Taking deferred DB pension early

GlasgowExpat2

I have been advised that if I took my DB pension on 6 April 2025 (I’d be 60 years and 3 months) it be £7,832.28 a year.  NRA is 65 years. However they can’t tell me what my pension would be at 65 - is this normal?  I have another DB pension and they’ve told me what it would at NRA and if I took it early. They provided the table below - can I calculate my pension at 65 from that?

Dazed_and_C0nfused

How would they know what the future inflation increases will be?

Surely any figure for 5 years in the future can only ever be an estimate.

You could estimate it yourself if you want, say using 2% as the average increase each year.

PootleF

I assume you still work in that job? So if you work until 66 there would be several things going on
1) you’d build up another 5 years of contributions
2) the amount you’ve built up already would no longer be subject to an early retirement factor 
3) pay rises would impact future pension built up (I’m assuming a CARE scheme) and revaluation of your pot. 

You could ignore 3 and think about things in today’s money and assume pay increases with inflation.

It looks from your table as though taking 5 years early retirement factor of 0.751 (give or take as it is 3 months off this) which would mean the pension you’ve built up so far would be £7,832 / 0.751 =£10,428.76 

Then work out 5 more years of accrual by multiplying your salary x accrual rate (eg 1/80 or 1/60 or whatever your rate is) x 5.

Retiring 5 years early usually means a pretty big hit to DB pension when you consider both missing contributions and early retirement factors together 

GlasgowExpat2

PootleF said:

I assume you still work in that job? So if you work until 66 there would be several things going on
1) you’d build up another 5 years of contributions
2) the amount you’ve built up already would no longer be subject to an early retirement factor 
3) pay rises would impact future pension built up (I’m assuming a CARE scheme) and revaluation of your pot. 

You could ignore 3 and think about things in today’s money and assume pay increases with inflation.

It looks from your table as though taking 5 years early retirement factor of 0.751 (give or take as it is 3 months off this) which would mean the pension you’ve built up so far would be £7,832 / 0.751 =£10,428.76 

Then work out 5 more years of accrual by multiplying your salary x accrual rate (eg 1/80 or 1/60 or whatever your rate is) x 5.

Retiring 5 years early usually means a pretty big hit to DB pension when you consider both missing contributions and early retirement factors together 

No, it’s a deferred pension. I’ve updated the title 

Phossy

My pension folks start by giving me a projection at NRA then give me a actuarily reduced number - so I find it hard to believe they CAN'T give you a number.

Your actuarily reduced number is £7832. If your are male then that reduction at 60  from the table you shared is 0.863 and so your pension at NRA would be ~ £9875 (7832/0.863) before any adjustments for inflation. I guess you really need the reduction factor / year from your scheme. Most are typically 4 to 5%/ year.

DullGreyGuy

GlasgowExpat2 said:

I have been advised that if I took my DB pension on 6 April 2025 (I’d be 60 years and 3 months) it be £7,832.28 a year.  NRA is 65 years. However they can’t tell me what my pension would be at 65 - is this normal?  I have another DB pension and they’ve told me what it would at NRA and if I took it early. They provided the table below - can I calculate my pension at 65 from that?

What are the terms of your pension?

Most have some form of indexation whilst in deferment so no one can tell you what it will be but only forecast what it might be based in their assumptions of what will happen to inflation. Actuaries are like weathermen, one of the few professions where they expected to be wrong but accepted as such as long as they can explain why. 

Its unusual for a pension to be unwilling to forecast but it may be a language barrier with you insisting you want to know what it will be and them not willing to give you a guesstimate when you're asking for absolutes. 

Tommyjw

Some DB companies are just crap at giving future projections, its such a basic request for us that i find it so odd i wouldnt believe it hapoens unless i read it on this forum, its literally no more calculated than giving a current one, just add +X% per year remaining and caveat letters with more wording about it being an estimate and you're done. 

GlasgowExpat2

I’m female.  I contributed between 1990 and 1999

They’ve advised “we are unable to provide you with a valuation as at your Normal Retirement Date (NRD). This is because the chosen retirement date (your NRD) is more than 12 months into the future and as a result, we are unable to predict the fluctuation within the factors used for calculations”

Cobbler_tone

That's not bad. My deferred scheme does not increase until it is in payment. I could take it now with the reduction factors but not worth it as still working. Trustee's can make discretionary increases but haven't so far and the scheme is in good health.

Hoenir

Tommyjw said:

Some DB companies are just crap at giving future projections, its such a basic request for us that i find it so odd i wouldnt believe it hapoens unless i read it on this forum, its literally no more calculated than giving a current one, just add +X% per year remaining and caveat letters with more wording about it being an estimate and you're done. 

What value is a future projection worth? Easy enough to use a calculator and compound the pension by a % increase over a number of years. Giving estimates just provides a stick to be beaten with. When the figures turn out totally different. 

michaels

GlasgowExpat2 said:

I’m female.  I contributed between 1990 and 1999

They’ve advised “we are unable to provide you with a valuation as at your Normal Retirement Date (NRD). This is because the chosen retirement date (your NRD) is more than 12 months into the future and as a result, we are unable to predict the fluctuation within the factors used for calculations”

I guess because of the inflation cap it is not possible to give a real terms future valuation?