Early retirement at 55...help please

robin61

madeinireland wrote: »

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...

Yep scheme B as well. The Government throwing a spanner in the works is a concern. I reckon the most likely change would probably be the 40% tax relief.

At the moment I am maxing out as far as making sure I put as much in as I need to in order to reduce my gross pay right down to the point where I start paying 40% tax. If my calculations are correct I will pay 40% tax on a grand total of £9 this year ! So I am really making the most of the generous tax relief whilst it is still available. I am hoping of course it doesn't change or if it does that it would not happen overnight it must be quite complex to change something as fundimental as tax relief. So hopefully we have a couple of years at least.

I was aware that you can convert lump sum into pension but when I looked into it the conversion rate was not very generous. I did speak to a guy from Accenture about that and he told me that roughly you get £49 in pension for every £1000 aged 60. Less if you retire earlier. That didn't seem good value to me but it is probably worth noting that they don't have this as an option in the Retirement Planner. So I wonder why they keep that quiet ?

I would hope if I go at 57 ish I would go with a package and I reckon that and a bit of help from my ISA savings could allow me to defer to 60 and avoid the actuarial reduction on the pre 2009 pension entitlement. Staying to 65 sounds like a life sentence ! So I will take a hit on the rest but that is unavoidable for me anyway.

robin61

Mr_Prudent wrote: »

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.

Very true. I reckon this is going to be a difficult decision when the time comes. I started by thinking I would take the pension and accept the reduction. Now I am thinking probably not I reckon I will be mulling over that for the next 3 years which is when I hit 57 and the numbers start to make sense.

juju17

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..[/QUOTE]
Yes, indeed.....sharesave!

kangoora

Sharesave has nothing to do with VR. He can benefit from sharesave AND voluntary retirement.

Obviously he would benefit from leaving after the sharesave options mature but he can still take VR at that point. I'm pretty sure BT even allows some element of sharesave to be paid into/cashed in even after taking VR, but again, something I've not looked into.

juju17

Kangoora, I realise that....but what I am saying, is that DH is tied into a sharesave scheme, so is waiting for that to mature before resigning. If at the time of maturity, there is a VR opportunity then obviously he could look into that....but that is a lot of 'if's'.
He can not do anything until maturity, as it would be foolish to not continue with the sharesave.
Our plan has always been for him to finish work at 55.....and that is what our aim is...life is short and we intend to enjoy life whilst we can

smjxm09

I am 57 years old with a section B pension and took a leavers package of 9 months which is for me was a years pay as it is tax free. I think a B member gets 1/80th per years service plus a 3/80th's lump sum while section C gets 1/60th but no lump sum.

I have an AVC of £39,000 plus a lump sum of £38,000

I have asked for my pension to be taken now. The reasoning for me was simple. When I looked at my last yearly statement dated 31st March 2013 it give me a projected pension at the age of 65 if I had left BT on that date and deferred it. As I kept a record of what my pension would have been if I had taken it on that day the pension was only £3000 more per year deferring it than taking it straight away. By the time I have reached 65 I will have already taken close to £90,000 in pension payments. I would have to be in my 90's to get that money back by deferring it .

As a side note, as I had savings that I could live on I was paying so much AVC's per month into my pension that I was paying no tax or National insurance but I had a take home pay of only around £500 per month. I had to be a little careful and kept an eye on the 25% lump sum rule so what ever happened I was going to have to leave by July at the latest.

robin61

juju17 wrote: »

Kangoora, I realise that....but what I am saying, is that DH is tied into a sharesave scheme, so is waiting for that to mature before resigning. If at the time of maturity, there is a VR opportunity then obviously he could look into that....but that is a lot of 'if's'.
He can not do anything until maturity, as it would be foolish to not continue with the sharesave.
Our plan has always been for him to finish work at 55.....and that is what our aim is...life is short and we intend to enjoy life whilst we can

Yep if you can afford to retire now then why not. I know of several people who have done this without a VR package.

robin61

smjxm09 wrote: »

I am 57 years old with a section B pension and took a leavers package of 9 months which is for me was a years pay as it is tax free. I think a B member gets 1/80th per year plus a 3/80th's lump sum while section C gets 1/60th but no lump sum.

I have asked for my pension to be taken now. The reasoning for me was simple. When I looked at my last yearly statement dated 31st March 2013 it give me a projected pension at the age of 65 if I had left BT on that date and deferred it. As I kept a record of what my pension would have been if I had taken it on that day the pension was only £3000 more per year deferring it than taking it then straight away. By the time I have reached 65 I will have already taken £88,000 in pension payments. I would have to be in my 90's to get that money back by deferring it .

Yes I notice on the annual statements it's all based on age 65 now. Were you able to get a figure for if you deferred the pension until age 60 ?

smjxm09

No, nor could I get a figure when I phoned India up so I just did a very rough figure of dividing the number of years by the sum.

What I do know for a fact for me is that my pension was increasing by just over a £1000 per year while I was paying in and say around £300 per year when I stopped. That it based on my length of service, age and grade.

juju17

smjxm09 wrote: »

As a side note, as I had savings that I could live on I was paying so much AVC's per month into my pension that I was paying no tax or National insurance but I had a take home pay of only around £500 per month. I had to be a little careful and kept an eye on the 25% lump sum rule so what ever happened I was going to have to leave by July at the latest.

I was considering suggesting to DH that he ups his avc to as much as possible, but then read something about this could be an issue with HMRC?...think it was called recycling?...especially if it is done very near to taking your pension?
Can anyone confirm this.....or am I losing the plot?
Thanks