Early retirement at 55...help please

robin61

madeinireland wrote: »

I wouldn't use them either as I think they are expensive.

Yes I've no doubt you can do things cheaper. We recently transferred my Wife's personal pension which would not let her take advantage of a lot of the new flexibility for DC schemes to one of their SIPPs. It is too early to judge whether they are doing a good job but I am aware she will be paying a premium for their expertise so if they don't do a good job they will not be getting their hands on any more of our money. Time will tell.

madeinireland_2

robin61 wrote: »

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 ?

It could be generous if you plan to be around on the planet for a few years - it really comes down to how long you will be drawing your pension.

Not all sections of the pension scheme have this conversion as an option but the more cynical amongst us would say the retirement planner is designed to encourage people to take a bigger lump sum to reduce the long term Impact to the company from the pension scheme so why would they presenT an option that increases that. I would not do the conversion normally but if it increases the amount of AVC you can take as your 25% tax free lump sum then I think it makes it more attractive.

robin61

madeinireland wrote: »

Yes I agree it's total madness to defer to 65 as your pre 2009 pension would then be in no mans land with regard to actuary reduction from 60 to 65 but I think you will find it makes good sense to defer to 60. I've done a lot of calculations to prove that for me anyway.

I have been thinking I need to do something similar but my excel skills are pants. However my mate at work is a genius so I reckon I will be twisting his arm on this. I think you will need to consider.

When taking pension on leaving v deferring to 60
Taking when leaving
1) The amount you will get paid in pension during those years until you reach 60
2) The compound interest you will get on this money over the years because that's going to have to be spent from savings in order to fund the deferred years
3) For me my AVC will be stuck for 3 years in the Standard life cash fund earning sod all interest. Plus I will be getting my TFLS early as well. I can invest that once I get it even by putting it in a 5 year fixed term cash savings account.

Against deferring to 60:-
1) The extra pension you will get once you reach 60 (index linked)
2) The extra lump sum you will get

Did you take all this into account and can you think of anything else you need to consider ? I've done a rough calculation over 20 years and at the moment it is coming out on the side of taking it on leaving.

I'm also thinking that during later years if you are lucky enough to live that long you will get the State Pension of say £6 - 7K or thereabouts so you will be getting an increased income later.

Difficult choice. I wish there was a proper On line calculator available.

Mr_Prudent

For all the calculations and procrastinations the one thing you can never calculate is an unexpected terminal health crisis.
My brother was diagnosed (out of the blue) with a malignant brain tumour just over two months ago and died a week before Christmas, just short of his 64th birthday. He was holding off taking his pension in order to maximise his payments. A fat lot of good that did him. Enjoy your life while you can as no one knows when the grim reaper will come calling!

madeinireland_2

Mr_Prudent wrote: »

For all the calculations and procrastinations the one thing you can never calculate is an unexpected terminal health crisis.
My brother was diagnosed (out of the blue) with a malignant brain tumour just over two months ago and died a week before Christmas, just short of his 64th birthday. He was holding off taking his pension in order to maximise his payments. A fat lot of good that did him. Enjoy your life while you can as no one knows when the grim reaper will come calling!

I am sorry to hear about your brother and you are right it comes down to when the grim reaper calls.

Under new legislation (from April I believe) you could have transferred you defined benefit fund to a SIPP and leave it entirely free of tax to his family which is what I would do if the unfortunate happens and I have some warning of course. If you have started to take your pension you of course don't have this option

madeinireland_2

robin61 wrote: »

I have been thinking I need to do something similar but my excel skills are pants. However my mate at work is a genius so I reckon I will be twisting his arm on this. I think you will need to consider.

When taking pension on leaving v deferring to 60
Taking when leaving
1) The amount you will get paid in pension during those years until you reach 60
2) The compound interest you will get on this money over the years because that's going to have to be spent from savings in order to fund the deferred years
3) For me my AVC will be stuck for 3 years in the Standard life cash fund earning sod all interest. Plus I will be getting my TFLS early as well. I can invest that once I get it even by putting it in a 5 year fixed term cash savings account.

Against deferring to 60:-
1) The extra pension you will get once you reach 60 (index linked)
2) The extra lump sum you will get

Did you take all this into account and can you think of anything else you need to consider ? I've done a rough calculation over 20 years and at the moment it is coming out on the side of taking it on leaving.

I'm also thinking that during later years if you are lucky enough to live that long you will get the State Pension of say £6 - 7K or thereabouts so you will be getting an increased income later.

Difficult choice. I wish there was a proper On line calculator available.

1 you don't need to stay in the cash fund you could move it to one of the index funds with the relevant risk of course
2 you don't need to use savings if you get a job elsewhere
3. What about the compound interest from all the extra money you will get from the funds you take later
4.it all depends how long you live really and what sort of lifestyle you want in retirement - all the other points are probably minor in comparison - otherwise why don't we all take the pension at 50
5 I haven't the figures in from of me but deferring from 55 to 60 increases my pension from something like £21k to in excess of £30k in that period - not to be sniffed at I think and I will have a SIPP to help fund me.

madeinireland_2

Also don't forget the benefit your spouse will continue to get when you have departed this world. I have a younger wife who will almost certainly outlive me - so I do need to ensure she is not left with too little if I take the pension too early.

Let's look at all this a different way - I presume you will all agree that the deciding factor in all this is time. If you accept that deferring will eventually end up the right decision then....

The actuary reduction percentages are designed to ensure the pension does not lose as a result of your decision to take early. The actuary would have based all that on shed loads of research about life expectancy etc. so on average it will be better not to take early otherwise they would lose out.

For my part I accept that the position will be different for everyone - but given my younger wife and the fact that I can't compete with their research I'd rather go down the route where the odds favour me unless I know of other circumstances that would change that position.

Good luck with your individual decision and I'm happy to be corrected if someone has information that might prove me wrong.

robin61

madeinireland wrote: »

1 you don't need to stay in the cash fund you could move it to one of the index funds with the relevant risk of course
2 you don't need to use savings if you get a job elsewhere
3. What about the compound interest from all the extra money you will get from the funds you take later
4.it all depends how long you live really and what sort of lifestyle you want in retirement - all the other points are probably minor in comparison - otherwise why don't we all take the pension at 50
5 I haven't the figures in from of me but deferring from 55 to 60 increases my pension from something like £21k to in excess of £30k in that period - not to be sniffed at I think and I will have a SIPP to help fund me.

Yep going at 55 is a big chunk to lose off your pension. I have a feeling I will be giving this a lot of thought.

robin61

Hi madeinireland. It's been good talking to you on this thread. I've been putting my limited Excel skills to good use and have come up with a rather scruffy spreadsheet and for me it is looking like going at 57 and taking the pension against deferring is a close run thing over a 20 year period but after that deferring will have been the better option. After that it will definitely have been better to defer. As you say it's a gamble how long you will live and your situation regarding dependents which are important.

God luck to you as well. Maybe we should have a BT thread on here ?

Mr_Prudent

Quote: "Also don't forget the benefit your spouse will continue to get when you have departed this world. I have a younger wife who will almost certainly outlive me - so I do need to ensure she is not left with too little if I take the pension too early."
Whilst I agree wholeheartedly with making sure that you make adequate provision for those you leave behind it can’t be wrong to enjoy what you have worked so hard to attain by taking a pension a little earlier can it?
I would have thought that most of those left behind would have the benefit of property that may well be too large for their needs in such an event and downsizing could well bring extra income if it were really needed.
I must admit that my judgement is polarised by the fact that I have lost a brother who worked hard all his life for a retirement he will never enjoy. All I suppose I am really saying is that it opens your eyes when something as devastating as terminal cancer happens to someone so close. It makes you realise that how much or how little you retire on becomes less important when you fall victim to an untreatable condition. All the money in the world as the likes of Steve Jobs became all too aware will not help in such circumstances.