NMW question in relation to DB pension whilst still working

Cobbler_tone

Looking for some clarity to assist a colleague.
I have just realised that my 63 year old colleague is eligible to take the part of their DB pension with a NRA of 60. He has no intention of retiring and hasn't even looked at his pension, with 30 odd years service.

My view is (without giving him financial advice!) is that he could take this part of the pension (which will now be increased as he'd be taking it 3 years 'late') and up his contributions into the current DC, not only being tax efficient but also to bolster this pot.

Question is (with the same employer) is the need to stay above minimum wage based solely on the income from his employment, i.e. the he can only use his salary, or could DB income from the same company be factored in? I would envisage that solely going from salary to minimum wage won't be enough to account for the full amount of DB he could be receiving.

It never ceases to amaze me just how many of my colleagues and peers have no clue what is in their pension and the mechanics of them. Half of them don't know if they are in the DB or DC!

Thank you

molerat

I would say no as the pension is not part of his pay for the work carried out in that pay period.

Cobbler_tone

Thanks...I think I answered my own question with the good ol' internet elsewhere.
I'll check what he sacrifices now as could well be down to the point of minimum wage. I know a few of my guys got letters from HR on this.

Marcon

Cobbler_tone said:

Looking for some clarity to assist a colleague.
I have just realised that my 63 year old colleague is eligible to take the part of their DB pension with a NRA of 60. He has no intention of retiring and hasn't even looked at his pension, with 30 odd years service.

My view is (without giving him financial advice!) is that he could take this part of the pension (which will now be increased as he'd be taking it 3 years 'late') and up his contributions into the current DC, not only being tax efficient but also to bolster this pot.

Question is (with the same employer) is the need to stay above minimum wage based solely on the income from his employment, i.e. the he can only use his salary, or could DB income from the same company be factored in? I would envisage that solely going from salary to minimum wage won't be enough to account for the full amount of DB he could be receiving.

It never ceases to amaze me just how many of my colleagues and peers have no clue what is in their pension and the mechanics of them. Half of them don't know if they are in the DB or DC!

Thank you

Pension certainly doesn't count. See https://www.gov.uk/guidance/calculating-the-minimum-wage

Cobbler_tone

Marcon said:

Cobbler_tone said:

Looking for some clarity to assist a colleague.
I have just realised that my 63 year old colleague is eligible to take the part of their DB pension with a NRA of 60. He has no intention of retiring and hasn't even looked at his pension, with 30 odd years service.

My view is (without giving him financial advice!) is that he could take this part of the pension (which will now be increased as he'd be taking it 3 years 'late') and up his contributions into the current DC, not only being tax efficient but also to bolster this pot.

Question is (with the same employer) is the need to stay above minimum wage based solely on the income from his employment, i.e. the he can only use his salary, or could DB income from the same company be factored in? I would envisage that solely going from salary to minimum wage won't be enough to account for the full amount of DB he could be receiving.

It never ceases to amaze me just how many of my colleagues and peers have no clue what is in their pension and the mechanics of them. Half of them don't know if they are in the DB or DC!

Thank you

Pension certainly doesn't count. See https://www.gov.uk/guidance/calculating-the-minimum-wage

Thanks Marcon.

The reality is he is the type who will work to 67 (at least) and not touch his DB pension until then, with whatever increases are added, before having two meaty workplace pensions and the state pension. I can't be seen to hint at giving financial advice and we are all built differently or else I am sure he'd be chasing it himself. He isn't hard up and certainly never will be!

Not complaining as he is one of my best workers! 

Marcon

Cobbler_tone said:

Marcon said:

Cobbler_tone said:

Looking for some clarity to assist a colleague.
I have just realised that my 63 year old colleague is eligible to take the part of their DB pension with a NRA of 60. He has no intention of retiring and hasn't even looked at his pension, with 30 odd years service.

My view is (without giving him financial advice!) is that he could take this part of the pension (which will now be increased as he'd be taking it 3 years 'late') and up his contributions into the current DC, not only being tax efficient but also to bolster this pot.

Question is (with the same employer) is the need to stay above minimum wage based solely on the income from his employment, i.e. the he can only use his salary, or could DB income from the same company be factored in? I would envisage that solely going from salary to minimum wage won't be enough to account for the full amount of DB he could be receiving.

It never ceases to amaze me just how many of my colleagues and peers have no clue what is in their pension and the mechanics of them. Half of them don't know if they are in the DB or DC!

Thank you

Pension certainly doesn't count. See https://www.gov.uk/guidance/calculating-the-minimum-wage

Thanks Marcon.

The reality is he is the type who will work to 67 (at least) and not touch his DB pension until then, with whatever increases are added, before having two meaty workplace pensions and the state pension. I can't be seen to hint at giving financial advice and we are all built differently or else I am sure he'd be chasing it himself. He isn't hard up and certainly never will be!

Not complaining as he is one of my best workers! 

People get very nervous (rightly so in many cases) about inadvertently giving financial advice, which is sometimes a pity and sometimes a lucky escape for the person on whom they were going to inflict their misguided opinions. If two colleagues have a bit of a natter beside the coffee machine, it is usually just that - an informal conversation, assuming neither of them is in the business of giving regulated advice, or holding themselves out as doing so.

Employers have long been able to promote the merits of their own pension scheme and encourage employees to join it/find out more about it. The territory starts to get unsafe when phrases like 'I recommend/advise you to [take a particular action, such as pay maximum contributions, invest in particular funds or similar]'. Pointing out the facts in relation to your company's scheme and phrasing it as a question is likely to be a fairly safe bet eg 'Have you looked at your DB pension lately - I think you can take it at 60, can't you? HR will be able to tell you more if you wanted to investigate that possibility'.

But reading your question, I wonder why it would matter, given the type of character you have described? If he 'isn't hard up and certainly never will be', and the DB pension offers a late retirement increase, it could be much simpler for him to let the DB pension happily grow away with no effort or input from him, and add to his DC pot - which will require decisions at some point - as he is at present.

Sarahspangles

I wouldn’t swap guaranteed future income from a DB for the uncertainty of future income from a DC.

Cobbler_tone

Marcon said:

Cobbler_tone said:

Marcon said:

Cobbler_tone said:

Looking for some clarity to assist a colleague.
I have just realised that my 63 year old colleague is eligible to take the part of their DB pension with a NRA of 60. He has no intention of retiring and hasn't even looked at his pension, with 30 odd years service.

My view is (without giving him financial advice!) is that he could take this part of the pension (which will now be increased as he'd be taking it 3 years 'late') and up his contributions into the current DC, not only being tax efficient but also to bolster this pot.

Question is (with the same employer) is the need to stay above minimum wage based solely on the income from his employment, i.e. the he can only use his salary, or could DB income from the same company be factored in? I would envisage that solely going from salary to minimum wage won't be enough to account for the full amount of DB he could be receiving.

It never ceases to amaze me just how many of my colleagues and peers have no clue what is in their pension and the mechanics of them. Half of them don't know if they are in the DB or DC!

Thank you

Pension certainly doesn't count. See https://www.gov.uk/guidance/calculating-the-minimum-wage

Thanks Marcon.

The reality is he is the type who will work to 67 (at least) and not touch his DB pension until then, with whatever increases are added, before having two meaty workplace pensions and the state pension. I can't be seen to hint at giving financial advice and we are all built differently or else I am sure he'd be chasing it himself. He isn't hard up and certainly never will be!

Not complaining as he is one of my best workers! 

People get very nervous (rightly so in many cases) about inadvertently giving financial advice, which is sometimes a pity and sometimes a lucky escape for the person on whom they were going to inflict their misguided opinions. If two colleagues have a bit of a natter beside the coffee machine, it is usually just that - an informal conversation, assuming neither of them is in the business of giving regulated advice, or holding themselves out as doing so.

Employers have long been able to promote the merits of their own pension scheme and encourage employees to join it/find out more about it. The territory starts to get unsafe when phrases like 'I recommend/advise you to [take a particular action, such as pay maximum contributions, invest in particular funds or similar]'. Pointing out the facts in relation to your company's scheme and phrasing it as a question is likely to be a fairly safe bet eg 'Have you looked at your DB pension lately - I think you can take it at 60, can't you? HR will be able to tell you more if you wanted to investigate that possibility'.

But reading your question, I wonder why it would matter, given the type of character you have described? If he 'isn't hard up and certainly never will be', and the DB pension offers a late retirement increase, it could be much simpler for him to let the DB pension happily grow away with no effort or input from him, and add to his DC pot - which will require decisions at some point - as he is at present.

100% agree. I'm 30 years in role and have a keen interest in ER/IR. One thing I will do is push information that isn't readily available or proactively shared by the business. It's what a good manager would do. With 12 years as a employee representative I also know the lines you can't cross. Case in point, I know someone who stumped up £10k for full transfer advice a few years ago, despite the availability of this via the business as a taxable benefit for £1,400, i.e. less than £300 for a 20% tax payer.
There is a big difference between giving people the options and suggesting which one they do. Never underestimate the information and benefits at your fingertips that are never overly shared internally. e.g. all employees can get free instant GP appointments via an app and free EAP support with counselling etc, I can guarantee that a sizeable amount of employees don't know this.

The specific question was for my own knowledge base and potential future need for information. It is pretty much how I use this forum. 

As for "DB pension offers a late retirement increase, it could be much simpler for him to let the DB pension happily grow away with no effort or input from him, and add to his DC pot - which will require decisions at some point - as he is at present." that could well be the best ploy for him but today has led to him requesting a log on to view his pension...so job well done.

Cobbler_tone

Sarahspangles said:

I wouldn’t swap guaranteed future income from a DB for the uncertainty of future income from a DC.

I don't think anyone (well nearly anyone!) would ever suggest that.

It is about understanding the impact on a DB scheme beyond the NRA. As we have read, some of them don't increase after a certain age, so not much benefit putting it off....not the case in this instance but it will be pretty much cost neutral, or you'll be worse off depending how long you hang around.
Like with most topics discussed on here, things are rarely black/white and dependant on different schemes and peoples personal situations. Some people want to work to their graves, some would like to retire ASAP, some own homes, some don't, some people take risks, others are risk adverse. 
Say someone earnt £40k a year now and were going to work until they were 70. In their retirement they might have an income of £40-50k when their pensions all kick in. Maybe they could have had an income of £50k+ and travelled first class on a few holidays whilst they were still working and £30k a year post 70....maybe it doesn't matter because they squirrel all their money away anyway and will spend £12k a year for the rest of their days.
There is never a right/wrong answer when it comes to personal decision making IMO.

Marcon

Sarahspangles said:

I wouldn’t swap guaranteed future income from a DB for the uncertainty of future income from a DC.

Plenty of people would, hence the determination to transfer out from DB to DC regardless of the advice to stay put - the £££ signs are rolling before the eyes and everything else goes out of the window....