pension reduction for early retirement?

Brendan Burgess

Brendan Burgess

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Employee of prominent Irish PLC.
Defined benefit scheme.
Small sentence in scheme booklet stating a pension reduction would apply for early retirement i.e. before 65

Just informed the rate is 6% per year, so if you want to retire at 50, you lose 90% of your pension, 55 you lose 60% etc

Came as major shock to all.

Is this normal??

Tks in advance
 
Sounds right from my recollection of ILAC ( almost 10 years ago when the hair used to get in my eyes ). They used to however make an allowance for future revaluation i.e. they roll up the pension by a factor to allow for the revaluation that won't apply as you've taken your beneftis. Am I making any sense.
 
reply

They used to however make an allowance for future revaluation i.e. they roll up the pension by a factor to allow for the revaluation that won't apply as you've taken your beneftis. Am I making any sense.

Sorry, you probably are, but can you tease that out a bit as I don't quite follow

Are other folk aware of their clawback factor, could they post their rates?
Tks
 
Re: reply

Okay, when I was in ILAC they used to calculate benefits as follows ( in most DB schemes ).

Best done by example.

Joe has worked 20 years in a company and leaves 15 years early. Pensionable salary is 30000.

The calc was:

20/60 X 30000 = 10000

Now as he has 15 years left to go, they added 4% compund on for every year left to go. The factor may not be 4% now as inflation is normally lower )

Pension now = 10000 x ( 1.04 ^ 15 ) = 18009

Then they would apply the early retirement factor ( i.e. 1 - ( 15 x .06 ) = .1 ) giving you a pension of 1800.90 per annum.

Not all ILAC schemes are at 6% per annum but it's fairly typical and not just with ILAC. It's fairly much standard across the board.

Why do you want clawback rates from other people? These won't apply to you. Some schemes have actuarial tables based on the type of pension at retirement ( e.g. different rates between escalating / non escalating schemes ). Have been in two DB schemes myself. Both were 6% per annum.
 
ILAC?

I assume ILAC stands for "Irish Life Assurance Corporation"?
 
Reduction

Our defined benefit scheme has a reduction of 5%. This was introducted a couple of years ago when the markets slowed down. If you retire on ill health grounds there is no reduction. Our scheme also includes social welfare in the final 2/3 of salary payment.
 
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