Interest rates for December (impacting April 2021 benefit commencement dates) moved slightly lower versus November’s figures and were mostly in line with our expectations. Although interest rates have remained relatively low over past months, we do not expect to see that trend continuing indefinitely. Currently, April yields the largest lump sum value for your pension benefit and we are anticipating a noticeable increase in rates when January’s figures are released next month. If rates do increase, April will likely remain the most opportune month after January’s rates are released.
Last month we cautioned BP Employees who are separating from the company in 2021 to monitor interest rate changes closely as we expect to see rates increasing in conjunction with positive economic activity and additional federal stimulus programs. Higher interest rates negatively affect your pension’s lump sum value. Since January 1st, 2021, bond indexes used to calculate the 2nd and 3rd Corporate Segment Rates are already showing significant increases – implying increases in the corporate segment rates as well. This means we will likely be advising clients to take their pension lump sum as soon as possible, especially if you are a Heritage Employee because your pension is more sensitive to interest rate changes than Non-Heritage Employees.
Making sure you select the correct month to file for your pension benefits can greatly impact what you will receive. Late last year, many of our clients received a very significant increase to their total lump sum value, simply by waiting two additional months while rates fell substantially. It is important to keep in mind that while lump sum values can dramatically increase, the opposite can be true when interest rates rise substantially.
One of our specialties is understanding the inner workings of your BP Pension and how to make the correct decision about when to take your lump sum benefit. To schedule a complimentary consultation with one of our experienced advisors simply email us at firstname.lastname@example.org or call us at (877)739-6007.
Tyler E Ryan
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