UK Defined Benefits pension, early retirement

[JB300]

Scratching my head at this one…

 

Each month I get a quote for how much I will get from my UK Defined Benefits pension if I were to retire in 6 months (max I can get a quote for) & every month the number has been going up by more or less the same amount until I got to October’s quote where it went down.  I thought this might be an anomaly so did November’s quote at the start of this month & it’s up on October but still less than September’s. 

 

This makes no sense to me as if I took my pension in September not only would I get an extra 2 month’s pension but I’d also get more money & a higher PCLS!
 

Im going to do a quote for December next week & if it’s still down then will contact my pension provider to find out why but can anybody think of any reason why this would happen? 
 

NB This is a defined benefit pension so is solely based on my final salary, any changes in “Investment Performance” would not impact how much I get, good or bad. 
 

[topt]

The only thing I can think of is that because interest rates have moved that is affecting the relationship between the tax free lump sum and what is left for the annuity - but that is a pure guess 

[JB300]

1 hour ago, topt said:

The only thing I can think of is that because interest rates have moved that is affecting the relationship between the tax free lump sum and what is left for the annuity - but that is a pure guess 

As I said, “Investment Performance” shouldn’t affect what I get as it’s solely based on the salary I was on when I left the company. 
 

The pension matures when I’m 60 (Feb 2026), so I’m quite close to being able to get a final quote but if the December’s numbers are still less than September’s then I’m just going to take the money early. 
 

[Liverpool Lou]

2 hours ago, JB300 said:

This is a defined benefit pension so is solely based on my final salary, any changes in “Investment Performance” would not impact how much I get, good or bad. 

What did your pension scheme administrator tell you was the reason?

[JB300]

3 minutes ago, Liverpool Lou said:

What did your pension scheme administrator tell you was the reason?

I haven’t asked them yet, I was giving it 3 months worth of quotes so I could see if I could see some kind of pattern that I might be able to make sense of. 
 

Will be able to do December’s quote mid next week & if that’s still below September’s quote I’ll ask them but my reason for asking on here is that I’m really scratching my head to understand how that could be. 
 

 

[Patong2021]

9 minutes ago, JB300 said:

As I said, “Investment Performance” shouldn’t affect what I get as it’s solely based on the salary I was on when I left the company. 
 

The pension matures when I’m 60 (Feb 2026), so I’m quite close to being able to get a final quote but if the December’s numbers are still less than September’s then I’m just going to take the money early. 
 

 

Yes and maybe no. You are correct that a DB plan payout is  set up based upon years of service and salary. However, some plans allow for adjustments of the  payout.

- Read your plan to see if  the payouts are  allowed to be adjusted by the plan financial performance.

-Is your plan subject to cost of living adjustments that  can go up and/or down?

- Are you looking at your  plan payout calculation  in the same way every time you ask for a quote. i.e. at the same age  every time.

 

 

 

 

[Liverpool Lou]

1 minute ago, JB300 said:

my reason for asking on here is that I’m really scratching my head to understand how that could be. 

You've been head-scratching every month for several months yet you didn't think to ask the scheme admin, who would be able to answer your question, but thought that asking anonymous strangers who have no knowledge of your pension scheme was the best thing to do?   

[Keeps]

3 hours ago, JB300 said:

Scratching my head at this one…

 

Each month I get a quote for how much I will get from my UK Defined Benefits pension if I were to retire in 6 months (max I can get a quote for) & every month the number has been going up by more or less the same amount until I got to October’s quote where it went down.  I thought this might be an anomaly so did November’s quote at the start of this month & it’s up on October but still less than September’s. 

 

This makes no sense to me as if I took my pension in September not only would I get an extra 2 month’s pension but I’d also get more money & a higher PCLS!
 

Im going to do a quote for December next week & if it’s still down then will contact my pension provider to find out why but can anybody think of any reason why this would happen? 
 

NB This is a defined benefit pension so is solely based on my final salary, any changes in “Investment Performance” would not impact how much I get, good or bad. 
 

Please do report back with the reasoning behind this when you find out. I would like to know and perhaps others who also have a DB pension on the horizon. 

[JB300]

1 minute ago, Patong2021 said:

 

Yes and maybe no. You are correct that a DB plan payout is  set up based upon years of service and salary. However, some plans allow for adjustments of the  payout.

- Read your plan to see if  the payouts are  allowed to be adjusted by the plan financial performance.

-Is your plan subject to cost of living adjustments that  can go up and/or down?

- Are you looking at your  plan payout calculation  in the same way every time you ask for a quote. i.e. at the same age  every time.

 

 

 

 

Yes the plan includes a Cost of Living increase each year (Trustees discretion max 5%) but even if this changed I can’t see how they would decrease the pension.

 

I do the quotes to hit the same date (2nd of the month) to match my Birthday & for the past > 18 months it’s gone up by more or less the same amount each month, but in October (5 months before it’s due to mature) it (& the PCLS) went down for no reason I can think of. 
 

 

[JB300]

4 minutes ago, Liverpool Lou said:

You've been head-scratching every month for several months yet you didn't think to ask the scheme admin, who would be able to answer your question, but thought that asking anonymous strangers who have no knowledge of your pension scheme was the best thing to do?   

Very useful, thank you for your contribution… 👍🏻

[Keeps]

The thread below alludes to the fact that projected inflation could be a factor in figures fluctuating. Can't pretend to understand it fully I'm afraid. I don't know whether this would be a factor on a month to month quotation basis which you are experiencing?

 

Will be very interested to hear the outcome when you get to the bottom of it.

 

https://forums.moneysavingexpert.com/discussion/6562161/db-pension-quotation-value-keeps-decreasing-each-year

 

[JB300]

10 hours ago, Keeps said:

The thread below alludes to the fact that projected inflation could be a factor in figures fluctuating. Can't pretend to understand it fully I'm afraid. I don't know whether this would be a factor on a month to month quotation basis which you are experiencing?

 

Will be very interested to hear the outcome when you get to the bottom of it.

 

https://forums.moneysavingexpert.com/discussion/6562161/db-pension-quotation-value-keeps-decreasing-each-year

 

Thanks, I can understand how interest rates can affect the transfer out value of the pension as the money they would need to give you to purchase annuities to give you an equivalent  pension is less (my Xfer out value dropped by about 30% when annuity/interest rates shot up), but I can’t understand why the early retirement/taking the pension numbers would do anything but go up. 
 

Will do December’s quote middle of next week & then I’ll have 3 months of data to go back to WTW with (though I won’t be holding my breath waiting for a sensible answer from them).