Yearly reduction factor

There's a discussion of PIE at Pension increase exchange advice that you might find useful. Your life expectancy is the key factor to consider. If it's low, PIE can be a good deal but transferring out is likely to be far better. Older still and PIE can look better for those who can't get more from an enhanced annuity who don't want to use investments, in this range inflation is a significant factor.

Turpinr wrote: »

I was given a reduction factor of 63.1% to finish 5 years early from my deferred pension.

That's hard to credit. Are you sure it's an actuarial reduction? Could it be a combination of the effect of five years of active membership forgone, and actuarial reduction?

Turpinr wrote: »

At 61 its 69.2% and at 62 its 75.9.

Ah - you don't mean a reduction factor at all. I suspect you mean, on the contrary, that if you stopped work 5 years early you'd have received 63.1% of the pension that you would otherwise have received at 65, and so on.

If you find that remark hard to follow, translate it into your mother tongue and see if it's clear then.

Turpinr wrote: »

This is how it reads, Early retirement reduction factor 0.67600.
Which is age 60 and 9 months.
With a commutation figure of 14.5.

I suspect they've misled you - it's their command of English that's at fault, not yours.

There are two reasons to get a smaller pension at age 60/9 rather than 65/0. (i) You will have been an active member for fewer years. (ii) You will be subject to "actuarial reduction" because you will be drawing your pension for longer - approximately 4 years 3 months longer.

Maybe what they meant was that the reduction because of both effects together will be 32.4%, leaving you with 67.6%.

When people talk about "actuarial reduction" they are referring only to effect (ii). That's because effect (i) is dead easy to calculate. For example, if you are in a scheme that would pay you, say, forty eightieths of your final salary if you retired at 65, then if you retire five years early you obviously will get at most thirty-five eightieths.
The bit you can't calculate yourself without extra information supplied by the scheme is effect (ii). Your particular scheme has to tell you its own actuarial reduction.

I suggest you tell us (a) whether your scheme works on sixtieths, or eightieths, or whatever; and (b) how many years membership you will have accumulated at age 65. (I'm assuming that age 65 is the scheme retirement age. If I'm wrong, say so.)

PS. Yes normal retirement age is 65