Pension at 65

huon

Hi, I recently decided to review my pension. I am 59 now and will be 65 in June 2018.
I asked the Department of Work and Pensions for a State pension summary. They tell me I have 33 years and qualify for a full state pension of £107.45 a week plus an additional state pension of £4.25 a week.

Before 1986 I had several jobs, mostly as a TV engineer with large companies, but don't think I was a member of any pension schemes.
From 1986-2000 I worked as a Computer Engineer and did have a pension scheme.
From 2000-2006 I was self employed. I paid N.I. but did not join any pension scheme and did not earn a lot, only paying a small amount of tax in one year.
In 2006 I decided I might as well rent my flat and go to Spain to live in a flat I had inherited. I only did voluntary work in Spain but had some income from my UK flat although not enough to pay tax.
I also had some savings and about £100K from a house sale, most of which I spent whilst in Spain.
My savings running low I returned to the UK early 2012 and am now back in my UK flat. I am doing some supply teaching through an agency. This year I will earn about £8,000 and hopefully next year it will go up to about £12,000. I do not think I am in any other pension scheme.

OK, so the one pension I have is worth about £71K. I wrote to the pension company and asked if I could have 25% as cash and start getting my pension now. They say I can't because I need to buy a GMP which costs about £98K. Apparently if I do not have enough when I am 65 (which seems likely) they will make up the shortfall. (Great!)
I am fine about that but am now confused about how much pension I can expect at 65.
There is about £5.5K state pension and I hoped the company pension would top that up by about another £2-3K
That feels OK to me. I intend to move out to my Spanish flat, either rent or sell my UK flat and live the good life for as long as possible. I do not have expensive tastes and that amount of money should suffice.
But what is this GMP? In simple terms does it mean my company pension will pay for my state pension? Am I now looking at getting only the state pension or was I right in thinking I will get a bit extra from my company pension?

dunstonh

OK, so the one pension I have is worth about £71K. I wrote to the pension company and asked if I could have 25% as cash and start getting my pension now. They say I can't because I need to buy a GMP which costs about £98K. Apparently if I do not have enough when I am 65 (which seems likely) they will make up the shortfall. (Great!)

That sounds like a section 32 buy out bond (could be a couple of other things but S32 is most likely). If so, that sounds correct. Although you can transfer it to a personal pension and take 25% now. Although its probable that it would be a bad idea (not always but it needs calculating).

But what is this GMP? In simple terms does it mean my company pension will pay for my state pension?

GMP is guaranteed minimum pension. It means the pension provider will pay you at least this minimum at the scheme age. If the fund is unable to pay the GMP using market rates then they can withhold the tax free cash (potentially the whole 25%) and if there is still not enough then the provider will have to make up the difference to match the GMP. (I have simplified the process there somewhat for clarity rather than provide a technical answer). It will have no impact on your state pension.

xylophone

http://www.pensionsandannuities.co.uk/Guaranteed_minimum_Pension_GMP.htm
The explanation provided in the above might clarify.
See also http://dl.dropbox.com/u/452108/20110217094333898.pdf
http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/annual-increases

atush

I would advise renting rather than selling your UK property. AS you might want to move back again and would have difficulty doing so if you didn't have someplace to live.

Any chance of getting a part time job in a school district and joining the Teachers scheme for some years? I presume as an agency teacher you aren't a member of a scheme?