DB pension?

[Waitfortheguinness]

Anyone in the pension know who can help me out with some info.
looking to retire within the next year or so…..the sooner the better….am early 60s now.
i have some savings but also have a pension from a job from years ago. I assume it’s a db scheme, was in a company pension about 1988-1999. I have their current info but it’s not easy to decipher and seems more geared up to those still currently in employment and with future options - transferring to another provider (quoted an CETV value?) annuity or lump sums?
i can call them but want a bit of general info as backup…if you get me 😬
I get a statement each year telling me what I will get, so far it indicates just below 9k per year and seems to increase by about £500 a year. If I wish to take it asap will that effect any future values - am I right in thinking it doesn’t benefit me to leave it unclaimed any longer than necessary?
are there any questions I should be asking them about starting to claim this….
many thanks for any info……cheers

It's impossible to answer most of those questions without knowing what pension it is.

If it's talking about annuities, it's probably not a DB one.

I think they’re referring to options, if people want to transfer to another provider…….although it does say that these are not often recommended and not usually taken on by another pension co. I assumed it’s a db as it’s a set pension value paid rather than a “pot” in your name? Plus these were pretty prevalent during the 90s as a tax benefit to the employer?
how can I check for definite.

It possibly is a DB pension if they're talking about CETV (cash equivalent transfer value). But I don't know for sure.

If it is a DB pension, you will need to meet the age requirements to access it. If you leave it in longer, it will continue to grow a small amount as it's most likely index linked (I'm assuming you're no longer making any employee contributions?). And yes, a DB pension is different to DC which is the 'pot' you're referring to.

Why not just ring the pension provider and ask them?

Yes, I will call them but I’m always a bit edgy when speaking about something of an official nature without being confident I’m sure of my facts/understandings first. Sometimes you need to be genned up on something a bit to be able to ask the correct questions…..

Yes, of course, that's understandable.

You asked "am I right in thinking it doesn’t benefit me to leave it unclaimed any longer than necessary?"

It will continue to grow each year as DB pensions are index linked (can't think of the exact terminology) but mine grows by inflation +1.5% every year regardless of contributions. This means it keeps pace with the value of money over time. So, in that sense, it doesn't harm you to leave it unclaimed - it won't go down in value.

The normal minimum pension age is 55 (changing to 57 in April 2028) so you can't access it before then.

Hope that makes sense.

It would be helpful for you to know what the Normal Pension Age is for your pension. There will be an earliest age you can claim at (e.g. 55, 60) as per a PP, and there will be the Normal Pension Age. I have a DB pension scheme and the figures quoted for annual income or lump sum or whatever usually apply to the Normal Pension Age. If you take it earlier, it's reduced by a percentage each year (at least that's the way mine works) to reflect the fact that you will be drawing on it for longer.

If you take it later, sometimes it's a slightly larger amount, but in general I don't think there's much benefit in leaving it in there past normal pension age. It depends from scheme to scheme though.

There are some very good pension forums on Facebook that I've been using e.g. Your pension and planning for the future - by MoneyHelper. If your pension, or any part of it, is Defined Contribution (DC) then you can ask for a free Pensionwise appointment to talk you through your options. They don't deal with DB pensions but if you read older posts in the group you pick up a lot of useful information.

But also, please don't be embarrassed about ringing up your pension provider and just asking - they will be used to it! Just make sure you have a copy of a recent pension statement with you when you call; it should have all the information you need. Good luck!

Do you have a login for the pension provider’s website, or an email address that you can contact them via.

I have 2 deferred DB pensions and both have websites with email contact details, such that in the last few years I have emailed them and asked for updated quotations for different ages, and with/without lump sums as well as monthly payments.

It is sometimes easier to put requests into words on an email rather than discussing it on the phone. Plus you get a written reply.

Yes, thanks. I’ve got online access etc. but it seems that most of the information there was aimed at current employees and what their future options could be.
i have since emailed their help dept and they are going to put a request in for an upto date valuation etc, but it may take 2-3 weeks for them to get back to me. Once I have this I may call to speak if there’s still any bits I’m not sure about, as then I will have the docs to refer to. I will also need to look at if there may be any tax implications as I’m still currently working full time, but am planning to leave within 6 months…….getting to old and fed up to continue working now 😂🙄 so had enough of this Groundhog Day!
just thought it may help with cash flow to start getting my pension now……
cheers all for your help!

Can you see your own pension on the website? If so there will probably be an estimator that lets you put in different dates and see what you will get. It might be called a forecaster. You are looking for information on deferred pensions on the site as that is the term for a DB pension that you are no longer actively paying into.

Once you have got your valuation, you should be able to ask for an online/phone appointment with someone, rather than just speaking to whoever answers the phone. They will be better placed to answer any queries.

If you are early 60s, and your original pension date was 65, you won’t lose too much by taking it early, and it will still go up by an inflationary figure once in payment. However, many DB pensions historically paid out to women at 60 or younger, so you might not lose out at all.

Generally with DB, the main decision is whether to take the 25% tax free lump sum with smaller monthly pension, or a larger monthly pension.

In terms of your tax problem, I know at least one of my DB pensions has stated that from requesting the pension to actual first payment can be a few months, so bear that in mind.

What @Vickyvogue25 wrote about how much to take as a lump sum vs pension amount is the very important bit to understand. Unfortunately or fortunately we don’t know our death date depending on how you look at it. We worked out the age I would have to live to plus potential interest and I decided to take a bigger lump sum.

Out of curiosity, what job did you do for this particular pension? £9k a year for life for 11 years service increasing £500 a year, seems very generous unless you were in a civil service pension in a senior position. Is that £500 a year actually the amount it would increase if you were still in full time employment and contributing to the same pension under the same terms?

Finance, but not at a very high level then, assistant level - not qualified. This was nearly 30 years ago, for a large PLC and, as I assume a final salary pension. I assume it’s grown by average 4-5% a year since, and calculated on salary level and no of years paid in whilst I worked there?

It doesn't seem that out of the norm - I started work in 1992 and have around 4 years of final salary pension from my first two jobs. I started on £12,500 and left on £31,000, but wasn't in the pension scheme for the first year. My pension statements from those two jobs show that combined current value of those 2 pensions is around £4k a year, increasing with inflation every year. At one point the transfer value of the two was well in excess of the total gross amount I'd been paid over the period!

My DH had a similar sounding pension, he worked at the company for 6 years and it would have paid 11k per year plus inflation for life from the age of 60. However he cashed it in for nearly 650k and now does drawdown.

Crikey….how does he only contribute for 6 years but get that pension value, was he on a massive salary?

I think about 58k 20 years ago. Every 18 months he was able to ask for a valuation of the pension and the amount kept going up so he sold the 11k a year pension for a cash amount about 4 years ago and that helped with being able to retire at 55. I don’t know the term for selling the pension.