Making Money Defined Benefit (DB) pensions: What you need to know
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Jun 30, 2025 Join financial advisor Peter Lawlor, with over 30 years of experience in defined benefit pensions, as he demystifies the complexities of these schemes. He explains how DB pensions guarantee income and the implications of recent regulatory changes, particularly in the NHS. Peter discusses the risks and rewards of transferring out of DB schemes, emphasizing the importance of understanding pension rules. Listeners will learn to navigate the financial landscape, make informed retirement decisions, and avoid potential scams effectively.
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DB Pensions Guarantee Stable Income
- Defined Benefit (DB) pensions guarantee a fixed income not subject to market risk, taken on by the employer.
- The pension amount is typically a fraction of final salary multiplied by years worked, often indexed to inflation.
Early Pension Has Financial Trade-offs
- Taking DB pension benefits early results in actuarial reductions to compensate for longer payment duration.
- There is a crossover point where early retirement may financially disadvantage you depending on lifespan.
Check Pension Statements Closely
- Always review your annual benefit statement carefully to understand your accrued pension and final pensionable earnings.
- Avoid pay cuts or going part-time near retirement as it can reduce your pension benefits.