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Calculation check
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Old 01-03-2017, 15:07   #1
Mike
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Calculation check

Hi all

Sorry for what seem a simple things but would appreciate some help !

Trying to work out if I take a pension at 55 (would have been paid at 60 as it's protected) I will incur a 25% reduction in the annual amount.

Given I will be getting it 5 years early at what age would a higher figure paid from 60 catch up with the reduced figure (but pay 5 years earlier). Example I have been working on is the higher figure of £10,000 pa.

Thanks

Mike
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Old 01-03-2017, 15:52   #2
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Re: Calculation check

The magic figure is 15 years.

---------- Post added at 14:52 ---------- Previous post was at 14:47 ----------

If you retire 5 years early and get a 25% reduction as a result, they pay you £7,500 for life rather than £10,000. So by the time you reach the regular retirement age, you're £37,500 to the good. Thereafter, you continue to receive £7,500 per annum where you would otherwise have received £10,000, a difference of £2,500, so every year that £37,500 advantage is eroded at the rate of £2,500 per year. 37,500/2,500 = 15.
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Old 01-03-2017, 16:39   #3
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Re: Calculation check

Quote:
Originally Posted by Chris View Post
The magic figure is 15 years.

---------- Post added at 14:52 ---------- Previous post was at 14:47 ----------

If you retire 5 years early and get a 25% reduction as a result, they pay you £7,500 for life rather than £10,000. So by the time you reach the regular retirement age, you're £37,500 to the good. Thereafter, you continue to receive £7,500 per annum where you would otherwise have received £10,000, a difference of £2,500, so every year that £37,500 advantage is eroded at the rate of £2,500 per year. 37,500/2,500 = 15.
Thanks for this so 75 is the magic number.

Hopefully live that long
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Old 01-03-2017, 16:52   #4
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Re: Calculation check

I did the same calculations on one of my pensions (took it at 51).

If I live past 73, then I will technically be a bit worse off than if I'd waited until I'm 60.

However, I decided I'd rather have the money now.
I may not live that long, and its worth more to me now than in 18 years time.
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