Ending added years contract early
Discussion
I am paying into an added years contract to boost my pension.
I took this out at 40 to run until I am 65.
I want to retire before I'm 65 and want to know if I should end the contract before retiring, so as to avoid the actuarial reduction that would be applied if I retired before the age of 65 with the contract still active.
I can't find the required info to make the calculation, so I've turned to a popular internet car forum to try to answer this complex question.
Does anyone on PH do this sort of calculation for a living?
I will happily pay for accurate advice.
I took this out at 40 to run until I am 65.
I want to retire before I'm 65 and want to know if I should end the contract before retiring, so as to avoid the actuarial reduction that would be applied if I retired before the age of 65 with the contract still active.
I can't find the required info to make the calculation, so I've turned to a popular internet car forum to try to answer this complex question.
Does anyone on PH do this sort of calculation for a living?
I will happily pay for accurate advice.
Speak to your pension scheme administrator. The below scenario is likely, but SPEAK TO YOUR PENSION SCHEME ADMINISTRATOR who will explain/interpret the rules and how they apply in your situation. Their details will be on your most recent benefit statement.
It reads as if you agreed to pay a contribution between age 40 and 65 to earn additional years service, which will be used to calculate an additional pension payable from age 65.
1. If you stop paying contributions, the years purchased will be pro-rated based on 'time paid / total term to age 65 from 40'.
2. If you retire before the added years pension is due, it will be actuarially reduced. Stopping contributions will not prevent actuarial reduction to years accrued if pension is taken early. This will be set out in the scheme rules.
The above 2 points are mutually exclusive, and as I said, a likely situation, not definitely yours.
It reads as if you agreed to pay a contribution between age 40 and 65 to earn additional years service, which will be used to calculate an additional pension payable from age 65.
1. If you stop paying contributions, the years purchased will be pro-rated based on 'time paid / total term to age 65 from 40'.
2. If you retire before the added years pension is due, it will be actuarially reduced. Stopping contributions will not prevent actuarial reduction to years accrued if pension is taken early. This will be set out in the scheme rules.
The above 2 points are mutually exclusive, and as I said, a likely situation, not definitely yours.
Thanks.
When I took this policy out I went for 65 instead of 60 as the normal retirement age at that time was 65.
Since then it has been moved to 60.
If I had thought that the NRA was likely to change to 60, I'd have gone for 60 on the added years policy (obviously).
Could I have a valid case to argue that I wasn't fully informed when I took this policy out?
There must be quite a lot of people who will be affected by this change.
When I took this policy out I went for 65 instead of 60 as the normal retirement age at that time was 65.
Since then it has been moved to 60.
If I had thought that the NRA was likely to change to 60, I'd have gone for 60 on the added years policy (obviously).
Could I have a valid case to argue that I wasn't fully informed when I took this policy out?
There must be quite a lot of people who will be affected by this change.
Mind me asking which scheme this is? It's odd that the Normal Retirement Age (NRA) would be reduced!
Re. your question - there is no case for anyone to answer.
Perhaps ask the administrator what it would cost for you to switch to an added years contract at age 60, and ask if you are permitted to make back-payments to change the NRA on those years you have already accrued. Either way it will cost you - paying for a benefit payable from 65 costs less than paying for a benefit payable from age 60.
Edited to add - you can take your added years early, or delay receipt of your main pension. Note that it's very likely the pension you have earned already in the main scheme is payable from 65 without reduction, rather than 60.
Re. your question - there is no case for anyone to answer.
Perhaps ask the administrator what it would cost for you to switch to an added years contract at age 60, and ask if you are permitted to make back-payments to change the NRA on those years you have already accrued. Either way it will cost you - paying for a benefit payable from 65 costs less than paying for a benefit payable from age 60.
Edited to add - you can take your added years early, or delay receipt of your main pension. Note that it's very likely the pension you have earned already in the main scheme is payable from 65 without reduction, rather than 60.
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