Pensions, ISAs, mortgage

jem16

bournefree wrote: »

From 55 (in a fortnight) I can retire early, though with actuarialy reduced benefits. Additional Pension with the Teachers Pension Scheme doesn't have any risk, does it?

As I said earlier, it's risk free from your point of view. Did you base your quote on age 60 or age 65?

whereas a Personal Pension would, wouldn't it, as it would involve an annuity.

It doesn't have to involve an annuity. You could use Income Drawdown or Flexible Drawdown.

At work there is a voluntary severance scheme at the moment, which I could take from 55 (not that I'm planning on it); we haven't got to compulsory redundancy yet.

I'd be jumping on that if I was offered it as it usually means you can access your pension straightaway with no actuarial reduction.

Have been reading other threads about pensions being taxable when paid, versus the flexibility of S&S ISAs. Even if I had a pension of 27K I'd still be in the 20% tax bracket - so does that mean it's better to go for additional pension over an S&S ISA?

Yes because in your case it's 40% tax relief to pay 20% when you retire.

jem16

bournefree wrote: »

so it's based on paying in x thousand in tax to increase the pension.

Sorry I don't understand - "paying in x thousand in tax".

17-18 K for £1000 per year seems steep - I wonder if it's worth it?

The £1k is index-linked from the moment you purchase it. Yes it's expensive but only you can say if it's worth it.

Remember that £17k will only be £10,200 after 40% tax relief.

bournefree

Quote 'As I said earlier, it's risk free from your point of view. Did you base your quote on age 60 or age 65?'

60, though they say if you're still working beyond NPA you can continue to pay in.

Quote 'It doesn't have to involve an annuity. You could use Income Drawdown or Flexible Drawdown.'

I don't know anything about these, so will have to look into that, though simplest to just add additional benefit to the TP, isn't it?

Quote: 'I'd be jumping on that if I was offered it as it usually means you can access your pension straightaway with no actuarial reduction.'

Maybe I should look at that again, although I'm getting married in July and that might affect things (my partner is already nominated and we've been together for 8 years).

jem16

bournefree wrote: »

though simplest to just add additional benefit to the TP, isn't it?

Simplest isn't always best though.

You have to weigh up all of your options and decide what to do.

bournefree

jem16 wrote: »

Sorry I don't understand - "paying in x thousand in tax".



The £1k is index-linked from the moment you purchase it. Yes it's expensive but only you can say if it's worth it.

Remember that £17k will only be £10,200 after 40% tax relief.

Omit 'in tax' - my error! Looking at the tax implications, this sounds good!

jem16

bournefree wrote: »

Omit 'in tax' - my error! Looking at the tax implications, this sounds good!

Sorry I would have to change that amount as you would not to able to claim 40% tax on all of it if you made one lump sum payment. You would only be eligible for 40% on £7k of it and 20% on the other £11k.

You could, however, split it over 2 or more tax years to get the full 40%.

bournefree

'I'd be jumping on that if I was offered it as it usually means you can access your pension straightaway with no actuarial reduction.'

Just looked at our voluntary severance scheme. I reckon I'd get £29817 (just below the £30K tax and NI threshold).

bournefree

With the voluntary severance scheme, it isn't actuarialy reduced, so would mean £17,677 pension and £53030 lump sum (tax free). So the total would be the pension plus £82847. The pension is lower than I'd like, but the lump sum looks good. Any thoughts?

atush

At what age do you actually plan to retire? Will you volunteer to go, then continue to work as a contract or supply teacher? Would you still be in the HRTax band?

Can you get higher than 17...K in your pension if you take less than the full lump sum? Do you need all of that 82K LS? Can you still buy 1K extra pension with 10K as described?

It sounds to me like you should investigate the voluntary scheme. Esp if you can get your pension up to 20K.

With 20K income from a secure FS pension, anything you put in your PP now (or later if you continue to work) would be available for Flexible DD- where you could take any amount from the pension you like. It would be subject to income tax at your highest rate, so it is best not to draw any that puts you in the HRtax band.

PP can carry some risk, but with each 100 in the pension only costing you 60, it is a no brainer.

jem16

bournefree wrote: »

The pension is lower than I'd like, but the lump sum looks good. Any thoughts?

Unfortunately with the section of the scheme you are in, you can't give up some of that 3 times pension lump sum to gain extra pension.

However perhaps it's possible to use some of the severance payment to purchase some Additional Pension although you will probably be limited to £1k.

With some redundancies, they enhance your pension with a number of years. I take it you're not being offered that?

Whether it's correct for you or not depends on how much you need to live on and whether or not you wish to continue in teaching. My friend took early retirement 4 years ago and says it's the best thing she ever did!