Pension at 55

[deristrong]

Coming up to my 55th birthday (June). I know we now get various options about our pension (Taking out some of it / all of it / none of it). Does anyone now if I'll be contacted automatically nearer the time or do you have to instigate it yourself? Also since re-joining Royal Mail 3 years ago it's been Zurich who have dealt with my pension but when I first left in 1999 it was another company who seem to have lost me (18 years service so a bit worried). Anyone know who it was back then? Thanks all.

[RobertT]

You won’t get contacted at 55 because it is before normal retirement age, so it’s up to you to instigate things if that’s what you want to do.

Since rejoining you’ve been in the RM Defined Contribution Plan which as you say is administered by Zurich. But if you left previously in 1999 you should have a deferred Royal Mail final salary pension tucked away. You should have been been getting annual statements off them since? Have you moved house and not told them?

I suggest you get in touch and tell them your situation:

Email: pensions.helpline@royalmail.com

Pensions Service Centre
PO Box 500
Chesterfield
S49 1WX

Phone: 0114 241 4545

[pj2001]

Why would you want to draw your pension 5 years early, you stand to lose 25%+ of your pension and lump sum.

[Fatboyslim]

Why would you want to draw your pension 5 years early, you stand to lose 25%+ of your pension and lump sum.

Everyone is different. That's why.

Someone I knew. Drew pension at 55. Took VR at 60. And passed away at 62. At least he had seven years worth instead of two.

[stroller]

Fatboyslim,

A great reply, you are correct everybody thinks differently, i know you lose 25% if you take it at 55 but I don't care about percentages, I am taking mine shortly and intend to use my pension payments on 2 lovely holidays per year etc etc, I don't want to get morbid but what good is a un-reduced pension worth to you if your not alive to enjoy it.

That's my take on it perhaps I have not got my sensible head on

[RobertT]

Ultimately whether it’s a good thing to take your pension early or not comes down to how long you’re going to live, which is something nobody really knows. So really it’s just a big gamble!

You could take your pension early, have a few nice holidays and drop down dead at an early age. Or you could live until your 90’s, possibly work for longer than you otherwise would have done and live the last 25 years of your life struggling for money.

Alternately you could take your pension at the correct age/s, guarantee yourself a better income in your old age, be realistic about your life expectancy and use your pension for what it’s intended.

Personally I don’t think it’s about everybody thinking differently as such, it’s more a case of everybody having different financial and health circumstances. The average life expectancy of a 55 year old man is their early 80’s, although some will obviously live for longer and some for less. Surely that average is what you need to use to determine whether you’re doing the right thing, not some preconceived idea that you might die young because somebody you knew did.
I would hazard a guess that most people also know a few people who have lived to a ripe old age aswell.

Personally I don’t see the point in paying into your pension for years and then taking it early just because you can, which seems to be the logic of a lot of people. A pension is all about providing income when you give up work. It’s not a savings account to dip into to pay for luxuries while you’re still working.

That’s my two penneth worth anyway.

[fly-catchers]

Give the current and increased work pressures and no real allowance for age I think more and more posties will be leaving once they get to 60. At least at that age you get the full NRA 60 and a reduced NRA 65 part. The thought of working that extra 5 years to get the full 65 part is not appealing whatsoever to me even though in an ideal world it would be best to get the maximum pension possible. With my knee and ankle issues I hope I actually get to 60 and am still able to walk!!

[RobertT]

Give the current and increased work pressures and no real allowance for age I think more and more posties will be leaving once they get to 60. At least at that age you get the full NRA 60 and a reduced NRA 65 part. The thought of working that extra 5 years to get the full 65 part is not appealing whatsoever to me even though in an ideal world it would be best to get the maximum pension possible. With my knee and ankle issues I hope I actually get to 60 and am still able to walk!!

An alternative would be to take your NRA60 if you leave at 60 and defer your NRA65 until 65 assuming it's affordable. With the RMPP expected to close in its current form in 2018 you wouldn’t be building up any more years after then anyway and if you got another job you could possibly get a pension equivalent to the RM Defined Contribution scheme there?

The important thing is to be realistic about your time in retirement and make the most of what you’ve got towards it. The RMPP provides valuable benefits that would cost a lot more to buy through an annuity than it costs you in contributions, particularly the pre-2008 part. So many people seem to just want to toss that away without too much thought.

If you’re thinking of taking it early what you really need to do is work out the approximate ‘break even age’ compared to taking it at the normal time. It can be a lot younger than you may think.

[fly-catchers]

I always get confused when they say deferring your pension. If I left at 60, would I get a greater pension from the 65 part if I left it untouched until 65? But as no new money would go into that part once you leave I would have thought it would not make any difference. Apart from increasing index linked- which would happen if you took it as well. I am also assuming for the moment that if you left at 60 you did not get another job- at least not straightaway.

[RobertT]

I always get confused when they say deferring your pension. If I left at 60, would I get a greater pension from the 65 part if I left it untouched until 65? But as no new money would go into that part once you leave I would have thought it would not make any difference. Apart from increasing index linked- which would happen if you took it as well. I am also assuming for the moment that if you left at 60 you did not get another job- at least not straightaway.

If you take your NRA65 at 60 it would be reduced by 25% and then increase yearly with inflation in payment.

If you don’t take it until 65 it won’t be reduced but will still increase with inflation until 65 and beyond.

[fly-catchers]

I always get confused when they say deferring your pension. If I left at 60, would I get a greater pension from the 65 part if I left it untouched until 65? But as no new money would go into that part once you leave I would have thought it would not make any difference. Apart from increasing index linked- which would happen if you took it as well. I am also assuming for the moment that if you left at 60 you did not get another job- at least not straightaway.

If you take your NRA65 at 60 it would be reduced by 25% and then increase yearly with inflation in payment.

If you don’t take it until 65 it won’t be reduced but will still increase with inflation until 65 and beyond.

Thanks for the reply Robert. Although you say the 65 bit won't be reduced if you don't take it till 65 I assume it must be less than it would have been if you had carried on working and paying into it. When I used the calculator on the RM pension website it gives an reduction on the 65 bit at about 50% on the pension and more than 50% on the 65 supplement bit- If you retire at 60. So am I right it would be nearer 25% reduction if you did not touch the 65 bit until 65?

[RobertT]

Thanks for the reply Robert. Although you say the 65 bit won't be reduced if you don't take it till 65 I assume it must be less than it would have been if you had carried on working and paying into it.

What your pension is worth will be dependent on how many years you pay into it. So if you work for RM and the scheme stays open long enough you will obviously accrue more pension by 65 than you would have done if you leave earlier.

In practice the NRA65 element of the RMPP started in 2010 and is expected to close in 2018, so if that does happen, no one will build up more than 8 years of NRA65 pension anyway.

When I used the calculator on the RM pension website it gives an reduction on the 65 bit at about 50% on the pension and more than 50% on the 65 supplement bit- If you retire at 60. So am I right it would be nearer 25% reduction if you did not touch the 65 bit until 65?

The figures you input into the calculator are from your annual statement, which assume you will work until you’re 65 on the same wages as now. If you take your NRA65 at 60 those figures are effectively being reduced twice. 1) Because you’re paying into it for 5 years less, and 2) Because you’re taking what you’ve accrued up to that time 5 years early.

If you stop paying into it at 60 but don’t take it until 65 you’ll be paying into it for 5 years less but won’t face any early payment reductions.

The reductions in percentage terms will vary from person to person to some degree because everyone will be a different age and have different levels of potential service. But your 25% is probably in the right ballpark.

You must also bear in mind that if the current RMPP does close in 2018, unless you’ve already hit 65 or left RM altogether by then, any statements you have relating to your NRA65 pension will be worthless.

[fly-catchers]

Thank you for your clear and honest answers Robert. As I & others have said before I have learnt far more about the RM pension from you than any other sources. :)

[RobertT]

Thank you for your clear and honest answers Robert. As I & others have said before I have learnt far more about the RM pension from you than any other sources. :)

Thanks

[trythat]

Robert I can't remember if you've discussed this before, but I assume our pension upto 2008 doesn't change in value as long as you take after reaching 60? Just that we're hoping to retire at 55 and live on our savings until 60 and then take our pre 2008 pension at 60 or later. As we're not far off 55, I'd like to confirm our thoughts are on track, don't really want to work at RM any longer than we have to now