Notional pension income & continuing to work

Client is single, currently working, pension age, getting state retirement pension.

AFAIK (I need to check) she currently works too many hours to access any of her occupational pension, but I believe that there may be a semi-retirement option, & this is where I get concerned.

She gets a small amount of HB based on her state pension & earnings. No notional income taken into account at present.

She would like to reduce her hours. My concern is that if she reduces her hours she opens up the possibility of notional income.

I assume that whilst her earnings are MORE than she could get from the occ pension no notional income falls to be taken into account as you can’t envisage a situation where she gets the pension income without at the same time reducing her earnings.

However, I’ve been looking at reg 41 of the HB(SPC) Regs & can’t see anything specifically providing for that.

Even if there is a semi-retirement option, her projected pension is very small and I think it’s unlikely that the employer would allow her to work few enough hours for earnings (or earnings plus part-pension) to be less than her full occ pension, so I think that notional income doesn’t arise - in other words, whilst she is still working, her actual income is less than the occ pension income would be were she to stop working.

It’s not a money purchase scheme, so does this relate to whether the client has chosen to ‘defer’ (reg 41(1)(b))?  What she is actually doing is deciding not to retire from work as yet, so does deferral only relate to where you have retired but choose not to receive an occ pension (because until you retire, you are not entitled to that pension), or is carrying on working a type of deferral?  Deferral doesn’t seem to be defined when it comes to occupational pensions (at least not in the HB Regs).

Update: have done more research and as far as I can tell, carrying on working past a scheme’s retirement age IS deferral. However, I think the problem continues to be hypothetical as maybe in most cases where there’s a possibility of MTB entitlement income is greater whilst a client continues to work. This is definitely the case here for this client & I think would be even with a semi-retirement option. Be interested if anyone does know what would happen if notional income was greater, however.

WillH - 23 June 2019 01:07 PM

AFAIK (I need to check) she currently works too many hours to access any of her occupational pension

That sounds a bid odd.  Is it a DB or DC scheme; I assume DB.  You need to be very confident that she can’t access her pension savings in any way.  e.g., Is there no option to take lump sums post retirement age?

Thanks Gareth - I was hoping you’d see this.

Yes, it’s a DB scheme. And yes, I do need to make sure of that point…so far all client has is a forecast of monthly pension income if she were to stop work. I need more information to be sure that, as you point out, there isn’t a lump sum option (or if there is, that it would be low enough not to affect benefit).