Loss of % of defined benefit pension in lieu of lump sum

J

Jimbobp

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Hi,
I have a relation who due to a dispute with his employer has been offered (through the labour relation court) to take a lump sum of €60k and then take early retirement. He is 58 and according to his defined benefit docs if he takes retirement now he will get 96% of the benefit due to him (100% being available from aged 60 onwards). He's looking to see if I can help him work out what he is losing out by taking retirement now (so he can go back to his employer with a counter offer).
He wants to work this out as a lump sum figure. Its fairly easy to work out what the loss of things like loss of VHI, death in service benefit will cost him to replace, but does anyone know what the monetary loss of taking his defined benefit now as opposed to 7 years time will cost him? He also has an AVC, could this be impacted by taking early retirement?

His NRA pension calculation is : 1/60 * Final salary * yrs service.

If he retires now this figure will be the same * 96%

Is there anything else he will be loosing out on by going on retirement now? He reckons his defined pension is not indexed linked.

Any info appreciated
 
Is there a union?
The reduction to 96% is sort of an acturial valuation. As part of this agreement get this removed. You could ask for additional years to be credited. You may get 2 to 3 years additional years. Also make sure the pension is indexed linked.
Final Salary is normally reduced by State pension. Make sure it is reduced by SP * number of years service/40
Is he married? Is there also a spouses pension?
Max out his AVC. At 58 he can contribute 35% of 2007 income (P60 amount) provided it is done before Oct 31.
 
Thanks for that asdfg, v interesting.

I think he does have a union but not sure what sort of lee way he will have to ask his employer for these concessions.

If he maxes out his AVC (think he has about €60k in it at the moment) can he elect to take all of this as his 1.5 times final salary TFLS without reducing his main pension benefits?

As well as asking for additional years, indexation etc, is there any mututal benefical way for him to receive a lump sum if they offer him more than the original €60k? Could the company elect, for instance, to pay €40k into his AVC. They can write it off againt tax and he can take most if not all as part of his TFLS? Instead of him paying 35% of 2007 income into his AVC, could the company pay this as part of his pay off ?

Thanks again
 
If he maxes out his AVC (think he has about €60k in it at the moment) can he elect to take all of this as his 1.5 times final salary TFLS without reducing his main pension benefits?
Click to expand...
Yes, the max he can withdraw is 1.5 times final salary. If there is any thing left he can use this to increase his pension.

Not sure about the remaining part of your question
 
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