effect of reduced hours on pension entitlement

[wbbs]

Bit of a long query but I need to figure out whether reducing my working week is potentially going to cost me a fortune in the future.

Scenario - I have worked full time all my life, 25 yrs pensionable service at the moment, age 50, salary approx 50k. Based on present service and salary I estimate my pension would be approx 20k at age 65 if I stopped work now, no intention of doing that, however there may be a possibility of getting a non discounted pension at age 55.

Now if I were to reduce my working week to 50%, salary will drop to 25k, does that mean that if I were to avail of a non discounted pension at 55 it would be based on a percentage of my reduced salary at that time and I would lose the benefit of 24yrs of full time work? I have got kind of conflicting answers to my queries with HR. One answer says yes that would happen, if my pension now was 20k based on 50k salary, my pension in 5 yrs on 25k salary would be approx 10k (ignoring the extra 5 yrs service for simplicity), other says pension would be based on full time pay but instead of having an extra 5 yrs from age 50 to 55 added on to pension fund only 50% i.e.. 2.5yrs would be added on, this would still leave me with at least the 20k forecast now.

Sorry for long query which I dont even fully understand myself but basically would it be very foolish to reduce my hours at this stage if there is a possibility of pension within few years. I know I am lucky to have a job but really feeling the need for a bit of a life too.

 

[JoeRoberts]

First of all it seems by your calculation that your scheme does not have a state pension offset i.e. your pensionable salary is not reduced by a multiple of the state pension, often 1 or 1.5 times.
While possible, this is rare, but worth checking if your understanding is correct. Some older style companies have this. If you have, you are lucky.

Many pension schemes are similar but the Trust Deed ( incorporating all amendments) for your scheme is the Bible.

Regarding your specific query I would do 2 things
1) request a copy of the Trust Deed and all subsequent amendments. Ask if it reflects all current pension legislation. Many don't, as it costs companies to get them updated..
2) direct all queries to the Trustees of the scheme in writing and request a written answer to your query. They are the responsible persons in law, not HR.

It is too important to rely on a HR dept. If they make a mistake they have no responsibility, only the Trustees have. I don't believe the HR dept would have the expertise to answer your query and even if they check with the Trustees or pension admin company they may miscommunicate the question or the answer. Often, the Trustee won't have the expertise either, but it is up to them to get the proper answer, and convey to you the correct information.

It is YOUR pension, take control, don't be afraid to ask questions. Get your answers in writing.

 

[wbbs]

Thanks for reply, it was one of the trustees told me ask HR. I think you're right, written enquiry is probably whats needed.