Pension supplement

[spaceman07]

Hi, if you leave RM at 55 plus can you still claim the supplement even if you find another job elsewhere?

[heapsy]

If you are section C then yes. But pretty certain it's reduced for early payment. This has been mentioned several times on here.

[NorthernBoy]

As we are talking about the supplement it got me thinking about whether taking the pension early is actually as costly as previously thought….

Here’s my thinking….if you take your pension at 55 we all know you take a 25% reduction, but if you are not working for RM you will get the supplement as part of your pension.

However as the supplement drops out at state pension age, you are effectively getting the benefit of 5 more years of the supplement in your yearly pension

Does the above actually reduce the impact of taking your pension early due to you getting the ‘maximum’ pension (having the supplement) for 5 extra years.

What are peoples thoughts on this? Not saying having the supplement for 5 extra years should be the only factor if taking the pension early, but is it a factor to consider. The supplement dropping out at sp age is never really discussed on here, but clearly it will reduce your annual pension.

Any thoughts / opinions.

[RobertT]

Whether the supplement is reduced and by how much, is one of those questions that gets asked every so often on this forum. But we never seem to find out the definitive answer to if it is reduced, and by how much.

I suspect once people have left RM, they have no inclination to remain an active contributor to this site for too long. Or else they just don't understand the benefits they're getting?

However, I could be totally wrong here! But I seem to remember someone getting their figures, and the amount of supplement they were due to get was reduced for early payment. But the total they were due to get by SPA worked out the same as if they'd taken it at NRA.

Perhaps there is someone with personal experience who can clarify?

Reaching SPA and no longer getting the supplement will reduce your RM pension, but that will obviously be counteracted by getting a larger amount from the state.
Based on current amounts, I stand to be over £8,000 per year better off at SPA, and I'm happy enough with that.

[fly-catchers]

When I enquired the supplement is reduced by 5% per year but them that total is divided by the number of years you will receive it.

[NorthernBoy]

Another way of looking at is if you are not working for RM and you take your pension (at any age), then it is always going to be higher as you are getting the supplement.

You could make the argument that a RM worker who continues to work past 60 and draws their pension is at disadvantage to those taking their pension and working for another firm, as they will get the supplement.

Why are pensions so complicated!

I am thinking about taking all my NRA60/65 benefits between 58-60 at the moment depending how much I have in my sipp.

[fly-catchers]

Another way of looking at is if you are not working for RM and you take your pension (at any age), then it is always going to be higher as you are getting the supplement.

You could make the argument that a RM worker who continues to work past 60 and draws their pension is at disadvantage to those taking their pension and working for another firm, as they will get the supplement.

Why are pensions so complicated!

I am thinking about taking all my NRA60/65 benefits between 58-60 at the moment depending how much I have in my sipp.

Another less common complication is you get a bit of supplement straightaway even if you stay with RM. If you had transferred another DB pension from a previous employer to RM! I gained an extra £126 per year till I left RM at 63 when I them started receiving the rest of my supplement after much chasing up including contacting the CEO of Capita!

[RobertT]

When I enquired the supplement is reduced by 5% per year but them that total is divided by the number of years you will receive it.

So for clarification and based on that formula.
If my NRA60 supplement is £1,000 per year at 60. What would it be at 55?

Thanks.

[heapsy]

£750 per year.

[RobertT]

£750 per year.

But that would mean getting a total of £9,000 for taking it at 55 compared to £7,000 at 60, based on a SPA of 67.

I'm not sure I can see that happening.

[NorthernBoy]

£750 per year.

But that would mean getting a total of £9,000 for taking it at 55 compared to £7,000 at 60, based on a SPA of 67.

I'm not sure I can see that happening.

Yes you would get £9000 over the 12 years assuming a 25% reduction in supplement is correct.

As I’ve mentioned previously getting the supplement for 5 extra years actually softens the 25% reduction factor for taking at 55. As it drops out from your pension at 67, you are effectively getting 12 years of maximum pension (clearly with reduction), rather than 7.

Not saying getting the supplement for 5 extra years means you should take your benefits early, but if yours is a decent amount it may encourage you to do so.

Previously I was definitely taking all benefits at 60, but I am now considering taking at age 58.

Can anyone who has got their pension at 55 definitely confirm that the supplement reduces by 25% as compared to the payable at 60 figure.

[RobertT]

But is the 5% reduction per year for the supplement, correct?

I think they use a different formula, and can remember someone on here saying they'd contacted the PSC, who said it wasn't the same as the main pension.

Although to be fair I can't give a definitive answer either way.

[NorthernBoy]

But is the 5% reduction per year for the supplement, correct?

I think they use a different formula, and can remember someone on here saying they'd contacted the PSC, who said it wasn't the same as the main pension.

Although to be fair I can't give a definitive answer either way.

Exactly Rob, the reduction factor for the supplement is the key here.

As I say we need someone who has taken their pension at 55 to compare their supplement to their age 60 expected supplement payment amount.

It would not surprise me that they use a different formula for pension supplement reduction, but I can see no mention of it on the website.

[RobertT]

I don't think there's any mention of the 5% reduction for the main pension either.

[NorthernBoy]

This is what I found on the website

What are the disadvantages?

You’d normally start taking your Age60 benefits when you turn 60,
Your Age60 benefits will be reduced by approximately 5%
for each year you take them before 60. So, if you took your Age60 benefits at 55, the amount you’d get would be reduced by approximately a quarter when they start being paid to you.