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    • half empty
    • By half empty 4th Jan 18, 8:30 AM
    • 8Posts
    • 4Thanks
    half empty
    Might have to go early. What have I missed if I take my pension early.
    • #1
    • 4th Jan 18, 8:30 AM
    Might have to go early. What have I missed if I take my pension early. 4th Jan 18 at 8:30 AM
    55 (56 later this year). Final salary pension at the moment and the possibility of a big wage drop (15-20k) due to job changes beyond my control. I was never going to go past 60 anyway.

    No cards, no mortgage and not a lot in savings.

    As I understand it, if I go early and take the pension rather than defer it, the pot (-25%) will be taxed if I touch it (already higher rate tax bracket). Not that I had really considered it as the pension will track inflation and seems reasonable. Rather play safe with that.

    25% tax free, best to take that or leave it if long term living wanted? I expect that the bulk would be put in an ISA of some sort not frittered away on a Ferrari...

    Monthly pension will be taxed, but what else will I have to pay, I understand that national insurance etc. is not deducted? Google tends to overload you with rubbish replies.

    Sums seems to indicate we can do it but info varies. At the moment the stress of the job is a major factor and getting to old age now seems a target, even on a limited pension rather than getting to the larger pension by working a few more years and dropping down at the last hurdle.

    New job outside this firm, might do but skill set is rather limited to the work I do now so part time non skilled probably. Who knows.
Page 1
    • haf63
    • By haf63 4th Jan 18, 8:49 AM
    • 204 Posts
    • 52 Thanks
    haf63
    • #2
    • 4th Jan 18, 8:49 AM
    • #2
    • 4th Jan 18, 8:49 AM
    If you take the pension early then its very likely that it will be a reduced pension (circa 5% per year taken early but check with your scheme as it varies a lot). Tax has got nothing to do with it really. Obviously whatever pension you take will then become your income and get taxed accordingly.
    You should also check the 25% tax free as taking that will reduce the pension considerably and the combination of taking pension early and 25% lump sum may mean you don't have a sufficient income for your needs. Basically too many variable to give you a clear answer
    • IanSt
    • By IanSt 4th Jan 18, 10:16 AM
    • 206 Posts
    • 160 Thanks
    IanSt
    • #3
    • 4th Jan 18, 10:16 AM
    • #3
    • 4th Jan 18, 10:16 AM
    I think you need to do some careful budgeting to see what your expenses are likely to be going forward. As you have limited savings make sure you leave nothing out. E.g. how will you buy your next car, and the one after that, and after that. Then there is the upkeep of your house. When you're used to a high salary then it's fairly easy to cope with unexpected bills, but they may be harder when you're on a more limited budget.

    Once you have that you can better judge whether you can afford to take the lump sum from your pension. Usually it is much better financially to leave the money in the pension, but you've not given any details so won't comment further.

    With regard to taxes: yes you'll pay tax on it as its income, but there won't be any NI payable on the pension, however will you need/want to pay any voluntary contributions to bring yourself/partner up to the full state pension?
    • kidmugsy
    • By kidmugsy 4th Jan 18, 10:52 AM
    • 9,974 Posts
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    kidmugsy
    • #4
    • 4th Jan 18, 10:52 AM
    • #4
    • 4th Jan 18, 10:52 AM
    You are paying higher rate tax at the moment: could you make enough of a pension contribution - to a Personal Pension of some sort - to let you avoid that tax? Then when you do chuck in your job you could live off the personal pension for a while before you feel the need to start the FS pension. That way you'll suffer less actuarial reduction on the FS pension.

    On what definition of "final salary" will your pension be based? Some use last year of employment, some the best of the last three years, some the best three sequential years in the last ten, ...: there are other variants too. You need to tell us.
    Free the dunston one next time too.
    • half empty
    • By half empty 5th Jan 18, 7:03 AM
    • 8 Posts
    • 4 Thanks
    half empty
    • #5
    • 5th Jan 18, 7:03 AM
    • #5
    • 5th Jan 18, 7:03 AM
    Thanks for the replies. It has given me more to look at that I missed. Apologise if I try to be vague on somethings in avoiding employer etc, though may be bleeding obvious for all I know
    haf63.
    trying to get the figures for both options regarding 25% but department dealing says there are issues in the revised system, not happening yesterday. Did not know about reduced options for early out, I need to chase, must be in the book. 25%, need to see what I can get on re investing in a shares ISA or something, understanding there is a risk.

    Thanks.

    IanSt.
    Spreadsheet has been done however as the figures are a bit off I need to clarify the final number (I suspect, see above), I am sure I am in the right area but the finals figure corrected are needed. As haf63 pointed out, reduced by a % for early out I was not aware of so need that as it may say "no to go".

    Looks like we will have enough a month to put some away (400-600 after outgoings). That includes all the outgoings and toping up other half private pension until that is used at a later date.

    Wife is staying in work for longer, age gap. Just realised and deducted that in case something happens and that is tight but not impossible. That has altered my outlook on this. Might have missed that.

    kidmugsy
    Threes years I think is the best of. I need to chase that, with all that is happening, I read the booklet and it goes in one ear and out the other and I miss bits (timeline to say yes or no is close). That might be the breather.

    Thanks all. Will get back into the documents today to see what else I am missing.
    • justme111
    • By justme111 5th Jan 18, 9:13 AM
    • 2,905 Posts
    • 2,800 Thanks
    justme111
    • #6
    • 5th Jan 18, 9:13 AM
    • #6
    • 5th Jan 18, 9:13 AM
    It looks like you need someone you trust to do the mapping for you as you do not seem to be able to map your answers and questions and options. for example:
    1. option 1 - to continue working on reduced salary. how much stress it involves , will it affect tour pension negatively and by how much, what will be your net income, how much drop in income will it be.
    option 2 - retire early. how much will be your pension what will you do about shortfall in your income and what the total loss over your lifetime be due to taking reduction. usually reduction is around 4% per year taken early.
    option 3 - take lump sum but start drawing pension at 6O unreduced - can you do it at al?
    what were you planning to do with lump sum? what do you need to live on?
    your trade union/association may be of help re pension info.
    • half empty
    • By half empty 5th Jan 18, 4:02 PM
    • 8 Posts
    • 4 Thanks
    half empty
    • #7
    • 5th Jan 18, 4:02 PM
    • #7
    • 5th Jan 18, 4:02 PM
    I think you are right. Certainly asking here has woken me up to more that I was unaware of. Thanks to all. It is appreciated.

    Better get some advice. This is looking more like changing roles.
    • LHW99
    • By LHW99 5th Jan 18, 5:30 PM
    • 1,055 Posts
    • 901 Thanks
    LHW99
    • #8
    • 5th Jan 18, 5:30 PM
    • #8
    • 5th Jan 18, 5:30 PM
    Also worth checking your / your wife's state pension entitlements.
    If you would be short of the full new state pension, you could buy added post-2016 years, which are good value, if you do stop work early.
    https://www.gov.uk/check-state-pension
    • PeacefulWaters
    • By PeacefulWaters 5th Jan 18, 9:45 PM
    • 7,527 Posts
    • 9,410 Thanks
    PeacefulWaters
    • #9
    • 5th Jan 18, 9:45 PM
    • #9
    • 5th Jan 18, 9:45 PM
    I think you are right. Certainly asking here has woken me up to more that I was unaware of. Thanks to all. It is appreciated.

    Better get some advice. This is looking more like changing roles.
    Originally posted by half empty
    Beware accepting a lower salary. It could lead to a lower pension.
    • half empty
    • By half empty 6th Jan 18, 8:08 AM
    • 8 Posts
    • 4 Thanks
    half empty
    Beware accepting a lower salary. It could lead to a lower pension.
    Originally posted by PeacefulWaters
    Yeah, that was the panic that set me off asking the question here. I accept that going early it will be reduced, the trade off is stress, time not living out of a vehicle/hotel and and getting a local low skilled job with standard hours. Part time perhaps.

    After replies etc. prodding me in the right direction now looks like best of three years (though did see something else when skim reading). Help line shut this weekend but with everything else, there is a breather. Not had a lot of time to sit down properly with it (scheme rules) but this weekend I will.

    LHW99, certainly, think our IFA is going to be contacted to run through the issues with my pension rules to hand including her pension both private and state.
    • enthusiasticsaver
    • By enthusiasticsaver 6th Jan 18, 9:53 AM
    • 5,131 Posts
    • 9,780 Thanks
    enthusiasticsaver
    You can get quotes for how much your pension will be should you retire early but normally it would be reduced depending on your scheme and normal retirement age unless you retire for ill health reasons or sometimes redundancy.

    You will probably not be a higher rate tax payer in retirement unless your pension is very good and there will be no NI or pension contributions etc.

    Before DH and I opted for early retirement we mapped our expenditure and pension income on spreadsheets to make sure we could afford to retire. DH had overpaid significantly into his pension so he took the TFLS which we invested and his pension is over the tax threshold but he no longer pays higher rate. Consequently his pension is only around £600 less than his take home pay was and we were saving that anyway.

    Why don’t you have savings? We found it useful to live off what we thought our pensions would be in the years approaching retirement and save the difference. Some went on the house, cars, holidays but a lot was invested in stocks and shares isas and sipps as a backup to pensions as my pension is much lower than my DHs.

    Can you go part time with your existing employer or take flexible retirement where you draw on the pension but still work part time?
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • Mutton Geoff
    • By Mutton Geoff 6th Jan 18, 11:09 AM
    • 1,029 Posts
    • 1,094 Thanks
    Mutton Geoff
    Why donít you have savings? We found it useful to live off what we thought our pensions would be in the years approaching retirement and save the difference
    Originally posted by enthusiasticsaver
    That is a good idea. I am a big believer in saving first then spending what's left whereas many do the opposite.
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £4,014

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    • enthusiasticsaver
    • By enthusiasticsaver 6th Jan 18, 11:33 AM
    • 5,131 Posts
    • 9,780 Thanks
    enthusiasticsaver
    That is a good idea. I am a big believer in saving first then spending what's left whereas many do the opposite.
    Originally posted by Mutton Geoff
    We have always saved in various pots for short term things like insurances, Christmas, holidays etc and then medium term for home improvements and replacement cars and long term for retirement, to help children. We always tried to keep a balance though and did spend as well but not every spare penny. I would feel quite insecure I think without any investments or savings behind me.

    It also seemed like common sense to me to adjust your expenditure to your expected income in retirement in the five years prior to that. We were lucky in that we paid off our mortgage before our daughters went to university (deliberately timed) and then after that we were investing for retirement and to help our children with their first house deposit, wedding etc etc so our outgoings really reduced once that part of our lives was over.

    We decided we would aim for 60 but ended up going at 58 because we could afford it.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • half empty
    • By half empty 8th Jan 18, 6:47 AM
    • 8 Posts
    • 4 Thanks
    half empty
    Re savings. Paying off stupid card decisions and larger mortgage that we should not have had and not really paying attention. For what ever reason, it is what it is. Hindsight is a wonderful thing. Now we are starting to pile it away after the mortgage (overpaid like crazy for years). We have some but not what I would call a large amount. Could probably go a year at the moment. We are not all the best financial planners.

    W
    • crv1963
    • By crv1963 8th Jan 18, 7:21 AM
    • 192 Posts
    • 502 Thanks
    crv1963
    Re savings. Paying off stupid card decisions and larger mortgage that we should not have had and not really paying attention. For what ever reason, it is what it is. Hindsight is a wonderful thing. Now we are starting to pile it away after the mortgage (overpaid like crazy for years). We have some but not what I would call a large amount. Could probably go a year at the moment. We are not all the best financial planners.

    W
    Originally posted by half empty


    Having a years savings is not bad going so don't beat yourself up! Taking a big wage drop may affect your pension but you may be able to preserve the pension at your higher salary?


    I'm going to take my DB pension this year then we both are going to go for a less stressful job each. We'll then look at it as having 3 wages coming in- one to save into DC pensions, two to do as we are now- a colleague and his wife retired he started a new job, they live off of their pensions and his wage is finishing off his mortgage and paying into a DC pension.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
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