Confusing DB pension wording
Discussion
I'm trying to figure out pensions and one of my DB schemes says - "The figures above are given in todays money, adjusted to show the effects of inflation in the future."
The statement was from 2016 and a retirement date of 2032.
No matter how many times I read it, I can't figure out whether the number quoted is what I should expect as a pension in 2032 - or whether it was an estimate of the 2016 equivalent..... it says £16k & 25% of LTA - so is that £16k estimated in 2032 - or was 16 in 2016, so around 18 now and likely mid 20's by 2032 ?
The statement was from 2016 and a retirement date of 2032.
No matter how many times I read it, I can't figure out whether the number quoted is what I should expect as a pension in 2032 - or whether it was an estimate of the 2016 equivalent..... it says £16k & 25% of LTA - so is that £16k estimated in 2032 - or was 16 in 2016, so around 18 now and likely mid 20's by 2032 ?
Reading the scheme booklet might clarify, but I guess you're talking about a deferred pension that was quantified as £16k a year in 2016. Almost all UK deferred pensions will be indexed in line with CPI inflation up to retirement, subject to a cap of 2.5% or 5% a year (depending on which years of employment it relates to). If so, then the pension would still have £16k annual 'purchasing power' when it starts in 2032 unless inflation roars ahead in which case it may become devalued.
Different indexation rules may apply once the pension begins. Again, the scheme booklet and written benefit statement should expalin.
If I've misunderstood and instead it's a final salary pension and you're still in their employment, then generally the pension would be linked to your salary close to retirement, but there are many variations on this theme nowadays.
Different indexation rules may apply once the pension begins. Again, the scheme booklet and written benefit statement should expalin.
If I've misunderstood and instead it's a final salary pension and you're still in their employment, then generally the pension would be linked to your salary close to retirement, but there are many variations on this theme nowadays.
Carbon Sasquatch said:
Thanks, I guess that does seem to be the obvious answer - will just likely take months for a reply.....
I'd expect them to have a 14 day level of service on a request of this type. You can ring and ask them what the turnaround is. There's a pensions regulator, so they can't just say "whenever".Thanks - that's what I was hoping for - I will ask for a revaluation to confirm.
It's a DB scheme that was wound up in 2016 - and I left in 2020. there seem to be different rules for increase on different tranches within the scheme depending on the year they were accrued - the terns becoming less generous in later years vs the early years - 5% before 2009 & 2.5% after - both with CPI reference - so matches what you're saying.
Purchasing power is the way I was trying to calculate it - like the state pension being 7k right now - and I have a few other DB bits - so cobbled together, starts to feel like an OK sum from 65/67 onwards.
My plan is to retire early & spend all my DC stuff and savings until the DB & State pension kick in.
Next stop financial adviser to confirm I haven't missed anything obvious.
It's a DB scheme that was wound up in 2016 - and I left in 2020. there seem to be different rules for increase on different tranches within the scheme depending on the year they were accrued - the terns becoming less generous in later years vs the early years - 5% before 2009 & 2.5% after - both with CPI reference - so matches what you're saying.
Purchasing power is the way I was trying to calculate it - like the state pension being 7k right now - and I have a few other DB bits - so cobbled together, starts to feel like an OK sum from 65/67 onwards.
My plan is to retire early & spend all my DC stuff and savings until the DB & State pension kick in.
Next stop financial adviser to confirm I haven't missed anything obvious.
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