Level or Non level

LHW99

Do you know what income your need / want when you fully retire? Working that out might help in deciding

RogerPensionGuy

I've read and reread this thread and still can't understand it.

Can anyone explain very simply how a DB can pay out level or non level(guessing indexed somhow)

How can the TFLS(I think) reduce over time.

Why does 2nd opinion get state pension included and the 1st doesn't mention it.

I've read up on pensions for many years and just can't understand the OP, however posters are giving views, so I'm so interested to find out what dots I'm not joining up.

Any short and simple reply will be much appreciated.

Cheers Roger.

westv

https://forums.moneysavingexpert.com/discussion/comment/82171635#Comment_82171635

The headline can be confusing. I think both are index linked. One pays out more until the SP kicks in and then reduces.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82171635#Comment_82171635

You're not the only one who finds the OP confusing.

I think this sort of adjustment to a DB pension is pretty rare (Midland Bank is famous for it - there is even a Clawback campaign).

I think the basic idea was you'd get a steady pension inclusive of the state pension so when the state pension isn't being paid you get more from the DB scheme and when it is being paid you get less. But overall you'd get the same pension - it is just that some of it is now coming from the state.

It gets more complicated because it was designed around the old basic state pension and then the Govt changed things. So how much gets knocked off the DB pension to accommodate the state pension has to be specified in the rules of the DB scheme and bears little relationship to the actual state pension you will be receiving (so the £17500 only goes down to £9000 instead of say £5000).

The lump sum being higher under option 1 than option 2 doesn't (I think) mean it is reducing over time. It is just that the lump sum will be a factor of the starting pension so if the starting pension is higher the lump sum is higher.

Reddevil74

Hi

I will post more info maybe make it clear

Its basically front loading .

Non level --- Yearly pension£15,317.86  Yearly amount paid from Scheme pension £15,317.8 & 15% tax free £102119 . ( so a full state pension along side this if I reach aged 67 )

Level --- Yearly pension£17,810.28  Before State Pension age of 67 £17,810.28.  After State Pension age of 67£8,215.90 & tax free £119000

Also a full state pension but db drops to £8215. Its still a uplift but not to the extent of Non level

All inflationary linked and will be higher in 4.5 years , when i leave .

. Im.happy with the numbers my head as happy to get part time job until mortgage paid off .

I am just torn what one to choose hence why I posted to get some educated opinions & am glad dont have to decide yet tbh .

Thanks

QrizB

And what's particularly confusing (well it confused me at first) is that "level" and "non-level" don't refer to the DB pension, but to the pensioner's total income including the Basic State Pension of (currently) £184.90 a week.

So the "level" DB is the one that starts high then drops, while the "non-level" one is a constant value.

Of course even with the "level" option the OP will see an increase in total pension as they'll be receiving the New State Pension not he old Basic one.

OP are you expecting to have any other pension income besides this DB and your NSP?

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/82171738#Comment_82171738

its very easy to miss some context that makes sense to you, when you’re trying to get across mechanical bits, lifestyle bits etc. Agree it was a bit confusing but from OPs side assume their perspective is total income - the reducing DB provides a level income, and the non-reducing DB provides an increasing income

RogerPensionGuy

Thanks for the replies All.

So I think I more better understand it now, my example below is my thinking, at age 57 years old I active my DB pension, all DB pension payments increase with an index like RPI or sumthink.

*********

LEVEL…30K pension at age 57Y and it increases every year per whatever and when I reach state pension age say 67Y my income remains the same say 40K PA however the DB pays 23K & the state pension pays 17K PA and this 40K @ age 67Y carries on going up.

NON-LEVEL…25K pension at age 57Y and it increases evey year per whatever and when I reach state pension my DB is say 32K PA & the state pension of say 17K joins in and now my income PA is say 49K PA and they keep going up.

**********

So just augmentation of income and picking what feels right I guess. Mortality, health, go-go, non-go-go years, inflation, tax changes and a fagg packet will make an entertaining evening.

Cheers Roger.

MarlowMallard

Assuming you invest any spare in an ISA which matches inflation: after 20% tax, the reducing one puts you £20k + (10 x £2k) = £40k ahead at age 67. Thereafter it is losing at 0.8 x 6k per year, which is £4.8k. So breakeven point is only age 75.5, and you have a high chance of living longer than that.
Unless you are desperate for some expensive travel pre-67, or you have reduced life expectancy, or you have a 90-year old millionaire parent, the £15k non-reducing looks much better.

Reddevil74

I have no other savings of significant value .

Just paying DB scheme and AVC is a struggle . Hence why after 40 years I will collect it in one way or another.

I will recieve some inheritance but need to help partner and kids .

Im planning on leaving my existing job to remove penalties if I stay & also as im fatigued and demorilised .

I will try find a part time 3 days a week job .

This will give me exactly the same or more income I have now when added to my pension . but no shifts , no weekends , less hassle .

I dont have extravagant lifestyle, one 11 day hol and few short breaks is fine & I see cars as a waste so buy Japanese reliability and run into the ground .

Its a railway pension , I know they have a FB site but im not on social media & also this site has a more educated poster in regards to the level/ non level query .

Enjoying reading opinions

Thanks