Stepped Pension

gdn1947

At age 61 my employer is offering a stepped pension option whereby I receive an additional £3366 until NRD at which point the company pension will be reduced by £4539 plus pension increases awarded between retirement date and NRD. Unless I am missing something this doesn't look a good deal as I'd get 4 years at £3366 = £13464 additional pension but would lose £4539+ for every year I draw the company pension after age 65. I'd appear to be worse of after only 3 years 3 x £4539+ = £13617+. Am I missing something blindinly obvious which makes this a good deal?

Regards,

gdn1947

jonathon_hart

Is it a final salary pension?

I would imagine that it was (and is contracted out on GMP - guaranteed minimum pension basis) so the reduction is because the government takes over paying some of the pension at State Pension age - so you don't actually lose out.

Check with the scheme administrators who should be able to confirm if this is the case or not.

gdn1947

Jonathon

Thanks for your response. The pension is a final salary scheme with GMP. Just wonder if you could explain your answer in a little more detail as I am still unclear as to why I am not losing out.

Thanks

gdn

MrChips

I think you have slightly misinterpreted the situation. My guess is that the £4539 reduction will be to the already increased pension, not the original amount.

Your pension after 65 will therefore actually be only £1173 lower (ignoring increases in the meantime). This way, the overall pension (including state pension) will be roughly level throughout.

You should get this double checked though.

jonathon_hart

As above - the increase in the pension is only a temporary measure to cover you until the state benefits are paid.

Unfortunately I'm not 100% on the way it works as I've never personally administered a scheme that does this, however I am aware of schemes that do have this step in them.

The scheme administrators should be able to explain this fully.