DB Bridging Pensions

Cobbler_tone

The portal has now updated to display an additional option of a bridging pension.
I think the key part missing (well at least I'd like to see it) is what the reduced pension at 67 would be. Maybe there is a valid reason why this isn't displayed and will be in the full quote I have requested. This is a live system, so based on the figures today which increase each month.
After campaigning the Trustees for two years I am just pleased they have introduced it. I hope it helps a few people to retire earlier than they intended. 

Age 55

TFLS: £103,460

Annual pension: £15,519

Or full pension of: £20,583

Bridging pension option

TFLS: £136,873

Annual pension: £20,531

Or full pension of: £26,887

Phossy

You are right about the part that is missing.

Cobbler_tone

Phossy said:

You are right about the part that is missing.

Well as it is cost neutral I’ll hazard a guess it will drop to around £12,500 at 67 but I’ll let you know.
With DC drawdown it gives me around £180 tax free and a lifetime income of around £32k give or take from 56. That’s my half of the party anyway.

Cobbler_tone

I now have my quote through (36 pages of it) and do need to go back to them but wondered if anyone has any experience/knowledge or insight into the mechanics. It will take them a month to reply.

I can see the value of the additional lump sum and bridging pension is around £90k by the time I am 67. I can see the drop in pension at 67 and it is equivalent to 18.5 years before I could be worse off.

The one thing I can't see in all of the documentation is what the increases are based on. i.e. will the increases be based on the full bridging pension, whilst in the background increases are made proportionally on the lower pension at 67? This info seems to be missing from the extensive pack.

Cobbler_tone

Just bumping this due to the fast flow of thread turnover.

I'm interested in details of anyone who has accessed a bridging pension. I have spoken to the provider, who understood the question but wasn't sure of the answer, so they are looking into it.

They are (pretty) confident that the annual increases will be applied against the bridged amount (i.e. higher pension from start to age 67). My query is around the treatment of the lower pension from 67. Is it is figure quoted today, or will there be annual increases applied from now to 67? If not the drop would be extremely significant.

I have mapped the impact (using a modest 2.5%) assuming both parts increase at the same time to see the break even point. 
I wouldn't make decisions based on feedback here but wondering if some the experts have a view on the likely mechanics.  

Milltir

There is an impact on annual allowance to consider: https://forums.moneysavingexpert.com/discussion/comment/81124925#Comment_81124925

Cobbler_tone

Milltir said:

There is an impact on annual allowance to consider: https://forums.moneysavingexpert.com/discussion/comment/81124925#Comment_81124925

Thanks, this won't apply.
Using the image from this old thread you shared. The question is specific to the treatment of the highlighted figure. Will this be increasing in line with the scheme rules? e.g. if growth was capped at 2.5% and started today, would the £19,852 actually be £26,700 by the time it came into payment?

xylophone

Have you checked on any effect taking a BP may have on pension increases after SPA?

Cobbler_tone

xylophone said:

Have you checked on any effect taking a BP may have on pension increases after SPA?

I think that is my question. The provider 'assumes' the rises will be applied on the part in payment. e.g. for the sake of simplicity....base pension £10k, bridging pension £13k, post 67 pension £8k....again for simplicity assume a 2.5% annual increase.
 
So they are saying the 2.5% would be applied against the £13k if selected. I am trying to confirm if the £8k will grow between now and 67 in the background. I would assume it does but at the same time am not assuming anything until I know for sure. Understandably it makes a sizeable difference.
The other thought is that the rises may have been based on the base £10k against both. I know they are complicated calculations designed to be cost neutral against average life expectancy.

Cobbler_tone

Update.
My bridging pension adds the exact state pension amount at time of retirement and reduced core pension. The ‘state pension’ part does not increase, the reduced core part does. At state pension age the additional amount drops away. I can only assume a 2.5% rise on all elements. So from today to 67 the state pension would be around £14k and the total pension would increase around £4k per year.
It is complex because it depends on lump sums taken etc but in general the break even point is around19 years. Lots to consider but at least I fully understand it now.
It probably makes sense to have it earlier and a flatter income, rather than £70k a year if you last to 90+