Pension at normal pension age
When a member of a defined benefit scheme reaches the scheme’s normal pension age, they are entitled to a pension based on:
the scheme’s accrual rate;
their final pensionable remuneration; and service in the scheme.
The pension in payment is taxed as earned income.
EG – A member joined the scheme 20 years ago, with final pensionable pay of £72,000 and the scheme has an accrual rate of 1/60th. Therefore the pension entitlement will be:
Question - Use Your Note Taker To Jot Down Ideas / Calculations
Sarah is about to retire at the age of 65, which is the normal pension age of her company’s defined benefit pension scheme. Sarah has pensionable service of 26 years. The scheme has an accrual rate of 1/60ths for pension and Sarah’s final pensionable remuneration is £45,000.
Calculate Sarah’s pension entitlement at the scheme’s normal pension age.
Sarah’s pension entitlement will be: 26/60ths × £45,000 = £19,500 p.a