Ill health and defined benefit

S

Sick

Guest
Due to ill health I am considering the option of early retirement. Does anyone have any experience of this in a defined benefit pension scheme (private). I am 45 with 22 years service. Full pension is based on 40 years and retiring at age 65. It would be possible to make this enquiry in work but to me at present it is a sensitive area.
 
C

Conan

Guest
Ill health

Start with the scheme booklet and see what that says. Even better if you have a copy of the scheme rules.
In general, if you go on early retirement you will get a proportionate benefit. In your case this might be 22/43 times 66%. Generally this will be reduced further to allow for the fact that you are getting the pension 20 years early. The common reduction is circa 4% for each year.
HOWEVER, if the eary retirement is because of ill health, and you can prove such, some schemes will not impose any reduction. But it depends on the scheme rules.
 
S

Sick

Guest
Thanks

Conan,
Thank you for the reply. I believe our scheme does not make any actuarial reduction. I do not understand 22/43 of 66% could you please give an example of an amount based on a final pension (aged 65) of €25000
 
C

Conan

Guest
Ill Health

If it would normally take you 43 years to earn the full pension (joined Co at age 22), but on ill health retirement you had only completed 22 years service, then proportionate pension earned would be 22/43 times expected pension.
Whether this would be reduced on ill health depends on the scheme rules.
If you are in ill health, does the scheme provide any Permanent Health Insurance (PHI) cover that would provide an income if you were out of work due to illness ?
 
S

Sick

Guest
Ill Health

Where would I find out the answers to these questions. Due to illness I was out of work for 10 months but the company paid me a full salary. The rules to the best of my knowledge are 6 months full pay and then 6 months half pay. What would permanent health insurance normally cover. My scheme is non contributory.
 
C

Conan

Guest
Ill health

Your scheme booklet should outline whether you have a PHI benefit.
If yes, this would give you an income (say 66% of salary) if you are out of work due to ill health. This would mean that you are not forced to retire early and would in effect remain in the pension plan accriung benefits.
If you do not have PHI, then your only option when the 6 months half pay ceases would be to retire on ill health (assuming you cannot go back to work).
So check you pension scheme booklet for your precise benefits and options.
 
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