Pension reductions

muswellblue

Hi,

if you take your private pension early, there are bigger reductions the earlier you take it, the largest reduction being at 55. 

When the age you can take your pension changes from 55 to 57, will the reductions stay the same, or would they adjust them, meaning a bigger reduction at 57 than their would’ve been before the change. 

Hope this makes sense ;-)

El_Torro

Assuming you’re talking about a DB pension there probably is a difference between taking it at 57 rather than 55. It depends on the pension scheme rules.

Marcon

muswellblue said:

Hi,

if you take your private pension early, there are bigger reductions the earlier you take it, the largest reduction being at 55. 

When the age you can take your pension changes from 55 to 57, will the reductions stay the same, or would they adjust them, meaning a bigger reduction at 57 than their would’ve been before the change. 

Hope this makes sense ;-)

If you take a DB pension before the scheme's Normal Retirement Age, the reduction factors reflect the number of years/months it is taken before NRA. The change in minimum pension age has no impact on the factors. 

Taking the pension at 57 rather than 55 means that you are closer to the scheme's NRA, so the total reduction in the starting level of the pension will be less.

Therefore you will have a higher starting level of pension if you take it at 57 rather than at 55.

QrizB

On the flip side, if the scheme NRA tracks SPA then when SPA changed from 65 to 67, taking it at 55 became 12 years earlier not 10 and so the ERF probably got worse.

Changing the minimum age to 57 might just be undoing this worsening.