Early retirement at 55...help please

Linton

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!

There are undoubtedly very sad cases one can cite and one appreciates the impact it must have had on yourself. However it is not necessarily a sensible idea to base one's life choices on them. Consider this....

According to the official life expectancy table someone aged 60 now making a decision on retirement strategy is roughly twice as likely to live to 100 than die by 65. If you use all your money to enjoy your life in the early years you could be consigning yourself to poverty for decades. At least those who die early dont know that they have missed out financially.

robin61

Mr_Prudent wrote: »

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.

This must have been very hard for you. My wife is definitely in the enjoy your money while you still can camp So as long as you are not putting yourself in a position of being in real need later in life is there is a lot in favour of what you are saying.

madeinireland_2

Mr_Prudent wrote: »

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.

Yes I agree that's why I'm retiring at 55 rather than 65 - doesn't mean I have to take my bt pension at that age if it's not a sensible path for me.

madeinireland_2

robin61 wrote: »

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 ?

Yes that's what I would have expected and me or my wife are rather hoping we will make it beyond 80 between us so that's why I'm deferring till 60. I'm happy to partipate in a bt thread - I think there are probably a lot of but people on here.

smjxm09

The other thing to consider, which will be pointed out on the seminar, is that you need more money in early retirement than in the latter years of retirement as while you have health and mind you are more likely to have holidays etc. My dad stopped spending money when he got to his 80's.

Going back to the BT portal it seems to me to be impossible to find out what pension I would get by differing it to 60. How are people here doing a calculation without any information as India just don't want to know?

ExBT_Bob

I left BT under an early release scheme and deferred my Sec B pension. I was concerned about the lack of choice on my BT AVC and last January transferred it out in ££ to a SIPP with a well known company. It was over £40k and I was able to self select shares/funds to suit myself. I have just gone into capped drawdown and able to take the tax free 25%. The rest will wait now until after April 5th 2015 when, under the new rules, I can change it to flexi drawdown and start to take additional cash as I see fit, which in my case, as I have no other taxable income (living off savings/investments from ISAs) I can take up to £10.5K each year tax free.
I'm now 56 and still loathe to take my BT Pension due to the actuarial reduction on the pre 2009 service (which is 20%) and the small amount I worked post 2009 (at 41% reduction).
Whilst the actuarial reduction on the Pre April 2009 service is 0% at 60, I am led to believe that it actually gets enhanced post 60yrs old too.
Incidentally you are only able to continue with your sharesave contract if you are a certain way through it at leaving, which I think on a 5-yr contract was after 3-yrs. Check the literature.

ExBT_Bob

So my advice would be to try for a release scheme, take any leaver payment up to £30k as it's tax-free (redundancy). Direct any surplus to your BT AVC so that it's sheltered from tax. Move your BT AVC to a SIPP (it's free to move) and then under the new rules you can get most if not all of your leaver payment out and previous BT AVC savings tax free, depending on your taxable earnings of course. During this time you can leave your main BT pension benefits untouched. Try to avoid the horrific actuarial reductions at all costs if you're under 60 by living off other savings/earnings if possible.
At your hubbies age he would see a 25% reduction on his pre April 2009 and 44% reduction on his post-April 2009 pension. That's a huge reduction and for life!

robin61

smjxm09 wrote: »

The other thing to consider, which will be pointed out on the seminar, is that you need more money in early retirement than in the latter years of retirement as while you have health and mind you are more likely to have holidays etc. My dad stopped spending money when he got to his 80's.

Going back to the BT portal it seems to me to be impossible to find out what pension I would get by differing it to 60. How are people here doing a calculation without any information as India just don't want to know?

I recently called Accenture about this and pointed out that the deferred pension figure at age 65 isn't a lot of use when three quarters of your pension entitlement is based on age 60. They said they were aware and are hoping to be able to start making this information available. In the meantime you can ask them to put a quotation together for you if you are leaving. Sounds like jam tomorrow and no timescales were mentioned but let's hope they come through with this.

robin61

ExBT_Bob wrote: »

So my advice would be to try for a release scheme, take any leaver payment up to £30k as it's tax-free (redundancy). Direct any surplus to your BT AVC so that it's sheltered from tax. Move your BT AVC to a SIPP (it's free to move) and then under the new rules you can get most if not all of your leaver payment out and previous BT AVC savings tax free, depending on your taxable earnings of course. During this time you can leave your main BT pension benefits untouched. Try to avoid the horrific actuarial reductions at all costs if you're under 60 by living off other savings/earnings if possible.
At your hubbies age he would see a 25% reduction on his pre April 2009 and 44% reduction on his post-April 2009 pension. That's a huge reduction and for life!

Yes the AVC does give you some options. I put a spread sheet together at the weekend. My target is to retire with a package age 57. When I look at the figures and take everything into account for me it would be year 20 of retirement when I would start making a profit by deferring to age 60.

robin61

So here's what I included in my calculations. I'm very happy to have anyone challenge the rationale.

Taking the pension at 57:-
Index linked pension income in years 1 to 3 including compound interest
Interest gained in years 1 to 3 on the tax free lump sum which includes the AVC which would be boosting the TFLS
We won't be paying tax on our investments as they will either be in ISAS or in my wife's name (non taxpayer)

Deferred pension at age 60:-
Higher index linked pension from year 4 (no pension income in years 1 to 3) also taking into account income tax
Higher tax free lump sum
Interest on both of the above (tax free)