Early retirement -Teachers Pension v savings

jodie264

I am 55. Left teaching 5 yrs ago. Deferred pension and not paid into any other fund since - self employed. Budget cuts mean I've lost a LOT of work though still small bits around.
Lump sum at 56 will be £27,051 with pension of £9,017 annual. At 60 will be equivalent to £32,584 and £10,861.
NO IDEA what to do - tenant so no worries there, had intended using lump to pay off anything I owed at 60 meanwhile not taking on any more payments but dont know if I'll find enough work to cover things as they are.
Been giving some thought to 'getting out now' espefcially with Oct spedning review which will hit my work hard probably.
I'd appreciate any advice. Cant take lump without taking pension Ive been told. Can I do the limited work that I know I'll have even though its much less than the last five years?
Any other things Ive not thought about Id appreciate hearing from people.
THANKS GUYS:A

Loughton_Monkey

Difficult to advise fully, without knowing a lot more, but eventually it's your own decision.

Time, I suggest, for a bit of spreadsheet work. First work out what happens if you ignore your pension until age 60. Put in all your spending, and assumed income - whether by benefits, or contract work etc. Take tax implications into account.


Then, do an alternative scenario based upon taking the pension benefits now.

If state benefits are not involved (perhaps because of other savings etc.) then it could be of value taking your pension now, giving you 4/5 years to draw the income with a very small tax liability. However, if you are confident of earning more than about £6½K in casual work, then your tax situation is little altered.

If, at the end of the day, there are no major state benefits, or taxation implications, then it really boils down to cash flow. i.e. Can I survive until age 60 on casual work, and then retire on state pension plus higher teacher's pension? If not, then you probably have no alternative but to take the pension now, and live with the fact that your 'over 60's' income will be some £1,800 less.

[As a general rule, pension schemes such as your own are 'fair' in these matters, and contain no penalties for early/late retirement. Put another way, the lower benefits quoted fairly take into account the extra years they have to pay out.]

jodie264

Thanks - cant get state pension until 65, no savings either and could probably make a living of around 5000 a year with other casual, contracted work...by casual I mean 3 or 4 times a year earning around £1000 and maybe another £200 here and there about 4 times each school term...none in hols but then Ive not had that for 5 years anyway. Spreadsheet good idea. Just want to earn enough to pay bills and not have all the stress of looking for work all the time to cover bills.

sleepless_saver

Will your teachers pension be actuarially reduced if you take it early, or are the figures you quote the actual amounts you will get?

jodie264

See 2nd para of post - have used calculator TP online for actuarially reduced and got the 27,051 and 9017 for retirment at 56. Doesnt seem that much difference though its around 81%...what would you do? Latest news on final salary pensions leaves me worried more today?!

sleepless_saver

jodie264 wrote: »

See 2nd para of post - have used calculator TP online for actuarially reduced and got the 27,051 and 9017 for retirment at 56. Doesnt seem that much difference though its around 81%...what would you do? Latest news on final salary pensions leaves me worried more today?!

What would I do? I think I'd follow Loughton Monkey's very good advice, and also use the helpful listentotaxman.com site to help work out projected net income when you're doing your spreadsheet. I make the difference between the 2 income options about £1500 a year net income as you won't be paying NI. Only you know if you need that £1500.

And I wouldn't worry too much about the final salary pensions thing. You have already accrued yours so it's unlikely to be much affected beyond the change from RPI to CPI which has already been announced.

jodie264

Useful - wonder if I could make more from lump sum by investing it instead of leaving it to grow in line with CPI?

sleepless_saver

CPI was 3.1% in August, that would be very difficult to match in savings so you'd need to be willing to take some investment risks to even equal current CPI. Plus you don't know what the CPI will be in the future, or what the interest rate on savings will be or how any investment you make will perform. It all depends on your attitude to risk, and also whether you will need to draw on the lump sum from time to time.