Defined benefits pension

Pants101

I have a defined benefits pension from a previous job. I can now take that pension without penalty as I am over 60. I am happy in my current job and have no pans to retire. My DB pension is £21k pa or £100k tax free and £16k pa. I am not sure whether to take the pension or not as I am still working, although it seems silly not too. I am mortgage free and have no depts so I don't think it's worth taking the tax free lump sum but again not sure. I bit of advice would be much appreciated, Thank you.

Dunky62

I was in a similar position and took the pension which enabled me to drop down to 3 days a week. Does your present employer have any kind of AVC scheme which you coul pay the extra income into tax efficiently.

Marcon

https://forums.moneysavingexpert.com/discussion/6654077/defined-benefits-pension

How much does it increase if you delay (defer) starting to take your DB pension - you need to ask the administrators for details of any 'late retirement factor'.

TadleyBaggie

If you don't take it, it's money you may never get back. I had a DB pension that I could have taken at 60, roughly £32K pa. I was still working so never thought about it at time. When I took it 2 or so years later it had increased by roughly 7% pa. So I will have to live into my mid 80's before I will break even.

What I should have done was take the pension, salary sacrifice the equivalent amount into my company pension at the time. I would have no worse off income wise (in fact probably better) and my company pension would have been £60K+ higher when I retired.

GrumpyDil

As above you need to understand what happens to the pension if you defer it. I have two small DB pensions, one has formal deferment factors which aren't great, the other has discretionary increases so I certainly won't be deferring that one.

Pants101

https://forums.moneysavingexpert.com/discussion/6654077/defined-benefits-pension

The DB pension if defered increase by around 2.5% annually. I am leaning towards taking the pension and increasing the contributions to my current company pension which is a bog standard pension from aprovider. I also feel because I have no depts, I will not take a lump sum.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81872920#Comment_81872920

Presumably it s 2.5% + inflation. For sure 2.5% is not great ( ideally should be >4%) but it might depend a bit on the annual inflation related increases. For example they maybe uncapped pre taking the pensions, and capped after taking it. In any case I think I would be tempted to take it, and do as you say increase current pension contributions.

£100K for a £5Kpa pension reduction is typical. If the T's and C's of the pension are very good ( such as uncapped inflation increases, 65% spousal payments for example) it is a bit low. If the Pension T's & C's are not very good then the lump sum looks better.

MarkCarnage

https://forums.moneysavingexpert.com/discussion/comment/81872277#Comment_81872277

That sounds pretty neutral from an actuarial perspective, given that life expectancy of a male aged early 60s is just over 20 years….so you are broadly in the same position as you would have been taking it at 60 overall….the factors behind actuarial reduction and enhancement are designed to be broadly neutral in relation to average life expectancy i.e. the cumulative pension paid until death should be the same. You could equally say that 'it's money you may never get back' taking the lower amount at 60….all depends if you outlive the average.