So confused... planning to retire at 67, redundancy means I have to take my LGPS pension at 58

FIREDreamer

Silvertabby said:

Marcon said:

I'm not 'arguing' anything. I simply pointed out that you can't force someone to start taking their pension.

Never known this happen with ill health or redundancy benefits, but a not unrare problem with deferred benefits due payment at 60 (old R85 records).  Those who did respond made it quite clear that they didn't want their LGPS pension because it was less than the means tested benefits they would have to forfeit.  Without bank details there was nothing we could do.

Deprivation of capital surely? Borderline fraud?

Silvertabby

FIREDreamer said:

Silvertabby said:

Marcon said:

I'm not 'arguing' anything. I simply pointed out that you can't force someone to start taking their pension.

Never known this happen with ill health or redundancy benefits, but a not unrare problem with deferred benefits due payment at 60 (old R85 records).  Those who did respond made it quite clear that they didn't want their LGPS pension because it was less than the means tested benefits they would have to forfeit.  Without bank details there was nothing we could do.

Deprivation of capital surely? Borderline fraud?

Let's just say that once the pensioner reached SPA DWP would ask us for full details of benefits due.  I don't know what happened after that.

ukdw

Personally for a DB pension I would only really consider taking a lump sum if the conversion rate was above 20-25 times - i.e. £62k-£77.5k. 

So in your position I would take the full £10k DB pension

I hope you find a new job ok.

letsomebodyloveyou

MarlowMallard said:

Silvertabby said: 

Under redundancy, the pension accrued to the last day of service is paid without any actuarial reductions.  It is NOT enhanced to what it would have been had the fund member carried on working/contributing to the scheme until normal retirement age.  The times I have had this conversation.....

In this case, and using figures for example only...

(A) Works/contributes to NRA/age 67
Pension payable  = £15K per year  

(B) Worked/contributed to age 58, then left on normal/voluntary retirement.
Pension accrued = £10K per year
£10K minus early payment reduction of £4k
Pension payable = £6K per year ,, plus whatever they accrue in future. 

(C) Worked to age 58, then resigned, did something else, and deferred pension until 67. 
  Pension = £10k per year from 67 , plus whatever they accrue in future. 

(D) Worked/contributed to age 58, then made redundant.
Pension accrued = £10K.
Pension payable (without early payment reductions) = £10K per year, plus whatever they accrue in future. 

 Up here I've edited Silvertabby's nice example a bit, and added in a new person (C) who deferred the pension.  Now you can see that you (D) are £4k per year better off than (B) for life, and about £90k lump-sum better off than (C) because you've had the £10k pa for an extra 9 years.  So it's a pretty decent gain.  You may or may not be better off than (A) depending what you accrue from now to 67. 

Thank you @MarlowMallard - just need to make sure I'm as tax efficient as possible once I get a new job. I've got a few more years in me yet  

letsomebodyloveyou

ukdw said:

Personally for a DB pension I would only really consider taking a lump sum if the conversion rate was above 20-25 times - i.e. £62k-£77.5k. 

So in your position I would take the full £10k DB pension

I hope you find a new job ok.

Thank you @ukdw - I think my dilemma was needing to make what felt like a very rushed decision over taking a tax-free lump sum (which I would need to invest wisely and manage), or have a larger but taxable monthly pension (which would be added to my future salary and taxed as I need to keep working). Much clearer now, thanks to everyone's helpful replies and explanations  

LHW99

letsomebodyloveyou said:

ukdw said:

Personally for a DB pension I would only really consider taking a lump sum if the conversion rate was above 20-25 times - i.e. £62k-£77.5k. 

So in your position I would take the full £10k DB pension

I hope you find a new job ok.

Thank you @ukdw - I think my dilemma was needing to make what felt like a very rushed decision over taking a tax-free lump sum (which I would need to invest wisely and manage), or have a larger but taxable monthly pension (which would be added to my future salary and taxed as I need to keep working). Much clearer now, thanks to everyone's helpful replies and explanations  

Remember, when you pay into a work pension you get a contribution, from HMRC as well as the employer.

If your DB pension increases your actual take home pay once you have your new job, then you can always add a bit more to the new pension (and get a bit more back from HMRC).

Could be 'win-win' - you end up with a bit more income while working, and end up with a bit bigger pension when you stop.

And even with the tax, 80% of something is better than 100% of nothing!