Net Pension Calculation

gazuk238

I am currently contemplating taking a voluntary severance package along with accessing my local government pension 7 years early.  I am currently waiting for a pension forecast from the pension fund.  My employer will be required to pay the strain costs to the fund.

To help me make my decision I would like to know what monthly deductions will be taken from the pension such as tax and NI (would I pay that?).   I have used Net Pay calculators in the past but am guessing that they wouldnt be of use to work out what the net pension would be.  So I am looking for a link to a calculator that works with monthly pension info, or a note of what I would need to do to work it out myself.   Thanks in advance for anyone that can point me in the right direction.

Dazed_and_C0nfused

gazuk238 said:

I am currently contemplating taking a voluntary severance package along with accessing my local government pension 7 years early.  I am currently waiting for a pension forecast from the pension fund.  My employer will be required to pay the strain costs to the fund.

To help me make my decision I would like to know what monthly deductions will be taken from the pension such as tax and NI (would I pay that?).   I have used Net Pay calculators in the past but am guessing that they wouldnt be of use to work out what the net pension would be.  So I am looking for a link to a calculator that works with monthly pension info, or a note of what I would need to do to work it out myself.   Thanks in advance for anyone that can point me in the right direction.

Unless anything changes in next weeks Budget there will be no NI deducted from your pension.

What tax code do you expect to be in place once your pension starts being paid?

How much is the pension expected to be each month?

Marcon

Use a net pay calculator but add back the deduction for NI 

gazuk238

Currently I have the code S1383M as I receive marriage allowance.  I am not sure if I can continue to claim this once retired, in which case I would imagine it would return to  1257L.

The pension is unfortunately reduced due to claiming it 7 years early, so its going to be something like £1600 a month, but I am currently waiting on a more accurate figure.   Would have to supplement it from the VS payment until I can  get a part-time job top to it up!

Marcon

https://www.gov.uk/marriage-allowance

Silvertabby

I'm a little confused.... 

If the terms of your voluntary severance dictate that you can only access your LGPS pension on normal retirement terms (ie, with early payment reductions), then there would be no employer strain costs to pay. 

But if employer strain costs are involved, that normally means that the pension will be paid without any reductions for early payment.

Or do you mean that by retiring 7 years early your pension will be 'reduced' by the 7 years you won't be working and contributing to the pension scheme?  

gazuk238

Silvertabby said:

I'm a little confused.... 

If the terms of your voluntary severance dictate that you can only access your LGPS pension on normal retirement terms (ie, with early payment reductions), then there would be no employer strain costs to pay. 

But if employer strain costs are involved, that normally means that the pension will be paid without any reductions for early payment.

Or do you mean that by retiring 7 years early your pension will be 'reduced' by the 7 years you won't be working and contributing to the pension scheme?  

Sorry, yes I mean that it will be reduced due to me not contributing for 7 years.   You have actually answered another question I was confused over, as I dont really understand what strain costs are.  I can look at a pension forecast on the pension schemes portal site.   It shows a figure for what the yearly pension will be, but also indicates that it has been reduced by an amount due to taking the pension early.  I assumed therefore that with the strain cost being paid by my employer, this would mean that the pension would actually be the amount quoted, plus the reduction amount indicated.  This appears to be what you have said.   I am attempting to get clarification on this from the pension scheme, but everything seems to take so long which is more than a little stressful as the VS scheme will only last so long.

Silvertabby

Yes, if your employer pays strain costs, then your pension/lump sum will be what you have accrued to your date of leaving without any reductions for early payment.

The strain costs reflect the difference between paying the unreduced / reduced pension for the rest of your expected lifespan (roughly age 85) and can be an eye watering figure.  How sure are you about getting VS?  It's just that the strain costs can be a major factor in an employer's final decisions.....

GlasgowExpat2

gazuk238 said:

I am currently contemplating taking a voluntary severance package along with accessing my local government pension 7 years early.  I am currently waiting for a pension forecast from the pension fund.  My employer will be required to pay the strain costs to the fund.

To help me make my decision I would like to know what monthly deductions will be taken from the pension such as tax and NI (would I pay that?).   I have used Net Pay calculators in the past but am guessing that they wouldnt be of use to work out what the net pension would be.  So I am looking for a link to a calculator that works with monthly pension info, or a note of what I would need to do to work it out myself.   Thanks in advance for anyone that can point me in the right direction.

This calculator has a “I do not pay NI option” under Additional Options

https://www.thesalarycalculator.co.uk/salary.php

gazuk238

@GlasgowExpat2.  Thanks for the link. I will throw my estimated figures into it to see how it comes out.

gazuk238

Silvertabby said:

Yes, if your employer pays strain costs, then your pension/lump sum will be what you have accrued to your date of leaving without any reductions for early payment.

The strain costs reflect the difference between paying the unreduced / reduced pension for the rest of your expected lifespan (roughly age 85) and can be an eye watering figure.  How sure are you about getting VS?  It's just that the strain costs can be a major factor in an employer's final decisions.....

I am pretty sure I will get it.  I work in a Further Education College in Scotland where the policy is not to have compulsory redundancies.  Certainly in my college there have never been any compulsory redundancies with "Voluntary" ones used instead.  I would say this is for the majority of staff that have taken it a very loose definition of the word voluntary.  And yes I would agree with you, the strain cost is way higher than I ever imagined, but you have explained why.  This is one of the main reasons I am not that keen on going for the new posts that are available, as I am sure that in a couple of years the college will be having to make savings again, with the funds for paying VS being reduced to the point of not being able to offer VS and therefore the unreduced pension.