early retirement

mazzy

My husband will retire December 2014 at 65, I am not due to retire until July 2018. He would like me to retire at the same time as him as otherwise he will be nearly 70 before we have retirement time together.

I am in a final salary scheme that is scheduled to pay out when I reach 63, I am hoping that I can take it early. If I go in 2014 and won't get my state pension until 2018 will I be penalised in any way for not working in the interim period. I will have worked for my company for 30 years but not on a high salary my pension forecast at the moment if I retire at 63 is nearly £8,000 a year.

I realise that will reduce if they let me go early and also if I take a lump sum. I don't want to reduce our finances dramatically by going early. We own our house and have £60 k is savings so some would be used to cover the shortfall until I get state pension.

I had children in 1970 and 73 so believe that I should have NI credits for at least 12 years that together with the 30 years takes me over the 35 required for state pension. So my question is does it matter if I don't work or pay NI contributions for the period of time between 2014 -2018.

My husband was also opted out as he had a private pension for about 18 years of his working life from 1980 -1998 at which point he opted back as he was told he should do it before he reached 50. That pension matured at 60 and he had a pot of around 70k, he took 25 % lump sum and transferred the rest into a pension at work which matured at 63 but he has deferred until 65.

Sorry to ramble but have put as much detail as possible as I have read other posts where people have left a lot of details out and it makes it hard to get an opinion.

We are careful with money and have no debt and although it won't be a great deal of money I think we will manage ok its just knowing if I will get penalised on the state pension that I want to know.

xylophone

http://www.thisismoney.co.uk/money/pensions/article-1616017/Womens-pensions-Home-Responsibilities-Protection.html

Get a state pension forecast for you and your husband https://www.gov.uk/state-pension-statement

Single tier pension may be in operation by the time you retire http://www.telegraph.co.uk/finance/budget/9935648/George-Osborne-brings-forward-major-pension-and-care-reforms-ahead-of-Budget.html
http://www.dwp.gov.uk/docs/single-tier-pension.pdf

Ask your company whether you will be permitted to retire early and if so what pension you will receive.

atush

What age are you now exactly? At what age do you want to retire? how many years early do you want to take your FS pension?

Is generally best to preserve a FS pension and not take a commuted lump sum if possible.

Also, in general (and for specifics you really do have to give more info esp your scheme and age) taking a opension early means around a 5% reduction for each year early. So taking a 20% reduction of your pension may not be what you would like to do?

mazzy

Born Oct 1953 so do come under new pension rules so I know I need 35 years NI. I will be just over 61 when I want to retire in December 2014.

Thanks for the info about 5% a year it means I am looking at losing 10% of private pension then. I will of course get a proper forecast from them nearer the time. Haven't wanted to do it yet as there could be a possibility of redundancy before then. I run a small canteen, wages paid by the company, they could at any time put it out to private tender and make me redundant so not intending to let them know yet that I am considering early retirement.

I sent for government pension forecasts yesterday so hopefully will get them in a couple of weeks.

My husband and I are foolishly both smokers so I think our lifespan will be reduced by at least 10 years. There is also heart disease on both sides of our family so another reason to suppose we won't be looking at a long retirement. Just being realistic here as I think it is something to take into consideration.

Our total yearly income is around £28 k so we have never had a huge income to live on.

I really wanted to know whether it would make a difference to my State pension if I don't work for the time 2014-2018 providing that I have already got 35 years of NI stamps. Do you have to sign on if you have no intention of working.

xylophone

Do you have to sign on if you have no intention of working.

You do not have to sign on.

http://www.bbc.co.uk/news/business-11619379

http://www.telegraph.co.uk/finance/personalfinance/pensions/9816473/State-pension-changes-Workers-misled-over-National-Insurance.html

gregorymorrill

It depends on you but normally early retirement get a lower retirement pay and you cannot get some benefits that get on normal retiree.

FatherAbraham

mazzy wrote: »

My husband and I are foolishly both smokers so I think our lifespan will be reduced by at least 10 years. There is also heart disease on both sides of our family so another reason to suppose we won't be looking at a long retirement. Just being realistic here as I think it is something to take into consideration.

Well done for thinking about this detail! You have got a pretty good grip on the important facts, it seems.

In the world of commercial annuities, a smoker would normally qualify for an enhanced (higheR) annuity, because of impaired life expectancy. A defined-benefit pension scheme presumably won't take account of personal life expectancy (they sometimes take account of illness suffered now, but that's a different matter). The shorter lifespans of smokers help cross-subsidize the pensions granted to the fit and healthy.

You should consider finding out the transfer value of your pension benefits, and looking at whether a commercially-purchased enhanced annuity with similar characteristics (survivor's benefit, indexation) would be a better deal for you.

Warmest regards,
FA

SeekTruth

mazzy wrote: »

...
I really wanted to know whether it would make a difference to my State pension if I don't work for the time 2014-2018 providing that I have already got 35 years of NI stamps. ...

I don't know the details about working part of a tax year - so will ignore that aspect.

The impact of working between April 2015 and April 2018 on your State Pension depends on a number of factors. We'd really need to know:

1. Whether you have ever been 'Contracted Out' of the State Additional Pension (SERPS/S2P). If you don't know then I'm guessing that a National Insurance record (this link) will tell you [I've never seen one of these statements, but have applied for one for myself so should know soon.]
2. How much Additional Pension you have earned to date, which the State Pension Forecast that you have applied for will show.

Depending on the answers to the above questions, it could well be that working between 2015 and 2018 has absolutely no impact at all on your State Pension.

mazzy

Thanks so much for your replies. I have been contracted out all the time I have worked for this company so that will be 30 years by the time I retire so I will get no added state pension, I know it will be deducted down from the state forecast of £144 but should not end up below todays pension ammount. I have done some research but just wasn't sure about the years I won't be paying 2014-2018.

My husband will be able to have more say in how his pension is paid as its not final salary one.

I was also trying to weigh up the benefits of taking the lump sum opposed to paying tax on government pension + private pension as the monthly sum will be lower and it will also bridge the gap for the years I won't be working having only company pension. I assume I won't have to pay tax on company pension during this time as the ammount will be below personal allowance.

Most of this is supposition at the moment but wanted to start planning now to see if its possible. I am not lazy and have worked since the age of 15 although did take a gap of ten years when I had my children, even so worked a couple of hours a day during a lot of that time. Its really my husband who wants me to go at the same time as him, doesn't want to be home alone and says we deserve at least some quality time together.

mazzy

Am I right in assuming I will have NI credits for the time I had my children?

Sorry ignore this just read the above link thanks for that.

McKneff

I thought if you were contracted out, then you did get SP2 or/and Serps.

As far as I know, both my OH and I do.

We were born 1944 and 1949 respectively.

You really need to get a pension forecast and ask about SP2/Serps