Welcome to the learning zone
Take the time to boost your knowledge with our pros & cons, frequently asked questions and case study below.
What is a Pension Increase Exchange (PIE)?
You are currently receiving a pension amount that goes up each year. A Pension Increase Exchange is where you take a higher amount of pension (pension increase) but have to give up (exchange) some of your annual inflationary rises.
Let’s look at a case study
Mark (aged 65) has received a Pension Increase Exchange (PIE) offer from his pension scheme, which increases his pension income in exchange for giving up his inflationary increases. He is unsure which option to take.
Mark has the following options:
A Pension of £8,000 pa increasing by 3% a year
A Pension of £10,000 pa which will not have any inflation increases (his PIE offer)
Mark's original income would catch up to his PIE offer by age 73.
By the time Mark reaches age 80, he will be worse off financially if he were to accept the PIE offer. This is Mark's break-even age.
*This graph is not to scale and is created as a visual aid to help your understanding of pension increase exchanges
Find out if a pension increase exchange is the right option for you. Book to speak to an adviser from Informed Pensions.
Weighing up what is best for you
What are the PROS of PIE?
Here are some potential reasons why a pension increase exchange might be a good option for you:
✔ Higher pension income for the early years of retirement
What are the CONS of PIE?
Here are some potential reasons why you may NOT want to exchange your pension:
✔ Loss of inflationary increases
✔ Could impact your Lifetime Allowance
✔ Could affect your tax position
✔ Could affect your entitlement to state benefits
Frequently Asked Questions
We have compiled a list of questions we often hear below but if you have a specific query, please do not hesitate to get in touch.
Can I get my pension increases back in the future?
No, accepting your PIE offer is an irreversible decision, it is therefore important to receive advice to ensure it is the best option for you.
Does accepting my PIE offer change my tax position?
Your pension income before and after a PIE offer is taxable under PAYE. Depending on your income sources, accepting the PIE offer and receiving a higher income could affect your tax position. An adviser can confirm your tax position on accepting your PIE offer.
Can accepting my PIE offer affect my state benefits?
Receiving a higher level of pension income can affect your state benefits, depending on if they are means tested or not. It is important to speak to an adviser to consider this.
Does accepting my PIE offer affect my spouse's pension?
Potentially, your spouse's pension entitlement may be based on your new income. It is important to consider your spouse's needs for pension increases as well as your own, an adviser can help you explore this.