Early Retirement & Best Pension Options

silentotter · 21 October 2009 at 9:02PM

I am 47 years old and plan to retire early at age 55. I have 3 company final salary pensions from a few previous employers that will pay out at age 65/66 depending on government policy. I also have a stakeholder pension, however I have not paid into it for a couple of years as it was performing badly. This will only pay out £1000.00 per year at the current amount of contributions made but is set to pay out at age 55.

The type of work I do has changed and I now work as a contractor and the agency does not offer a pension scheme.

Can anyone advice me what is best to do so that I get a reasonable retirement pension when I retire at 55.

I also have investments that are set to pay out an income of some sort when I retire.

shaunrc · 21 October 2009 at 9:51PM

Hi silentotter

My first question is to ask if your role as a contractor means you are self employed or if you have set up a limited company to do it? This can make a difference.

My suggestion would be to revisit your stakeholder and think through why your funds have done badly. Perhaps you need to think of choosing different ones or different amounts in each one. In these troubled times I would recommend considering your investment choices fairly frequently.

Personal pensions can often offer lower charges than a stakeholder and will usually offer a much wider investment choice which may help with investment performance.

Apart from that you need to restart contributions and if you plan to retire in 8 years then you will need to make fairly substantial ones. Also you could use investment ISAs. It is a choice in effect between full flexibility in an ISA and a pension which pays 25% of the fund tax free but the pension is taxed (for a basic rate taxpayer that is, if you are a higher rate taxpayer the tax relief on the contribution is more valuable). There is a thread on this forum which analyses the choice in more detail.

markr007 · 21 October 2009 at 10:20PM

Aside from the above good advice. Do you know what pension you want to retire on at 55 and do you know how much you are likely to get from the 3 old final salary schemes. Work this out and then work out your shortfall - this will then allow you to work out how much you need to contribute to get to where you want to be.

Generally speaking, and particularly when you only have 8 years left till you plan to retire all the different pension vehicles offer the same sort of things, the main thing is to get the money into them.

:-)

Cathy_Weiner · 22 October 2009 at 9:16AM

Hi Every One,
I am Cathy from USA. You are retiring 8 years later so there is more time to save good amount of money for retirement.You can save money as much as you can before the time of retirement.You have an investment in stocks so you can earn money from stake holders as well.

Thanks...

silentotter · 22 October 2009 at 8:15PM

Hi Shaunrc

Thanks for your advice. I am not self employed I work for an agency that deals with my tax in NI contributions.

I am used to a £15,500.00 salary per annum and would hope to get this when I retire. I don't expect the final salary pension would pay much as was only employed by the companies for 3 yrs or just over for each company. If I retired early would I be able to receive these pensions early? I know you would lose a percentage for taking them early.

I was payng £2100 per year into my stakeholder, would this be enough over the next 8 years? I also have investments worth at the moment £23,000.00. I have been informed by the DWP hat I would be entitled to £400.00 old age pension at age 65.

Silentotter

markr007 · 22 October 2009 at 10:23PM

Do you have a deferred benefit statement from your final salary pensions? If so then let us know the pension plus date of leaving. If not then I suggest you write off and get a new one from the schemes.

Regarding the stakeholder, do you know what the current fund value is?

novice-saver · 23 October 2009 at 9:57AM

silentotter wrote: »

I am used to a £15,500.00 salary per annum and would hope to get this when I retire.

You need a lot of money in a pension, particularly if you want this to happen at age 55.

Using current figures, claiming at 65, you may get around a 6% return so that would need a pot in excess of £250,000.

The returns are less for early retirement because of the longer payments period, so you'd need considerably more.

I can't see a legal way of accumulating that kind of money from your salary in the next 8 years, even 100% contribution would probably fall short.

Sorry to be the bearer of bad news.

chesky369 · 23 October 2009 at 12:05PM

...investments that are set to pay out an income of some sort when I retire... but does this mean when you plan to retire at 55 - ten years or so early - or at a more normal retirement date? What kind of annual income would this be?

I'm worried about your plan for such an early retirement since I can't see that you could contribute sufficiently huge amounts from a £15k salary. I think you may have to reconsider.

chesky369 · 23 October 2009 at 12:14PM

You didn't mention in your original post that this might fall under retirement for medical reasons. Is this so?

silentotter · 25 October 2009 at 9:55AM

No it wouldn't be early retirement on medical grounds I would just like to retire early at 55. So if pension plans are not a good option what is the best investment alternative that can be converted into a pension at a later date?

Silentotter

jem16 · 25 October 2009 at 10:28AM

silentotter wrote: »

No it wouldn't be early retirement on medical grounds I would just like to retire early at 55. So if pension plans are not a good option what is the best investment alternative that can be converted into a pension at a later date?

Silentotter

It's nothing to do with it being a pension wrapper or any other investment wrapper - both do exactly the same.

What people are saying is that you would have to contribute very high amounts to fulfill your dream of retiring in 8 years time and on a salary of £15k it doesn't sound very realistic.

Early Retirement & Best Pension Options

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