pension enhancement question?

[stroller]

I would only need to work part time

[stroller]

barrows

I sent you a PM did you see it?

[barrowc]

Yes - I saw your message.

If you mean that you would only need to work part-time if you were also receiving your pension then that eliminates some possibilities. The ideal situation if you leave before 55 is to not touch your pension until it's due to be paid - i.e. 60 for most of it and 65 for the last few years worth. If you need to take the pension before you get to 60 (and 65 for the other part) but you leave RM before 55 then whatever you do will reduce the value of your pension. Using baldrick's figures above, taking the 2 years money now (with reduced pension) ends up worse than taking 6 months VR (with enhanced pension) after about 10 years.

With the review of MTSF terms coming up, it's impossible to say which options we will even have in the future. Your decision is going to depend on your family situation, how quickly you could find another job, your health etc. If the job is causing you real physical problems right now or you hate it so much you're on the verge of chucking it or there's something in your life that needs the full 2 years lump sum to pay for then taking the money now might be your best choice. If you don't hate the job too much and it wouldn't be the end of the world if you were still with RM at 60 and you're physically OK then waiting it out might be better financially.

It's a gamble either way and none of us can advise you what call to make

[stroller]

baldrick

when you quoted

If you take it with EVR at 55 it will be enhanced by about £500 pa (my best guess), and your lump sum would be increased by £1,500. So an increase of £11,500 over 20 years, or £69,000 (+26 weeks VR 0f about £12k)more than if you take it early at 55 without EVR. You would be losing £81k over 20 years to get a VR payment of around £50k now.

what is the £69,000 figure? did you take into account my pension lump sum I would get if I took my pension at 55 whick would be over £50k as well as my £50k VR money

I am not very clued up about all this

[baldrick]

if you take the pension at 55 it will be actuarily reduced by 5% for every year you take it early.
So that would be a 25% on the NRA60 part of your pension (the main part) and a 50% reduction on the NRA65 part - I think that's how it works anyway. That is quite a big reduction, and it would mean a related reduction on your lump sum too. I don't know what your pension would be, but assuming it's £10k pa you are going to lose £2,500 pa and £7,500 on your lump sum. That's a loss of £57,500 over 20 years.

If you take it with EVR at 55 it will be enhanced by about £500 pa (my best guess), and your lump sum would be increased by £1,500. So an increase of £11,500 over 20 years, or £69,000 (+26 weeks VR 0f about £12k)more than if you take it early at 55 without EVR. You would be losing £81k over 20 years to get a VR payment of around £50k now.

@stroller My figures were only guestimates.
But I was guessing that if you took a £10k pension early at 55 (without EVR) it would be reduced by 25% so you would lose £57,500 over 20 years.
If you were to get EVR at 55 your pension would be enhanced. I think you would get about 2 years added to your pensionable service, and I think that would mean around £500 pa more on your pension, and £1,500 on your lump sum. So £11,500 over 20 years.
Also you would get a 26 weeks VR payment. Which should be about £12,000. So an extra £23,500, as opposed to a loss of £57,500 if you take the pension at 55 without enhancement.

So a potential loss of £57,500 + a potential gain of £23,500 = a total potential gain of £81,000. That is, if you get VR at 55, which you might not. On the other hand you could take the 104 weeks VR now which should be around £48-50k.

[baldrick]

did you take into account my pension lump sum I would get if I took my pension at 55 whick would be over £50k as well as my £50k VR money

I don't think that your pension lump sum would be over £50k, it is 3x your annual pension, so assuming that your pension would be £10k pa, your lump sum would be £30k. (You would need to be getting a pension of £16,600 pa to get a pension lump sum of £50k.)
If you take it at 55 without VR it's going to be reduced by 25%.
If you get VR at 55 it would be slightly enhanced, probably by about £1,500.

[stroller]

Cheers baldrick for explaining that to me, and I would also like to thank you and everybody else for you most helpful comments.

[deltaforce]

And don't forget if you take your pension 5 years early it will be reduced by 5 % per year But you will have recieved your pension for five more years than you would have to counter act this.

[Fatboyslim]

And you will not have paid anything into it also.

[stroller]

My NRA 60 benefits from last years pension illustration were

Maximum lump sum £49,621 pension after taking maximum lump sum £7,444

So if I take it at 55 with a 25% reduction lump sum £37,215 pension £5583.00

NRA 65 benefits

Maximum lump sum £29,187 pension after taking maximum £4378

So if I take that at 55 with a 50% reduction lump sum £14,595.50 pension £2189

So the NRA 60 and NRA 65 added together if I take it at 55 are as follows

Maximum lump sum £51,810-50 and a pension of £7772

Can anybody confirm if I am working it out correctly please

[RobertT]

With regard to your NRA65 benefits, it sounds to me as if you’re basing them on the wrong set of figures on your statement. I’m a Section C member but if your Section B statement is anything like mine then:

The ‘NRA65 benefits’ on your statement are a guestimate of what you’d get if you carry on working for RM until you’re 65 and stay at the same pay rate, etc. If you go part time of leave altogether, those figures obviously won’t apply anymore.

The amounts under ‘Your pension’ are what you’ve actually built up so far and will be a far closer reflection of the pension you’ll get if you take it at 55 although you would still have make relevant reductions for taking it early.

[barrowc]

edit: RobertT posted almost the same thing while I was writing this out. The NRA65 part of the pension illustration is quite confusing

You've almost certainly got the wrong figure for your NRA65 benefits. My pension illustration is for section C but the layout should be similar. On page 3 where it says "Your pension", I have a table detailing what my pension was worth on 31st March 2014. It was about £5.5K pension and £1K supplement - unlike section B, there's no automatic lump sum in section C unless you reduce the pension amount.

On page 4 there is a table under" NRA60 benefits " and those figures won't really change from year to year (apart from re-valuing the CSDB blocks which won't have much effect). That's because the NRA60 part closed on 31st March 2010 so you can't contribute any more to that part. For me £4K pension pension and £0.8K supplement or £21K lump sum, £3K pension and £0.8K supplement.

Further down page 4 is the "NRA65 benefits" and this is the bit that trips people up every time. These figures are based on you continuing to pay into the pension until you are 65. If you stop paying before you are 65 then you will get less than those figures. It's more than 25 years until I'm 65 so the figures look astronomical - £10K pension and £1.8K supplement or £55K lump sum, £6.5K pension and £1.8K supplement. That's assuming I pay in from 2010 until 2041 - i.e. 31 years.

For the NRA65 benefits you would get right now, you need to look back to the "Your pension" table on page 3 and subtract the "NRA60 benefits" from page 4. For me that leaves £1.2K pension and £0.2K supplement - that's based on me paying in from 2010 to 2014, so only 4 years. It doesn't show the maximum lump sum but that will change in proportion to the pension amount.

I would guess that your NRA 65 figures should actually be about £7800 lump sum with £1170 pension after taking maximum lump sum. Factor in the 50% reduction and that's £3900 lump sum and £585 pension. Add on the NRA60 stuff with 25% reduction and it's around £41K lump sum and £6170 pension.

Don't, however, rely on back of the envelope calculations like this, give the Pensions Helpline a call - 0114 241 4545 - and see if they can send you an accurate illustration.