Four working days to go before early retirement! How did you feel at this stage?

bigadaj

BaileysOriginal wrote: »

Q for Thrugelmir please. In my scheme the pension pot is uprated by CPI each year. However once in payment it is uprated by RPI. There is a 4% reduction per year for taking it early. Thrugelmir, do you think this may change the balance in your example, and in my case it might be possible that it is actually better to take it early? 55 rather than 60 without reduction for me. This is final salary pot that was accrued by my 20+ years in industry before redundancy, and I can no longer contribute. This will still form the bulk of my pension. Thanks.

From your information it would make it slightly more favourable to take the pension earlier than the example given by thrugelmir in most circumstances, rpi often exceeds CPI by around 1% which would narrow the gap and make the break even point earlier. There's of course no guarantee that this will continue and if CPI were to exceed rpi then you would be worse off.

Mr_Prudent

Thrugelmir wrote: »

Human nature says to have ones cake now and eat it. In the example you quote (at a true 5% reduction) after 15 years the person taking their pension earlier would received £3,000 more in total over the time frame. Sounds great. Until you realise that the person commencing their pension later is now receiving some £2,700 per annum more in pension.

So projecting forward to 25 years and 22 years respectively the figures now look like.

Amount received £371,884 vs £400,420

Annual Pension £20,734 vs £24,393 (£3,659 more per annum or 17.6%).

With longer life expectancy think of it as a marathon not a sprint.

Whilst not professing to be an expert (far from it) do you not have to take in to consideration the extra income tax that will be liable on the larger annual pension that is taken without reduction against potentially two or 3 years extra actuarially reduced pension invested in an ISA wrapper?
I do however understand the benefit of RPI/CPI index linking and people far more experienced than myself saying you would be mad to cash in early, but...... Tricky isn’t it!

homerhotspur

Whilst not professing to be an expert (far from it) do you not have to take in to consideration the extra income tax that will be liable on the larger annual pension that is taken without reduction against potentially two or 3 years extra actuarially reduced pension invested in an ISA wrapper?
I do however understand the benefit of RPI/CPI index linking and people far more experienced than myself saying you would be mad to cash in early, but...... Tricky isn’t it!

Yes , these are the sort of considerations I was juggling with. Also, the interest you would give up on using savings or, alternatively, gain by not using them and the interest you could possibly gain on investing the ( reduced) lump sum early. Also , if you take the early pension( which is in effect extra money) you still have that part of your life savings intact so (I think) this needs to be factored into the calculations somewhere. It is probably an unanswerable question but it is still a decision which needs to be made.

kidmugsy

homerhotspur wrote: »

I have often thought about this option. ie retire around 3 years early and live off savings to avoid the actuarily reduced pension and lump sum - approx 15% reduction for 3 years- but then I get bogged down in calcualutions and can't make my mind up. Obviously interest rates are a factor but the main thought for me is, if you take the reduced pension., say for example £10k instaed of 12k, you are still effectively getting £30k worth of extra pension which will only be clawed back over 15 years and at the same time keeping £30k worth of savings. I would be really interested to hear the counter arguments.

At age 60, say, your life expectancy is much more than 15 years, unless you have objective reason to suspect otherwise. On the other hand, though effectively getting an extra index-linked annuity that pays about 5% p.a. initially is more attractive than a commercial annuity for somebody that age, it's not killingly more attractive. If keeping the £30k were your only route to having a good cash emergency fund, that might be reason to take the pension early. I might also draw early if I had no spouse to take the widow's benefits and no reason to value any life insurance provided by the scheme, or if I were worried about the financial security of the scheme. I might also draw early if I had good reason to suppose I'd value the money more early in retirement than later. (For example, because it would be more valuable before my State Retirement Pension started.)

Getting your pension early and keeping hold of your £30k might also be looked on as a sensible diversification of investments.

Cyberman60

homerhotspur wrote: »

I have often thought about this option. ie retire around 3 years early and live off savings to avoid the actuarily reduced pension and lump sum - approx 15% reduction for 3 years- but then I get bogged down in calcualutions and can't make my mind up. Obviously interest rates are a factor but the main thought for me is, if you take the reduced pension., say for example £10k instaed of 12k, you are still effectively getting £30k worth of extra pension which will only be clawed back over 15 years and at the same time keeping £30k worth of savings. I would be really interested to hear the counter arguments .

The acturial reduction of 15% seems huge but certainly with my pension most of this was negated by annual inflationary rises of a RPI minimum 3%. One year I even had a 5% rise, so when you take this into account and also the fact that it is compounded, most of that 15% has been made up for in those three years !!

I would also add that if you wait for three years and take a higher sum, that a proportion of the additional amount could also be taken in tax, further negating the benefit.

melanzana

atush wrote: »

It is the 26th. And a no show

I feel robbed.

HELLOOOO!

I'm here..... And work is over!

All I can say at this minute is that my shoulders have gone down for the first time in years.

I had a great time clearing out my office. I found things I never knew I had, including a 20quid note in the bottom drawer, yay.

It was a lovely final day. I did not want any tea party or booze up or anything, but colleagues called in all day with little gifts and cards and flowers. It was lovely, and tad emotional. But I'm over that now!

Off on holidays tomorrow to celebrate.

I feel indolent already!

Best to all.

atush

Thanks, I feel better now lol.

Esp abt the 20 quid note

melanzana

atush wrote: »

Thanks, I feel better now lol.

Esp abt the 20 quid note

Atush, your posts made me smile, and really made me feel good.

I don't know how you did that....but you did!

I'll call back soon to update you. And if I don't, you will no doubt remind me and everyone else that I should!

Thanks again to you and everyone. X

melanzana

Oh, and I should add, that preparing for a carry on only flight on Ryanair is the most stressful thing..(if you let it!).

Where's that weighing thing and measuring tape FGS?

Can't you see the drama in our kitchen now? HE has a backpack. I have a little handbag. In addition to the carry on case, that's allowed now, but not TWO carry on equivalents...puleeease..

Cue... There may be trouble ahead. But it's fun just the same.

nearlyrich

Have a lovely time and no rushing back to work after priceless..