I couldn't help noticing how much my wife's pension increased over the last seven years of service. It creeps up slowly to age 60, when she would get an annual pension of £38000 and a lump sum of £49000. Then it jumps up quite dramatically, £44,500@62, £52,600@64 and £68,000@67. The lump sum stays the same as that is part of the, now closed, final salary.

Please explain, Jimmy.

I think its probably a product of a couple of things. Firstly, every year past 60 your OH isn't retired, means its a year "saved" as far as the pension company is concerned. The pension company will predict she has about 25yrs to live at age 60 (life expectancy 85 is about the going rate for someone age 60 today I think). So, if she stays in work 2 more years they will split the money she would have received in those 2 yrs over the remaining 23 of her assumed life. £38,000 x 2 / 23 = about an extra £3,300 per yr.

Secondly, they're investing that £38,000 x 2 = £76,000 for an extra 2 yrs (plus her £49,000 lump sum that she hasn't drawn down) at say 8% return, there's another £22000 ish to spread over the 23 yrs they'll be paying her £22000 / 23 = circa £900 p.a.

Finally, she's also contributing for those two years. Assuming she earns £60,000, that means there's an extra £60,000 x 25% x 2 = £30,000 to split over the 23 yrs, giving an extra £1300 per yr.

Adding these gets you to £43,500.

Clearly, I'm still a grand short, so I'm guessing the pension benefits are index linked in some way? If you find out what inflation rate they use for the benefits, it will probably get you to £44,500.