Retirement

[42]

I'd rather have a holiday sleeping in my spare bedroom than a Haven caravan

Whilst i dont understand these (older) people who own them, and go there every other weekend & bank holiday etc. But if you've got young kids & dont want the clart on with flights, they're actually canny enough. We've done it last couple of years, and the caravans are nicer than some of the hotels ive stayed in Spain, and the bairn really enjoyed it.

 

[NYMackem]

Have you factored tax into that also? Which then makes the earlier years more attractive. But goes back to what I said earlier, theres effectively a notional pot, and an average life expectancy age. The earlier you go, youre just spreading that pot over a longer period. And because you dont know when your health or time is up, its best to take the money as soon as you can afford to do it. No point in holding onto your late 60s then only having a couple of decent years to enjoy retirement

I hadn't, on the basis that the state pension and the personal allowance are now pretty much in lockstep, so in the absence of other retirement income, all of it is going to be taxed at 20%, and also because I reckon she'd get a job of some stripe after leaving her main job, whether that's a hobby job or part time consultancy.

However you are right in the absence of other income - the ten years between 57 and 67 would be worth more because the first £12k and change would be untaxed. Which in turn pushes all the ages up where retiring early stopd delivering the highest total retirement income.

 

[DaveH]

I don't have a DB pension, but my Mrs (no) is in the newest (and shittest) NHS scheme. Normal retirement image is 67 and for every year early you retire you take a cut in the annual pension payment of 3% - 6% on a sliding scale, where the earliest you can retire is 57 at 60% of your normal retirement pay.

I've worked it out that you are best going at 57 if you die before 77, 58 if you die when you're 78, 61 if you die between 79 and 82, and 67 if you live beyond 82.

That said, there's not much in it unless you live past 85, and even then I don't see what the point of having the 40% extra would be in your late 80s and beyond.

I'm in the HE sector and have similar rules, which have annoyingly been applied recently. It is one thing I didn't realise when I was young. You see all the attractions of a pension scheme and not understand them, but they look good. Then over the years they change the rules and there is nowt you can do about it. If I go at 57 then I think it is the same, somewhere between 60-66% of the pension.

I think when I'm 80, I'm not going to be spending as much and will not be as bothered about the lower income. I'd rather go earlier and enjoy life and not worry that I'll be sitting at the age of 82 thinking I could have squeezed a few more quid out of the scheme if I had gone later, or regretting not having died yet.

@42 makes a very good point about tax. One thought was go to at 58, live off savings, bleed them dry and then claim the pension at somewhere between 60 and 62 for the higher return. That will give me up to 4 years without paying any tax, followed by paying more tax each year because of the higher amount. I'll probably be better off taking the lower amount at 58 and topping it up from savings over a longer period, paying less tax each year.

 

[Canister]

I don't have a DB pension, but my Mrs (no) is in the newest (and shittest) NHS scheme. Normal retirement image is 67 and for every year early you retire you take a cut in the annual pension payment of 3% - 6% on a sliding scale, where the earliest you can retire is 57 at 60% of your normal retirement pay.

I've worked it out that you are best going at 57 if you die before 77, 58 if you die when you're 78, 61 if you die between 79 and 82, and 67 if you live beyond 82.

That said, there's not much in it unless you live past 85, and even then I don't see what the point of having the 40% extra would be in your late 80s and beyond.

That all sounds very good. All you have to do know is decide excatly when she is going to die!

 

[DaveH]

That all sounds very good. All you have to do know is decide excatly when she is going to die!

What an obituary.

DaveH died this morning after making a typo on his expected date of death in his pension planner and suffered an extreme case of conditional formatting. He lived by the spreadsheet, he died by the spreadsheet.

 

[Town End Farmer Giles]

I must be in the minority on this thread in terms of planning, I know roughly how much I'll get, when I plan on going and the rest is "Ah it'll be fine, if I run out money at 66 its only a year to wait for my state pension"

To be fair I really dont think I'll run out of money but some of you lot sound as though you'll be coining it in

 

[NYMackem]

That all sounds very good. All you have to do know is decide excatly when she is going to die!

It's not really about guessing your end date and picking the maximum total income on that basis, it's about understanding the potential costs of leaving early.

 

[Edinburgh Black Cat]

What an obituary.

DaveH died this morning after making a typo on his expected date of death in his pension planner and suffered an extreme case of conditional formatting. He lived by the spreadsheet, he died by the spreadsheet.

Here lies #REF

 

[NYMackem]

What an obituary.

DaveH died this morning after making a typo on his expected date of death in his pension planner and suffered an extreme case of conditional formatting. He lived by the spreadsheet, he died by the spreadsheet.

It'll be an INDEX/MATCH formula that will take me. A massive stroke as I seeth with frustration at why I can't get the hower to work.

 

[Darlo1973]

@42 makes a very good point about tax. One thought was go to at 58, live off savings, bleed them dry and then claim the pension at somewhere between 60 and 62 for the higher return. That will give me up to 4 years without paying any tax, followed by paying more tax each year because of the higher amount. I'll probably be better off taking the lower amount at 58 and topping it up from savings over a longer period, paying less tax each year.

Similar thinking here to live off ISA and other savings/investments (and hopefully a redundancy lumper) for a few years and defer claiming on the private pensions. Still working out the pros and cons for taking the maximum tax free lump sum from it or leaving the money within the pension

 

[stapler]

I'm in the HE sector and have similar rules, which have annoyingly been applied recently. It is one thing I didn't realise when I was young. You see all the attractions of a pension scheme and not understand them, but they look good. Then over the years they change the rules and there is nowt you can do about it. If I go at 57 then I think it is the same, somewhere between 60-66% of the pension.

I think when I'm 80, I'm not going to be spending as much and will not be as bothered about the lower income. I'd rather go earlier and enjoy life and not worry that I'll be sitting at the age of 82 thinking I could have squeezed a few more quid out of the scheme if I had gone later, or regretting not having died yet.

@42 makes a very good point about tax. One thought was go to at 58, live off savings, bleed them dry and then claim the pension at somewhere between 60 and 62 for the higher return. That will give me up to 4 years without paying any tax, followed by paying more tax each year because of the higher amount. I'll probably be better off taking the lower amount at 58 and topping it up from savings over a longer period, paying less tax each year.

Remember that that "4 years without paying tax" is also 4 years of unused personal allowance, which is up to 50 grand of untaxed income depending on how much taxable interest you get from your savings.

 

[DaveH]

Remember that that "4 years without paying tax" is also 4 years of unused personal allowance, which is up to 50 grand of untaxed income depending on how much taxable interest you get from your savings.

That is what I was getting at, just didn't word that very well reading back. You have put it far better.

 

[Edinburgh Black Cat]

Similar thinking here to live off ISA and other savings/investments (and hopefully a redundancy lumper) for a few years and defer claiming on the private pensions. Still working out the pros and cons for taking the maximum tax free lump sum from it or leaving the money within the pension

On the pros list, bear in mind you could feed some of the lumper excess into ISAs and General Investment Accounts which would allow you to keep the funds invested/growing and allow you to subsequently draw down over time to help manage the tax liability on the pension drawdown.

Out of interest, what pros and cons do you have so far?

 

[DaveH]

Similar thinking here to live off ISA and other savings/investments (and hopefully a redundancy lumper) for a few years and defer claiming on the private pensions. Still working out the pros and cons for taking the maximum tax free lump sum from it or leaving the money within the pension

I'm deferring the decision on that one!

If I go around my 58th birthday, then it will be 9 years, 10 months for me. (I'm still counting that as single figures). It is going to be a while before I'm into the finer details.

Once per year once I'm approaching my earliest retirement age, I can get a pension quote. In fact rather than use their website and their estimator tool (which makes some fundamental rounding down errors), they say request a quote. In that, I'm led to believe, they give you options of taking your defined benefit plus three times the annual benefit as a lump sum. You can waive the lump sum and receive a higher annual pension or some combination of both.

For me, the main phase of my pension planning is how I top up my private pension until the state pension kicks in. If that is a 9 year period, I need to work out if I'm better off having the higher annual payout, or take and invest the whole lump sum, using a ninth of it per year to top up my annual income.

I neither like or trust my pension company, so that might influence me to take the money when I can, then at least it is in my hands rather than theirs. They have changed the scheme a few times since I joined, making it worse each time. There are various legal protections, but I would still worry that they change the scheme around me, especially if they hit any financial hardships.

 

[Darlo1973]

On the pros list, bear in mind you could feed some of the lumper excess into ISAs and General Investment Accounts which would allow you to keep the funds invested/growing and allow you to subsequently draw down over time to help manage the tax liability on the pension drawdown.

Out of interest, what pros and cons do you have so far?

The main con is that if the pension lump sum was, say, £100,000 (to make it a round number) then apart from your ISA allowance and maybe filling up on Premium Bonds then the income from the rest of it would be taxed in a general savings or investment account.

Of course you could take the lump, buy a new car or spend it on a world tour.

 

[Snugster]

Logon or register to see this image

 

[Slatz63]

Logon or register to see this image

See post #4142 yesterday.

 

[Fletch]

Ignore this if your a final salary DB pension
For those posters with a DC(pot) pension , on retiring have you reduced the risk exposure ? Hoping the missus can retire end of March and hers is mix of 80% and 60% equity but I’m aware markets are very high at moment so unsure whether to switch some so it’s all 60% so less impact if was big dips when retires

 

[Barista]

The main con is that if the pension lump sum was, say, £100,000 (to make it a round number) then apart from your ISA allowance and maybe filling up on Premium Bonds then the income from the rest of it would be taxed in a general savings or investment account.

Of course you could take the lump, buy a new car or spend it on a world tour.

You could also consider taking this theoretical lump sum in stages over 4 years - e.g. take £25,000 tax free lump sum annually - £20,000 each year into an ISA, and the other £5,000 towards living expenses so that you don’t need to withdraw as much money from your ISA. That way you are just gradually switching from the pension tax wrapper to the ISA wrapper.

 

[Pop]

I'm deferring the decision on that one!

If I go around my 58th birthday, then it will be 9 years, 10 months for me. (I'm still counting that as single figures). It is going to be a while before I'm into the finer details.

Once per year once I'm approaching my earliest retirement age, I can get a pension quote. In fact rather than use their website and their estimator tool (which makes some fundamental rounding down errors), they say request a quote. In that, I'm led to believe, they give you options of taking your defined benefit plus three times the annual benefit as a lump sum. You can waive the lump sum and receive a higher annual pension or some combination of both.

For me, the main phase of my pension planning is how I top up my private pension until the state pension kicks in. If that is a 9 year period, I need to work out if I'm better off having the higher annual payout, or take and invest the whole lump sum, using a ninth of it per year to top up my annual income.

I neither like or trust my pension company, so that might influence me to take the money when I can, then at least it is in my hands rather than theirs. They have changed the scheme a few times since I joined, making it worse each time. There are various legal protections, but I would still worry that they change the scheme around me, especially if they hit any financial hardships.

Who is your pension company?

Pension administrators/actuaries/management companies don’t change your scheme, your employer does.