Bridging a Gap

jamesd

The drawdown approach you've described is one way. Another way is to take out a mortgage that lasts into retirement and repay mostly with the increased pension income from waiting until normal retirement age. Meanwhile you use the money from the mortgage to first pay the mortgage then boost your income until then. An equity release mortgage may be more suitable than a standard mortgage, notably the types that let you draw flexibly and only charge interest on the amount drawn.

kidmugsy

Takedap wrote: »

The reason that the company want to close the scheme is because they say it is not viable in it's current form.
Does this mean that they have been negligent in the past by NEVER refusing an early retirement request at age 60 AND by also enhancing the pension by giving unearned years to early retirers?

I don't know about "negligent" but certainly imprudent. One of my own schemes, USS, had a similar habit of hosing money around extravagantly; that's one of the reasons it's now in some difficulties.

Takedap

sunnystart wrote: »

Don't know if the company is negligent, but they seem to be trying to get out of their obligations to pay into the scheme and it is ironic that in the last newsbrief issued in December, the chairman of the trustees Allan Johnston is seen receiving a number of awards including 'Best UK pension Fund' and the gold award for 'Best European Pension Fund'.
Over the years it has been policy for British Steel, Corus and now Tata to leave people retire before they reach the age of sixty and have used the pension scheme to fund job losses and to get rid of the 'dead wood'.
I currently work for Tata myself and cannot think of a better way of demotivating the current workforce, some of which have worked in very unfavorable conditions for thirty to forty years and will be really lucky to live well into old age.

I wholly agree with everything that you say. In addition to the company "misusing" the scheme in all the ways you have stated above, there is also the fact that when it was run by Corus, the company took a long "pension holiday" where they made no additional contributions because the scheme was in such a good position.

They also allowed people to take out figures in far excess of their final salaries by calculating the pension simply on the last year of emploment but including overtime & bonus payments. The result of this was that on reaching the age of 59, people would all of a sudden start doing vast amounts of overtime which would boost their final salary by thousands of pounds which would then of course be paid in pertuity.

The hardest hit will be the shift workers (who are statistically proven to have a reduced life expectancy anyway) who not only find that they will now face an extra five years of burning cobbles, clearing tapholes & digging stickers but will also lose any prospect of their death in service benefit in case they keel over while they're doing it.

Loughton_Monkey

Takedap wrote: »

....I am now 55 & looking to bridge the 5 year gap & have the retirement that I have planned for.....

Nothing wrong with that......

Before pressing any important buttons, you will need to await the final outcome of any new 'rules' to the pension.

As, I think, you realise, you have little 'financial' options but to accept what the pension will actually pay and when. Any thoughts of suffering actuarial reductions or early retirement penalties should be discounted. THey could cost you dearly.

I would counsel you to start with the wider picture. You have another 5 years of earning. You have a good 'core' FS scheme. You have another pension fund. You have cash, savings, investments, some of which are in ISA wrappers.

Then you have a spending pattern which defines your current 'lifestyle'. You presumably have views on how you will spend your retirement and the cost of that new 'lifestyle'.


So put all that together in a spreadsheet or two, with the following objectives:

• maximising the use of any further tax advantages, like maxing out pension LTA and tax relief, and maxing your ISA allowances.
• making absolutely sure that the projected wealth at retirement will support the cost of your retired lifestyle (with safety margins).
• critically analysing the 'cash flow' to ensure that you can 'cover' any restraints as to when your FS scheme commences, and gaps of (maybe) 7 years or so before your State Pension arrives....

There is almost certainly a way of optimising the figures. For example, retiring at 60 you will have £10K+ a year tax free allowance. How will you 'use' that? Ramming as much cash as possible into a pension before 60, and drawing this out on flexible drawdown at £10K a year is a wonderful way if you don't have much taxable savings interest.

In other words, if you spend some quality time doing an overall 'plan', then all the individual details regarding pensions, drawdown, Capital Gains tax, Tax allowances etc. will tend to fit into place. It will also confirm (or otherwise) that you can indeed retire at 60 in comfort.

Trumpeter

coyrls wrote: »

http://www.employeebenefits.co.uk/compliance/court-rules-ibm-breached-employer-duties-in-pensions-restructure/104515.article

I'm also very closely involved in this. Thanks for the link & it'll be passed on to my Union rep.

Takedap

Loughton_Monkey wrote: »

Nothing wrong with that......

Before pressing any important buttons, you will need to await the final outcome of any new 'rules' to the pension.......

Ramming as much cash as possible into a pension before 60, and drawing this out on flexible drawdown at £10K a year is a wonderful way if you don't have much taxable savings interest.....

It will also confirm (or otherwise) that you can indeed retire at 60 in comfort.

Thank You for the wise words. I think I'm already aware of what percentage of my current salary I need to continue with my current lifestyle because I'm basically doing it already.

The biggest differences would be an increase in leisure time but coupled with a deceased need to save for the pension provision.

I think that I'm convinced that my initial course of action was correct, ie build up the secondary personal pension but now the question arises of how to do it.

Although I already have a SIPP set up, this was done just for HRT purposes. Now that this money becomes more important & the fund gets much bigger (living money not just for "extras") I need to decide on the level of risk I am prepared to take with it.

What would people's suggestions be for a modest level of growth, even if it's just keeping up with inflation, but minimising the risk of a financial downturn?
In the meantime, whilst deciding on which funds to invest in, is it true that I can deposit cash into a SIPP before the end of the financial year & decide later what to do with it?

mgdavid

Takedap wrote: »

........
In the meantime, whilst deciding on which funds to invest in, is it true that I can deposit cash into a SIPP before the end of the financial year & decide later what to do with it?

Yes, you can.

Loughton_Monkey

Takedap wrote: »

Although I already have a SIPP set up, this was done just for HRT purposes. Now that this money becomes more important & the fund gets much bigger (living money not just for "extras") I need to decide on the level of risk I am prepared to take with it.

What would people's suggestions be for a modest level of growth, even if it's just keeping up with inflation, but minimising the risk of a financial downturn?
In the meantime, whilst deciding on which funds to invest in, is it true that I can deposit cash into a SIPP before the end of the financial year & decide later what to do with it?

I have tracked all my investments in detail, and receive about 7% average annual growth rate over all my 'investments' [mainly funds]. Any one year, of course, can bomb 25%, but generally the markets recover with a quick partial rebound, and a longer full rebound.

Knowing what "guaranteed" income I have from FS pensions etc., I therefore know exactly how much 'cash' I need to use to top them up to my spending budget. Being conservative when I retired early, I chose to put 33% of my 'free cash' at 'risk'. I then quickly became a bit more cavalier and moved to 40%.

For the last couple of years, given the virtually zero cash savings interest, I have deliberately put an extra 10% into ISA funds, taking care to put it in 'safer' funds like the Absolute, Mixed, and 'Fixed' variety. Touching wood, these have coughed up nearer 10% over the last year as opposed to the 1.6% less tax I would have got in 'the bank'.

The rest is largely in [what I would call] average/normal risk funds dominated by growth markets [China, Far East, India] and by funds with good track records [Woodford, Invesco Perpetual, Fidelity]

One further point. If you [like me] might struggle to keep within basic tax band in retirement [something to consider in the run up to it anyway, if you can] there is a handy technique in the form of deferring your State Pension in favour of a lump sum. I rape my 'pot' pensions by drawing down the max that will keep me just within 20%. The year I decide to take my lump sum, I just need to take extra special care to have a fiver of 'headroom' within the 20% bracket, then the whole lum sum is only taxed at 20% [having been rolled up at a generous 2½% anyway].

Zim_Zimmerman

My company has informed me that the Defined Benefit scheme is closing in April 2016 and will be replaced by a Defined Contribution scheme and I will become a deferred pensioner after 38 years service.
My problem is I will not be 55 until a month later (May 2016).

My Wife is disabled and I am her carer, and each year it has got more difficult to hold down my job and care for her. I planned to take early retirement at 55 to look after her and now I am being told I cannot access my pension until I am 65.

Please can anyone help.

xylophone

Can you access the deferred benefits at age 55?

Presumably you had looked into taking early retirement and any actuarial reduction even if the scheme had continued?

Otherwise, if you did not seek to access your pension but left it deferred until Scheme Retirement Age, and gave up work to care for your wife, would you be entitled to benefits?