Pension Protection Fund benefits and retirement.
Discussion
I am 54 at present and thoughts are turning toward retirement. More so now as it is looking to be sooner than anticipated as my partner (5yrs older) is looking to retire around 65 - so 60 for me.
I have savings/investments as well as a DC pension that both I and my employer contribute to. All mortgages paid, no outstanding loans etc. Current thinking is to 'retire' around 60 and potentially make use of UFPLS combined with savings to minimise the tax I pay till I reach 67 and receive whatever the state pension is at that stage in addition.
To get to the reason for writing this - I also have a Pension Protection Fund (PPF) compensation/pension from a previous employer - originally a DB scheme. It is not a huge sum but is still significant enough. I am able to access the PPF site and use the benefit calculator there. I was surprised that the 'penalty' for bringing forward my retirement age was not as large as imagined. At my originally planned retirement age of 65 I am shown a lump sum of £22390 with an annual income of £3350. When I bring this forward to 60 the lump sum reduces to £20850 with £3120/yr. Not a huge impact and putting the figures into a spreadsheet suggest I am probably better off taking the money sooner rather than later. Which led me to look at the prospect of bringing the date forward further - to 55 (not as a retirement date, simply as the age to start taking the PPF benefit). When I do this the lump sum reduces to £19950 and £2990/yr. All these figures are index linked up to 2.5% pa. Again, putting the figures into a spreadsheet suggests that taking the benefit at 55 leaves me better off still (ie receiving more money in total beyond my 90s) - even taking into account I would be paying tax at 40% for the first 5 years on the annual income.
If I continue to work/earn from now until I am 60 is there anything to stop me doing this or any reasons why I shouldn't? I don't need this money at the moment it just on the face of it seems a no-brainer to take it now. I understand that as the PPF is/is derived from a DB scheme then there is no impact on any future pension payments I make between now and 60 - the MPAA isn't triggered for example? I understand I would have to make sure the sums from either the lump sum or the annual income did not find their way into a pension scheme to avoid recycling - though I am unsure how in reality that would happen.
I am sure I must be missing something! Are there any unintended consequences I haven't picked up? Can I take the PPF benefit/pension at 55 and not have any impact elsewhere - not formally retire? Does the above make sense?
I have savings/investments as well as a DC pension that both I and my employer contribute to. All mortgages paid, no outstanding loans etc. Current thinking is to 'retire' around 60 and potentially make use of UFPLS combined with savings to minimise the tax I pay till I reach 67 and receive whatever the state pension is at that stage in addition.
To get to the reason for writing this - I also have a Pension Protection Fund (PPF) compensation/pension from a previous employer - originally a DB scheme. It is not a huge sum but is still significant enough. I am able to access the PPF site and use the benefit calculator there. I was surprised that the 'penalty' for bringing forward my retirement age was not as large as imagined. At my originally planned retirement age of 65 I am shown a lump sum of £22390 with an annual income of £3350. When I bring this forward to 60 the lump sum reduces to £20850 with £3120/yr. Not a huge impact and putting the figures into a spreadsheet suggest I am probably better off taking the money sooner rather than later. Which led me to look at the prospect of bringing the date forward further - to 55 (not as a retirement date, simply as the age to start taking the PPF benefit). When I do this the lump sum reduces to £19950 and £2990/yr. All these figures are index linked up to 2.5% pa. Again, putting the figures into a spreadsheet suggests that taking the benefit at 55 leaves me better off still (ie receiving more money in total beyond my 90s) - even taking into account I would be paying tax at 40% for the first 5 years on the annual income.
If I continue to work/earn from now until I am 60 is there anything to stop me doing this or any reasons why I shouldn't? I don't need this money at the moment it just on the face of it seems a no-brainer to take it now. I understand that as the PPF is/is derived from a DB scheme then there is no impact on any future pension payments I make between now and 60 - the MPAA isn't triggered for example? I understand I would have to make sure the sums from either the lump sum or the annual income did not find their way into a pension scheme to avoid recycling - though I am unsure how in reality that would happen.
I am sure I must be missing something! Are there any unintended consequences I haven't picked up? Can I take the PPF benefit/pension at 55 and not have any impact elsewhere - not formally retire? Does the above make sense?
An 11% reduction for starting a pension 10 years early sounds like a no-brainer to me. I would have expected a 30%+ reduction.
Just one question - is the index linking the same for the pension in payment AND the deferred pension (ie. before payment). Often they're different although I don't know about PPF.
Just one question - is the index linking the same for the pension in payment AND the deferred pension (ie. before payment). Often they're different although I don't know about PPF.
LeoSayer said:
An 11% reduction for starting a pension 10 years early sounds like a no-brainer to me. I would have expected a 30%+ reduction.
Just one question - is the index linking the same for the pension in payment AND the deferred pension (ie. before payment). Often they're different although I don't know about PPF.
Thanks. The pension in payment is index linked and capped at 2.5%. I am not sure about prior to that - I would have to check further.Just one question - is the index linking the same for the pension in payment AND the deferred pension (ie. before payment). Often they're different although I don't know about PPF.
Om said:
LeoSayer said:
An 11% reduction for starting a pension 10 years early sounds like a no-brainer to me. I would have expected a 30%+ reduction.
Just one question - is the index linking the same for the pension in payment AND the deferred pension (ie. before payment). Often they're different although I don't know about PPF.
Thanks. The pension in payment is index linked and capped at 2.5%. I am not sure about prior to that - I would have to check further.Just one question - is the index linking the same for the pension in payment AND the deferred pension (ie. before payment). Often they're different although I don't know about PPF.
Your compensation will increase each year until you reach your Normal Pension Age (or Early Retirement Date if you retire early), and the increase will be in line with inflation, up to a limit set by government. But if inflation falls below zero, your compensation will not change.
If you decide to put off taking your compensation beyond your normal pension age, then your compensation will be increased using actuarial factors.
There are limits to the increases you’re entitled to as a deferred member. For compensation that’s derived from pensionable service before 6 April 2009, the amount of revaluation is capped at 5 per cent per year compound. The amount of revaluation for compensation related to service on and after that date won’t exceed 2.5 per cent per year compound.
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