Early-retirement wannabe

The_Doc

itm2 said:

That's where I got the forecast. This is what it said:

"You can get your State Pension on 6 May 2026. Your forecast is £180.21 a week £783.59 a month, £9,403.10 a year

Your forecast

• is not a guarantee and is based on the current law
• is based on your National Insurance record up to 5 April 2019
• does not include any increase due to inflation

£180.21 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions until 6 May 2026 as they fund other state benefits and the NHS."

So you're saying that if I don't have 35 qualifying years at retirement age I may get less than this, but there is no way of knowing how much I'll get now?

My page is slightly different as it does tell me that I will get a lower amount unless I contribute further. The fact that yours does not say that seems to imply that you will get the full amount without further contributions. A call to HMRC will confirm. 

Notepad_Phil

The_Doc said:

itm2 said:

That's where I got the forecast. This is what it said:

"You can get your State Pension on 6 May 2026. Your forecast is £180.21 a week £783.59 a month, £9,403.10 a year

Your forecast

• is not a guarantee and is based on the current law
• is based on your National Insurance record up to 5 April 2019
• does not include any increase due to inflation

£180.21 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions until 6 May 2026 as they fund other state benefits and the NHS."

So you're saying that if I don't have 35 qualifying years at retirement age I may get less than this, but there is no way of knowing how much I'll get now?

My page is slightly different as it does tell me that I will get a lower amount unless I contribute further. The fact that yours does not say that seems to imply that you will get the full amount without further contributions. A call to HMRC will confirm. 

I assume you also do not have the "You cannot improve your forecast any more." bit either. I believe that along with no lower amount if you don't contribute further is the indicator of whether you are already at the max possible - otherwise you will need to pay more national insurance (whether via voluntary or work) to get to the maximum for you.

george_jetson

Well I can't be the only one reassessing their options in light of the "current situation". In short a few months working from home has taught me amongst other things how little I miss the office environment.

So I'm wondering if I can bring forward my planned retirement age from 57 to 55. Here are my thoughts and rough working outs - if anyone can point out any obvious howlers or errors I've made I would be grateful.

I have been mortgage free for about 12 years thanks to these boards. Wasn't allowed to go part time which annoyed me at the time but may have done me a service.

My take home pay varies £2,200 - £2,300/month of which I save £1,000 and have been living quite happily on the remainder. Not extravagantly but I certainly don't "go without"... My savings "pot" is now about £110,000.

I was planning on working to 57 so I have enough NI for the full state pension but am now considering taking my work pension at 55 and paying for the two years NI I will be short (£750/year?).

If I go at 55 I will get a work pension of £12,000 a year. I understand that is below the tax threshold so, £1,000/month "in the hand"

I can top this up from my saving if required by £500/month so I'm in the same monthly financial situation as now. That will last till I'm 67 and the state pension kicks in. 

£500/month over 12 years is £72,000, which still gives me a £40,000 "buffer" in my savings (plus whatever I save in the next couple of years and my retirement lump sum)

Am I missing anything?

Sorry for the long post and thanks in advance for your help

jimi_man

itm2 said:

The_Doc said:

Yesitm2 said:

Jeez that's confusing! So is there any way I can get a clearer idea of what I will actually receive at age 66?

The government gateway website ("Pension / View Your State Pension Forecast" section) will tell exactly how much you will get if you do nothing (no further contributions) and how many years contributions you need to make if you want to get the full forecasted amount. Else call HMRC if you dont have access to the website.

That's where I got the forecast. This is what it said:

"You can get your State Pension on 6 May 2026. Your forecast is £180.21 a week £783.59 a month, £9,403.10 a year

Your forecast

• is not a guarantee and is based on the current law
• is based on your National Insurance record up to 5 April 2019
• does not include any increase due to inflation

£180.21 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions until 6 May 2026 as they fund other state benefits and the NHS."

So you're saying that if I don't have 35 qualifying years at retirement age I may get less than this, but there is no way of knowing how much I'll get now?

Unfortunately you've been given yet more confusing information. You need to disregard completely, the notion of 35 years being the correct number of qualifying years. It is only for people who started paying NI insurance AFTER 2016. If you started before then that doesn't apply to you. You might need more or you might need less.

Your state pension example is similar to mine. Mine also says '£175 is the most you can get. You cannot improve your forecast any more' as well as the first part about when you get it. 

However mine also has a bit in the middle that says
'You need to continue to contribute National Insurance to reach your forecast.
Estimate based on your National Insurance record up to xxxx..... is £xxx
Forecast if you contribute another 3 years before xxxx is £xxx'. 

Does yours say that? If it doesn't then you have reached the maximum and don't need to pay any more contributions. If it does say something similar then you do. It's nothing to do with the number of qualifying years whatsoever. But the forecast will tell you exactly how much you'll get now, as I've stated. 

coyrls

£180.21 is above the new state pension and therefore it must have already been accrued prior to 2016 and therefore no further contributions are required to get that amount.

jamesd

george_jetson said:

I was planning on working to 57 so I have enough NI for the full state pension but am now considering taking my work pension at 55 and paying for the two years NI I will be short (£750/year?).

My take home pay varies £2,200 - £2,300/month of which I save £1,000 and have been living quite happily on the remainder. Not extravagantly but I certainly don't "go without"... My savings "pot" is now about £110,000.

If I go at 55 I will get a work pension of £12,000 a year. I understand that is below the tax threshold so, £1,000/month "in the hand"

I can top this up from my saving if required by £500/month so I'm in the same monthly financial situation as now. That will last till I'm 67 and the state pension kicks in. 

£500/month over 12 years is £72,000, which still gives me a £40,000 "buffer" in my savings (plus whatever I save in the next couple of years and my retirement lump sum)

Are those £110,000 already in a personal pension? If not, move as much as you can as fast as you can because even if everything is at basic rate in and out you make 6.25% gain after tax. You'll do better because you have some income tax personal allowance available.

There are two limits and you must be within both of them:
1. annual allowance of 40k a year plus unused allowance from the previous three years can be carried  forward and  used. Usage is increase in value of wok defined benefit pension + employer salary sacrifice + gross (with added tax relief) value of personal contributions. Go over  and you tell HMRC and they make an Annual Allowance Charge to recover the tax relief, no penalty.
2. total gross pay including bonuses for your personal contributions only. Go over and you ask the pension firm for a Refund of Excess Contributions Lump Sum and they return the excess to you, no penalty.

Using personal pension money to live on while not claiming a defined benefit pension as soon as possible can be a good move, lessening the actuarial reduction. Depends on the numbers and individual life expectancy. You also benefit from having more personal allowance available when withdrawing the personal pension money, increasing the benefit of that.

It appears that it's 12 years to go so you'll need a fair amount outside the pension for before age 55 contingencies.

george_jetson

jamesd said:

george_jetson said:

I was planning on working to 57 so I have enough NI for the full state pension but am now considering taking my work pension at 55 and paying for the two years NI I will be short (£750/year?).

My take home pay varies £2,200 - £2,300/month of which I save £1,000 and have been living quite happily on the remainder. Not extravagantly but I certainly don't "go without"... My savings "pot" is now about £110,000.

If I go at 55 I will get a work pension of £12,000 a year. I understand that is below the tax threshold so, £1,000/month "in the hand"

I can top this up from my saving if required by £500/month so I'm in the same monthly financial situation as now. That will last till I'm 67 and the state pension kicks in. 

£500/month over 12 years is £72,000, which still gives me a £40,000 "buffer" in my savings (plus whatever I save in the next couple of years and my retirement lump sum)

Are those £110,000 already in a personal pension? If not, move as much as you can as fast as you can because even if everything is at basic rate in and out you make 6.25% gain after tax. You'll do better because you have some income tax personal allowance available.

No it's in a mixture of Marcus savings account, Vanguard S&S ISA and premium bonds.

Maybe I should have made different choices years ago but as I am 53 now is it still worth opening a SIPP?

MallyGirl

it is still at least 6% boost, more if you can salary sacrifice. No savings products are returning anything like that right now

itm2

jimi_man said:

itm2 said:

The_Doc said:

Yesitm2 said:

Jeez that's confusing! So is there any way I can get a clearer idea of what I will actually receive at age 66?

The government gateway website ("Pension / View Your State Pension Forecast" section) will tell exactly how much you will get if you do nothing (no further contributions) and how many years contributions you need to make if you want to get the full forecasted amount. Else call HMRC if you dont have access to the website.

That's where I got the forecast. This is what it said:

"You can get your State Pension on 6 May 2026. Your forecast is £180.21 a week £783.59 a month, £9,403.10 a year

Your forecast

• is not a guarantee and is based on the current law
• is based on your National Insurance record up to 5 April 2019
• does not include any increase due to inflation

£180.21 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions until 6 May 2026 as they fund other state benefits and the NHS."

So you're saying that if I don't have 35 qualifying years at retirement age I may get less than this, but there is no way of knowing how much I'll get now?

Unfortunately you've been given yet more confusing information. You need to disregard completely, the notion of 35 years being the correct number of qualifying years. It is only for people who started paying NI insurance AFTER 2016. If you started before then that doesn't apply to you. You might need more or you might need less.

Your state pension example is similar to mine. Mine also says '£175 is the most you can get. You cannot improve your forecast any more' as well as the first part about when you get it. 

However mine also has a bit in the middle that says
'You need to continue to contribute National Insurance to reach your forecast.
Estimate based on your National Insurance record up to xxxx..... is £xxx
Forecast if you contribute another 3 years before xxxx is £xxx'. 

Does yours say that? If it doesn't then you have reached the maximum and don't need to pay any more contributions. If it does say something similar then you do. It's nothing to do with the number of qualifying years whatsoever. But the forecast will tell you exactly how much you'll get now, as I've stated. 

No, it does not say "You need to continue to contribute National Insurance to reach your forecast". So it looks like no further contribs are necessary. I will try to contact HMRC to confirm.

jimi_man

itm2 said:

No, it does not say "You need to continue to contribute National Insurance to reach your forecast". So it looks like no further contribs are necessary. I will try to contact HMRC to confirm.

Looks like that's you sorted then, no more contribs required.