There was nearly open revolt at work today over a bombshell announcement made yesterday regarding our pensions.
Ok, I exaggerate, but there were lots of angry clusters of 50-somethings around the coffee machines! Working in the private sector, we can’t down our tools, although perhaps someone might have thrown their mouse across their desk in disgust!
I mentioned over on the Early Retirement Guys Forum
that HR had just confirmed the penalty for taking our defined benefit (DB) pensions early – Cerridwen
called it very punitive
– the whole truth is worse.
Pension Scenario Today
According to my pension paperwork (which I dug out last night), since I joined the plan before 2005, my Normal Retirement Age (NRA) in the plan is 60 (not 65, which I mistakenly believed).
The earliest I can take this is at age 55 and the penalty is 4% per year, so if I were to take my pension early at 55, I would take a 20% hit on my pension.
Pension Scenario after Company Sale
I’ve mentioned previously that the company I work for is being sold by our parent company and we’ve now been told that this will happen at the end of October, when our new owners finally sign on the dotted line.
With pretty much just one month to go, HR sent a ‘timely’ email in answer to people asking questions about the pension scheme.
Post 31st October 2015, NRA will increase to 65 for everyone, regardless of when you joined the scheme and the penalty for taking the pension early will be increased to 8% per year!
So now, if I wanted to take my DB pension at 55, my pension would be reduced by a whopping 80%! Even to take it 5 years later at 60 means a reduction of 40% – ouch!
I get how if someone leaves the business voluntarily to work for another company, they lose some pension rights. However, none of us are leaving the scheme by choice so this leaves a very bad taste in the mouth.
Something tells me that the company knew about this all along but have only mentioned it now, with just one month to go before the sale, having kept us all beavering away for the past 5 months under the guise of ‘Business As Usual!’ Certainly not business as usual when it came to our pension schemes!
Since I mistakenly thought that my NRA was 65, I wasn’t planning on taking it before then (maybe 64 at the earliest). Therefore, my own plans for FI/Early retirement remain unchanged – I continue to save and invest to accumulate a pot of money on top of my DB pension.
I believe an official complaint has been submitted to the senior leadership team – unlikely to do any good with only one month to go but better than doing nothing.
Business As Usual
When I happened to look around the office today, I saw very little work going on as nearly everyone was unhappily talking about pensions. Many people evidently had planned on taking their pensions well before NRA (including my boss and two other chaps I work with) and they were extremely unhappy and understandably upset.
Me – I just got on with my work as I’ve still got a job to do.
Of course I’m not happy with the changes made but perhaps I’m not as upset as I could be because I have got my own plans.