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6 Answers
I'm trying to make head & tail out of my woman's pension estimate from a previous employer, and whilst I like to think I can get to grips with most simple statements, this one is proving a little difficult to understand: so I'd like to ask any experts for an explanation. Obviously I can't state actual values and suchlike, I'll make up fantasy figures as needed, but I'm really after an explanation of terms and how they are arrived at.
The biggest head scratcher is that the figure stated as "Total Deferred Pension" does not seem large enough to fund the estimated figures in the options that follow it. Implying it isn't the gross figure doing the funding at all. The name "total" suggests to me that is the money to be invested, is that not so ?
For a fantasy example showing the issue:
"Total Deferred Pension" £50,000
Then underneath
Guaranteed Minimum Pension pre 01/04/1807 £35,000 per annum
Guaranteed Minimum Pension post 31/03/1807 £30,000 per annum
Excess Benefits above GMP £25,000 per annum
Adding the above 3 groups comes to £90,000, way above the £50,000 stated just above it, so how does that work ? Is the fund £90k or £50k ? And how / why / what ?
For sure the estimated annual pension and possible lump sum below suggest the larger figure is correct but in which case what the heck is this "Total Deferred Pension" ? What does it represent ?
TIA
The biggest head scratcher is that the figure stated as "Total Deferred Pension" does not seem large enough to fund the estimated figures in the options that follow it. Implying it isn't the gross figure doing the funding at all. The name "total" suggests to me that is the money to be invested, is that not so ?
For a fantasy example showing the issue:
"Total Deferred Pension" £50,000
Then underneath
Guaranteed Minimum Pension pre 01/04/1807 £35,000 per annum
Guaranteed Minimum Pension post 31/03/1807 £30,000 per annum
Excess Benefits above GMP £25,000 per annum
Adding the above 3 groups comes to £90,000, way above the £50,000 stated just above it, so how does that work ? Is the fund £90k or £50k ? And how / why / what ?
For sure the estimated annual pension and possible lump sum below suggest the larger figure is correct but in which case what the heck is this "Total Deferred Pension" ? What does it represent ?
TIA
Answers
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Yes I agree you do need advice
I thought this was a state pension estimate but you say it is nt
total deferred - is because she aint getting it now - it is deferred.
The scheme - lucky her - are you sure she doesnt want to retire on the figures given ? - guarantees £35k if taken before a date and £30k if taken after a date
but neva mind - you are £25 k in excess of that.
THAT reflects the fact that as time ticks on retirement deals are getting worse so get the old girl to retire now !
Lump sum will be something like 3 x pension - in your case £150k
If there is an option for a larger lump sum and a smaller pension then you should probably take it.
Your mistake - besides not retiring early on these figures is to add everything together and say it doesn't make sense.
depending on the date, add the excess to the figure above alone or the figure below alone.
Decent private pension - wow !
The av wage is £24k
and the average pension is £8 I think ( per annum )
I thought this was a state pension estimate but you say it is nt
total deferred - is because she aint getting it now - it is deferred.
The scheme - lucky her - are you sure she doesnt want to retire on the figures given ? - guarantees £35k if taken before a date and £30k if taken after a date
but neva mind - you are £25 k in excess of that.
THAT reflects the fact that as time ticks on retirement deals are getting worse so get the old girl to retire now !
Lump sum will be something like 3 x pension - in your case £150k
If there is an option for a larger lump sum and a smaller pension then you should probably take it.
Your mistake - besides not retiring early on these figures is to add everything together and say it doesn't make sense.
depending on the date, add the excess to the figure above alone or the figure below alone.
Decent private pension - wow !
The av wage is £24k
and the average pension is £8 I think ( per annum )
:-)
Thank Peter, but I think I'll need to analyse your explanation later today to clarify what the situation really is.
If, as you suggest, adding those 3 figures together, is incorrect, then there is an interesting coincidence. By doing so I get the same figure they use as the annual pension if one takes all as pension and none as lump sum.
I'm trying to advise, but I'm unsure I've explained it correctly to her at present, as this annual pension figure seems way above what investment of the deferred pension could produce pa.
Thank Peter, but I think I'll need to analyse your explanation later today to clarify what the situation really is.
If, as you suggest, adding those 3 figures together, is incorrect, then there is an interesting coincidence. By doing so I get the same figure they use as the annual pension if one takes all as pension and none as lump sum.
I'm trying to advise, but I'm unsure I've explained it correctly to her at present, as this annual pension figure seems way above what investment of the deferred pension could produce pa.
I think I've spotted the issue, I may be wrong, confirmation would be nice.
They never state "Total Deferred Pension" £50,000 is a payment per annum thing, it has always looked to be a single pot sum to me. But if I assume it is supposed to be a pa figure and if I assume a horribly low interest rate over the last couple of decades, then it starts to make sense.
The £50,000 compound interest over the time period does come to a ball park figure close to that stated as the present estimated pension.
I think that must be the answer. The missing "pa". But as mentioned, confirmation would be nice.
They never state "Total Deferred Pension" £50,000 is a payment per annum thing, it has always looked to be a single pot sum to me. But if I assume it is supposed to be a pa figure and if I assume a horribly low interest rate over the last couple of decades, then it starts to make sense.
The £50,000 compound interest over the time period does come to a ball park figure close to that stated as the present estimated pension.
I think that must be the answer. The missing "pa". But as mentioned, confirmation would be nice.
Yes, the total deferred pension is the size of the pot. But the pot size in your example seems far too low for the fantasy figures you used.
Can you give the data using something closer to the actual. Maybe double or half the actual figures across the board but not tell us which if you understandably don't wan to give actual figures
Can you give the data using something closer to the actual. Maybe double or half the actual figures across the board but not tell us which if you understandably don't wan to give actual figures
Oh dear. If it is the size of the pot ff then it makes no sense again.
One surely can not fund a pension 60% larger than the pot funding it, each and every year. Or alternatively give out as a lump sum in addition to a smaller pension 431% larger than the pot itself at the start.
This was the crux of my confusion. If it is the existing pot then it is working miracles as it seems far too low. But if instead it was the annual pension available had it been taken at the time of leaving the employer, and if it has increased by about 3% a year since, then all would make sense.
Actual figures are somewhat smaller but the ratios are not so very different. (Except I notice the "excess" one should be slightly larger not slightly smaller than the "post date" one.)
One surely can not fund a pension 60% larger than the pot funding it, each and every year. Or alternatively give out as a lump sum in addition to a smaller pension 431% larger than the pot itself at the start.
This was the crux of my confusion. If it is the existing pot then it is working miracles as it seems far too low. But if instead it was the annual pension available had it been taken at the time of leaving the employer, and if it has increased by about 3% a year since, then all would make sense.
Actual figures are somewhat smaller but the ratios are not so very different. (Except I notice the "excess" one should be slightly larger not slightly smaller than the "post date" one.)
Okay, if those figures are reasonably representative of the true figures then it can't be the pot size. My guess is that you will get one GMP figure plus the excess benefits; or you will just get the excess benefits.
A call to the pension provider is necessary I think.
I agree that these statements/quotes are not as clear as they should be- I received two quotes from my former scheme and the figures were massively different and the only explanation I could think of was that one was at present day values and one allowed for RPI/CPI over 10 years, but neither statement made it clear
A call to the pension provider is necessary I think.
I agree that these statements/quotes are not as clear as they should be- I received two quotes from my former scheme and the figures were massively different and the only explanation I could think of was that one was at present day values and one allowed for RPI/CPI over 10 years, but neither statement made it clear
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