No reduction for taking pension early

Dazed_and_C0nfused

katejo said:

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,

But you are now 62.

Do you know for a fact what happens to the pension you could have taken for the last 2 years?

Tommyjw

Usually what happens is your pension continues to revalue according to the relevant statutory inflation increases from 60->65 (so exactly what would happen normally with an age 65 NRD) , but no reduction is applied at all which is the different, so you're still seeing an increase each year before taking it

I havent come across a Scheme that would, instead, back-date pension to 60 but i suppose that could happen.

Dazed_and_C0nfused

Tommyjw said:

Usually what happens is your pension continues to revalue according to the relevant statutory inflation increases from 60->65 (so exactly what would happen normally with an age 65 NRD) , but no reduction is applied at all which is the different, so you're still seeing an increase each year before taking it

I havent come across a Scheme that would, instead, back-date pension to 60 but i suppose that could happen.

So say pension accrued at 60 is £5,000 and, for simplicity, it happens to have statutory increases of 3% for each of the following 2 years.

At age 62 the pension accrued is now worth £5,304.50/year.

What usually happens to the £5,000 that wasn't paid in year 1 and the £5,150 that wasn't paid in year 2?

Tommyjw

Dazed_and_C0nfused said:

Tommyjw said:

Usually what happens is your pension continues to revalue according to the relevant statutory inflation increases from 60->65 (so exactly what would happen normally with an age 65 NRD) , but no reduction is applied at all which is the different, so you're still seeing an increase each year before taking it

I havent come across a Scheme that would, instead, back-date pension to 60 but i suppose that could happen.

So say pension accrued at 60 is £5,000 and, for simplicity, it happens to have statutory increases of 3% for each of the following 2 years.

At age 62 the pension accrued is now worth £5,304.50/year.

What usually happens to the £5,000 that wasn't paid in year 1 and the £5,150 that wasn't paid in year 2?

Nothing, you aren't owed a pension no matter what at 60 , you're owed a pension calculated in a certain way.

It's no different at all than deciding to go at 70 instead of 65, you get an e.g. 5 year 25% Late Retirement increase added to the calculation, you don't get 5 years of pension payments added on.

SarahB16

Dazed_and_C0nfused said:

katejo said:

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,

But you are now 62.

Do you know for a fact what happens to the pension you could have taken for the last 2 years?

Katejo - what Dazed and Confused is very helpfully suggesting is that you don't want to have missed out on receiving two years of pension.  If you do not receive any enhancement from drawing it after 60 years of age then you really should consider drawing it as soon as possible and ideally two years ago when you reached the age of 60.  

katejo

Dazed_and_C0nfused said:

katejo said:

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,

But you are now 62.

Do you know for a fact what happens to the pension you could have taken for the last 2 years?

61 actually. Not 62 just yet. I can't choose to just take the final salary part now. I would have to take all of it. If I retired now and took all of it, I would lose out in later parts of the pension which require contributions up to 65, 66 or 67.

bolwin1

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?  

My pension has the same rule, so I'll start drawing it on my 60th in 4 months time. Just checking that yours isn't with a large UK retailer that sells medicine & beauty products, sounds a bit like Toots. They changed the rules a year or two back & removed the option to draw at 60 unreduced. Lots of my ex-colleagues were very unhappy about it, but as the 'early withdrawal' was discretionary, they couldn't do anything about it. 

As you say, there's no obvious reason not to draw it at the earliest opportunity.

dont_use_vistaprint

To be fair, I’ve known people in senior leadership in public administration who have to dragged kicking and screaming out ,  why would they give up  a 150K lifestyle position , with way too many sandwich buffets, committees and political meddling   for a 75K life with little purpose….

snowlaser

Aylesbury_Duck said:

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'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.

Two possible reasons come to mind:

1.  Many years ago you could be forced to leave a business at retirement age.  If that was set at 60 people could be forced to leave their job at 60 even if they wanted to work to 65 and earn 5 more years' salary etc.  By setting the retirement rule like that you COULD retire at 60 if you want but you could also work on.

2.  As people have said, sometimes firms had a retirement age of 60 for women and 65 for men.  But the Barber case found that to be unlawful.  As a result, the more favourable option sometimes could end up being also made available by default i.e. men who previously had the retirement age of 65 could now draw their pension (or at least the pension built up since 17 May 1990 when the Barber court judgment was made) unreduced from 60.

Cobbler_tone

Or a more complex scheme where some is reduced before 65 and some isn't. The scheme closed to new members in the July 2010 date.