continued working until 60. I have now dropped to working 4 days a week but have not yet taken the final salary part at all because I don't need the income at the moment and assumed it would be better to wait longer? Am I wrong to think this? I am nearly 62 and am deciding whether to drop to 3 days a week before stopping completely. 

What do the scheme rules say?

AIUI it's entirely possible you will get back payments when you eventually come to put the final salary pension into payment.

You may also find they are inflation proofed back payments.

Or you might have lost all that money by not taking it.

Surely the time to think about this was before you decided not to put the pension into payment?

I don't understand your last question. I  haven't had any reason to put the pension into payment yet because I am still working. The payments are inflation proofed but linked to the salary I was getting at the time. How would I have lost the money? I wasn't allowed to access it before 60 without penalty,