Early retirement at 55...help please

robin61

greenglide wrote: »

But it seems unlikely that you can get all of the AVCs tax free if you don't start the main pension at the same time.

Surely if you take the AVCs earlier you will be limited to 25% TFLS but then you could, possibly, take 25% of the main pension as TFLS as well even if the commutation rate may make it silly.

Yes that is my understanding. My strategy is to take the AVC and the main pension at the same time and use the AVC to fund the maximum possible tax free lump sum. That way I can do this without having to forego any pension to fund it.
If you take the AVC earlier than the main pension you have to do it via a SIPP or buy an Annuity with it. So you are only going to get 25% 0f the value of the AVC tax free. You also have to take the whole AVC if you take it earlier.

madeinireland_2

Robin I believe you are correct and your strategy is sound - just one thing that could throw a spanner in the works is that the gov could change the rules.

I am in the b scheme and plan to leave before 60. I am also adopting your strategy but a couple of things you may find useful to think about....

1. As well as a sizeable AVC amount I have also built up some funds in a separate SIPP which I will be able to help fund myself until I take the pension at 60

2. If you build up funds beyond the 25% of yoor main pension you can convert you lump sum to more pension to enable you to take more of the AVC tax free.

Hope this helps...

madeinireland_2

Juju - I'm not a IFA and I don't know you're details so it's difficult to give advice but you don't have to take one of the 6 options when you leave - if you do then you will be taking the pension when you leave.

I would personally always go down the path of avoiding taking the pension till 60 but it depends on you circumstances and what are you going to live on till you get your pension.

Every year you delay means your pension is enhanced by less actuary reduction.

The wealth at work seminars will help but I'm not sure I would let them manage my funds as I consider their charges quite high.

Good Luck

madeinireland_2

Juju - just another thought or two but...

Why would you need the lump sum - he will be getting a redundancy payment won't he.

Also remember upto £30k of the pay off is tax free and the rest he could put in his pension to avoid any tax on it to boost his avc amount

juju17

No, madeinireland, DH would not be made redundant, he would be resigning, so no pay off there.
He will definitely be leaving at 55, that is about the only decision we are certain of. I think it will be helpful for him to attend the [EMAIL="w@w"]w@w[/EMAIL] seminar, so we can then discuss his options further.
Thanks to everyone who has commented on this thread, as it has been useful to hear others opinions.

madeinireland_2

Crikey its a bit silly to be resigning with BT handing out voluntary redundacy all over the place.

Just about everyone I know is leaving with a package - with his service he would get 9 months salary if he left now with upto £30k tax free.

Why doesn't he ask ?

Crazy I think but I suppose you may have some good reason..

kangoora

madeinireland wrote: »

Crikey its a bit silly to be resigning with BT handing out voluntary redundacy all over the place.

Just about everyone I know is leaving with a package - with his service he would get 9 months salary if he left now with upto £30k tax free.

Why doesn't he ask ?

Crazy I think but I suppose you may have some good reason..

I'll second this, crazy to throw away redundancy money if it is available, he should enquire.

If he's Openreach they are recruiting like mad so it may be different there, still worth a go.

Mr_Prudent

Quote: "Every year you delay means your pension is enhanced by less actuary reduction."

But also remember that for every year of earlier retirement that’s money in your bank account. One needs to look at what age you will reach that “cross over point” and start losing out and also your health/life expectancy.

madeinireland_2

True Mr prudent - but the money in your bank probably won't be covered for inflation - also the fund that you build will cover you for life and has other benefits (50% spouse pension etc.) that you won't get with the money once out.

I do accept that it's not an easy equation and the answer is different for everyone. It boils down to how long will you (and spouse) live, what will inflation be and what else you can do with the money.

madeinireland_2

Kangoora - I believe even openreach had a scheme recently - I presume strategy is to replace those who have a high salary and good pension benefits with new people who don't.