Early Retirement

Chorlie

Hi,

I'm 39 and retired this year on ill health grounds. I was working for 19yrs for the same company, in their final salary pension so got my full pension. I'm also disabled so have been getting DLA and now getting some ESA.

I'm being taxed on my pension, but I'm sure I read in all my paper work that I'm not paying National Insurance and if I wanted to then I'd need to contact the Tax Office.

How will not paying NI effect me? Will it reduce my state pension? I'm getting NI credits due to the ESA, is it worth paying NI?

Also, I've always been a saver so have ISA, Bonds, Shares, Saving Certs etc, and I took my max Tax Free Cash Lump Sum so have that invested. I don't spend all my income and was wondering if I can start another small private pension even if I'm drawing one? Or is this not permitted, would I be best just investing as I'm doing now.

Thanks for any advise.

Chorlton

Loughton_Monkey

I don't have enough knowledge to address your NI issue.

However, the pension issue is quite easy. You are allowed to invest up to £3,600 a year in a stakeholder pension. Otherwise, pension contributions (for tax relief) must be paid out of taked income from employment.

I, too, am early retired (but by choice and not due to ill health) and draw a couple of pensions, but otherwise live off investment income/savings. But I specifically bung my £2,880 a year into a Stakeholder plan. Each year's contribution immediately shows up as £3,600. I know of no better investment! 25% Growth minimum in the first year!

Some people suggest that inflexibility and tax on the pension (when I finally take it) are 'negatives'. For me, though, I don't see this. I can take 25% of the rolled-up fund tax free. Having no children, I have no desire to leave any significant estate, and so my task is to eake out my pensions/savings etc. to keep me in the accustomed manner etc. So the more in pensions the better. If I die early, then, OK you can say I've 'lost'. But I don't care!!! If I live longer than I planned, then pensions keep paying me! no other investment does that.

So do strongly consider a Stakeholder pension.