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Reduncancy and pension
I am being made redundant after 35yrs of service,I am 58 yrs old. can anybody tell me if I am entitled to the full pension I would recieve if I could have remained in work until i was sixty
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As has been said, it depends on the terms of your redundancy and pension.
However, the most likely scenario (assuming you are in a �Final Salary� pension scheme) is this:
You will be credited with 35 contributing years. Assuming your scheme is based on eightieths (where forty is the maximum contribution) your annual pension will be calculated as 35/80 of your �final salary�. (This term itself is qualified differently. Some schemes use your best consecutive 12 months, some the best of your last 3 years, etc).
However, because you are taking your pension early, it will almost certainly be subject to an �actuarial reduction�. Most pension schemes run on the basis that they will pay each pensioner, on average, for about 20 years. Because you have left two years early, the likelihood is that you will draw yours for 22. Your pension will therefore most likely be subject to a 10% reduction (about 5% for each year it is taken early).
A couple of things for you to consider:
1. If you have received a redundancy payment, any amount over �30k is subject to income tax. However, you can use this money to add to your �pension pot� and draw up to 25% of this pot as a tax free lump sum. This means you can add the part of your redundancy settlement which would normally be subject to tax (i.e. above �30k) to your pension pot, and draw it tax free when you take your pension.
2. You can postpone taking your pension (and so avoid or reduce the �actuarial reduction�). However, remember that if you do, the 90% pension that you would receive for two years is lost. You can prepare a spreadsheet which will show you the �break even� point before deferment becomes advantageous and for someone of 58, it works out to about age 74.
Think carefully, do your sums and take advice!
However, the most likely scenario (assuming you are in a �Final Salary� pension scheme) is this:
You will be credited with 35 contributing years. Assuming your scheme is based on eightieths (where forty is the maximum contribution) your annual pension will be calculated as 35/80 of your �final salary�. (This term itself is qualified differently. Some schemes use your best consecutive 12 months, some the best of your last 3 years, etc).
However, because you are taking your pension early, it will almost certainly be subject to an �actuarial reduction�. Most pension schemes run on the basis that they will pay each pensioner, on average, for about 20 years. Because you have left two years early, the likelihood is that you will draw yours for 22. Your pension will therefore most likely be subject to a 10% reduction (about 5% for each year it is taken early).
A couple of things for you to consider:
1. If you have received a redundancy payment, any amount over �30k is subject to income tax. However, you can use this money to add to your �pension pot� and draw up to 25% of this pot as a tax free lump sum. This means you can add the part of your redundancy settlement which would normally be subject to tax (i.e. above �30k) to your pension pot, and draw it tax free when you take your pension.
2. You can postpone taking your pension (and so avoid or reduce the �actuarial reduction�). However, remember that if you do, the 90% pension that you would receive for two years is lost. You can prepare a spreadsheet which will show you the �break even� point before deferment becomes advantageous and for someone of 58, it works out to about age 74.
Think carefully, do your sums and take advice!
Like Dzug says it depends on your terms of redundancy,I accepted Early voluntary redundancy from the Royal M ail last year aged 58 after 20years service ,but it was because of special circumstances like the transfer of business to another location 90 miles away,appeal to their "sense of fair play"(if they've got one) and say your loyalty should be rewarded.
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