On leaving his employment with a UK company in May 1978, the subject
of this question (b Oct 1932) became entitled to a pension of £795 pa,
payable at normal retirement age (65).

At that time, the insurer estimated that, with bonuses, the pension
would have increased to £1,911 at normal retirement age.

In fact, the subject has not yet retired.

What formula can be applied to determine the current value of the
pension and its capitalised value?

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Request for Question Clarification by acorn-ga on 09 Feb 2003 17:37 PST

Is this a math problem or a real life question?  

As a real life question it would seem to make more sense to ask the
former employer as so many factors could have changed since 1978 plus
we don't even know the factors in place then.

For example, my own pension is calculated on a system that, had I been
in the same situation as your subject, it would have changed 3
times...always upward, fortunately :-)...so that the estimate from
1978 would not have reflected the reality in 2003.  In addition, my
pension has no capitalized value as it is a set pension based on
earnings and years of service and age and a point variable (that's the
thing that has changed over the years).  There is also an age
limit...in other words, retiring at 70 instead of 65 would make a
difference.  Retiring at 70 or 73 would make no difference.  Also,
retiring at 46 and not collecting till 73 has a different effect that
retiring at 73 and collecting immediately.

As a math question, I don't think we have enough information to anwer
it either :-)

Also, is there some reason the subject hasn't started collecting that
pension yet?  I realize that, if he's still working, taxes may have
been a factor, but he's old enough now that his tax situation should
have changed.  I admit, though, that I'm not that familiar with non-US
tax law.

Anyway, that's 11,466 pounds he's not gotten since being eligible. 
Now this may not be the correct mathematical way to figure out how
much the pension increased each year. They may be doing a set figure
each year or they may be doing a percentage. But I'm just gonna use
lazy arithmetic and chose an average of 60 pounds a year increase. 
That means it would take him over 13 years of increased pension to
break even.  He'd be 86 before it would have been a bad deal to having
started collecting already.  Now the time will very likely be less
using a percentage, but he's still gonna be a lot older than he is now
to break even, and the longer he takes to claim the pension, the
longer he has to live to have made waiting a wise decision.  I took
mine early as I was going to have to wait till I was 74.5 before I
started breaking even, and they couldn't guarantee I'd live that long
:-)  Plus I took that retirement money, bought rental property, and
bring in a lot more than that pension would have :-)

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Clarification of Question by probonopublico-ga on 10 Feb 2003 04:00 PST

Hi, Acorn

Yes ... It's a real life situation.

And the subject has contacted his previous employers who, after
protracted correspondence, now claim that they can find 'no trace' of
his entitlement.

This is notwithstanding the certificate that he was given shortly
after he left that employment.

The subject has started a complaints process and it may be that some
settlement might be offered. Accordingly, some maths (however
spurious) could be helpful.

He didn't claim the pension earlier because (a) He didn't the money
and (b) this was among a package of benefits that he had set up for
his wife who has now passed away.

It seems likely that the company nicked the benefits because no claim
had been made previously, perhaps assuming that the subject had either
forgotten or passed on.

There's a lot of pension mischief in the UK and it's getting worse.

Any stuff that you can string together would be most appreciated.