Pension Break Question

[notnarcissus]

Surely a 30 year pension for someone under 50 would have some sort of inflationary index added to it annually until the member retired. Inflation has been outperforming payrises and so could lead to a better pension than continuing to pay into the scheme. Perhaps that is why the timing of retirement was mentioned as a factor since inflation added to 'deferred' pensions is added in early April.

[melonhead]

Given that many friends will now probably not be able to go after 30 yrs service who originally would have, I would have felt very self conscious, guilty, selfish to have stayed on beyond my 30yrs/ 50th birthday ! Even now retired I feel awkward, almost uncomfortable in their company, to that end I have avoided any 'do's with excuses and live far enough away to distance myself !

[Lou1z]

I honestly didn't know you could do this. The other day, I was speaking to someone who had gone past his 30 yrs and was astounded that the FRS hadn't contacted him about his retirement. It was almost like he'd been forgotten about.

[bill.advanced]

The 18-20 issue was won solely due to the implementation of the 2006 age discrimination act, and only applied to payments made on an involuntary basis between ages 48-50 after 30 years of completed service. If you chose then at age 50 to remain in the service you had to continue payments into the FPS and on retirement your pension was based on your final salary and your commutation was based on your retirement date.

[omegaman]

Nn as you know fps is not uprated for inflation until you are 55 at which point you get all of the years back from when you retired I honestly dont know if the uprating would possibly go back 7 years to account for the 18 and 19 year old joiners. I do know people that have paid 36 years in the fps but only got 40 ,60ths. It was a personal choice for them to do this as it kept the final salary link, which is what they wanted as they got good promotions in the last 5 years of service.
I will find out about uprating for young joiners when back at work.

[Lou1z]

That's a new one to me for sure. I wasn't aware that it could be done. I also can understand that 18-20 didn't have a choice and the difference here is that you do. Lets do some simple, simple math.

Retire @ 50 on £30k (40/60ths) commutation factor 24
Annual Pension = £20, 000
Annual pension with full commutation = £15, 000 with £120, 000 lump sum

Now with £1k pay rise 2 years later

Retire @ 52 on £31k (40/60ths) commutation factor 23.2
Annual Pension = £20, 666
Annual pension with full commutation = £15, 500 with £119, 866 lump sum
Extra contributions would work out at £450 per month x 24 months = £10, 800

The above is without compounding interest rates from index linking etc
So lump sum is similar but the 2nd option gives you £500 extra per month which would allow you to pay back your extra contributions within 2 years.
So the second option is the clear winner assuming you live past those 2 years.

It's simple I know but gives you a rough idea.....

[notnarcissus]

Nn as you know fps is not uprated for inflation until you are 55 at which point you get all of the years back from when you retired I honestly dont know if the uprating would possibly go back 7 years to account for the 18 and 19 year old joiners. I do know people that have paid 36 years in the fps but only got 40 ,60ths. It was a personal choice for them to do this as it kept the final salary link, which is what they wanted as they got good promotions in the last 5 years of service.
I will find out about uprating for young joiners when back at work.

Deferred pensions and split pensions are uprated by inflation so why not one of an 18-20 year old joiner who is having a payment holiday before retiring at 50?

[notnarcissus]

It remains final salary.

[B]Q. If I get a pension holiday after I’ve paid in for 30 years, but I am still unable to retire because I am under 50 years of age, what happens if I get a pay increase or get promoted during this period?[/B]
You will still remain a full active member of the scheme during this contribution holiday period and your final salary will reflect any permanent pay increases.

However, when you reach age 50 you will have to make a choice to either retire immediately, continue in employment and resume contributions or continue without resuming contributions. Please note: If you continue in employment but do not resume contributions you will become a deferred member and any further increases in pay or promotion will not be considered. In this situation your pension will be calculated at the point you became a deferred member.

https://www.fbu.org.uk/blog/qa-18-20-clu...on-victory

[Kwacker]

Thanks for the replies so far folks. From what I can see it makes more sense for me as a WM to go at 50 after 32 years service than it does to stay on where I essentially see my pension fund dropping from there on in. Plus at 50, whilst still physically fit and able I have the potential to be able to move into another vocational area and work hours of my own choosing. I currently have a few irons in the fire, lets just say.

[notnarcissus]

[B]Q. What does this mean?[/B]
It means that if you are affected (i.e. you joined the scheme before the age of 20) upon reaching 50 you have three options:

• Retire immediately with a pension – As you have reached the earliest age you can retire from the FPS (except in cases of ill health). This is because you have accrued 30 years pension. You can commute the maximum and will not be limited to the lower commutation limit of 2.25 x your annual pension.
  
  
  
• Continue employment and recommence payment of contributions - You can chose to continue working but because you could retire immediately from age 50 with your pension you must resume pension contributions if you wish to retire at your expected NPA (if this is below age 60).
  
  
  
• Continue employment without resuming your pension contributions thereby becoming a deferred member - You can continue to work without resuming your pension contributions, but you will become a deferred member and will not be able to access your pension before age 60, except on ill health grounds. This is an important decision and could cost the individual a significant amount of money. Members are advised to take financial advice before taking this option.