Early 'retirement'

[Deleted User]

My husband has recently been made redundant. He is 56. We are currently in the midst of a major building project on our house so we decided he would not look for work but will project manage the construction, doing a lot of the work himself. I earn enough for us to live on so income is not a problem but i am just concerned that he will no longer be making NI contributions. We will both have work pensions of about £7-8k but we will need our state pensions as well. He has worked continually from the age of 18 so 38 years of contributions which i feel should be ok but just wondering if i'm missing anything.
Thanks for any advice

greenglide

Has he ever been Contracted Out of SERPS / S2P by a Defined Benefit (final salary) or a Defined Contribution pension scheme?

If so he might not get the maximum.

You need a state pension forecast from here https://www.gov.uk/state-pension-statement

jamesd

With 38 years he will be entitled to at least the full flat rate unless he was contracted out. If not self-employed as well he'd probably be entitled to something over £200 a week due to the earnings-related Additional State Pension.

So a key question is, is the work pension due to being in a contracted out pension? Perhaps a final or average salary pension like those typically offered in the public sector? If so, his pension level implies that he would currently be entitled to no more than today's basic state pension due to the number of years being contracted out that it probably took to get that pension level. Once the flat rate comes in from 6 April 2016 any future years worked or bought would increase this at 1/35th of the flat rate level per year until he reaches the full flat rate cap level.

Since he is 55 or over he can today ask for a state pension statement that will tell him his entitlement, though it will probably not yet include the last tax year or this tax year. Those under 55 can't yet get this, just a statement of current system rights that takes no account of the flat rate changes that may not fully allow for the deductions for being contracted out.

At a minimum you can expect that you'd each have a state pension of £5,000 a year if you have 30 years of contributions but it's probably quite cheap and easy to increase that to around £8,000, whatever the full flat rate cap turns out to be. Just by working or buying more years after the flat rate has started.

Once you've checked state pension entitlements you could consider things like using a mortgage or equity release mortgage to increase current income, intending to repay fro the possibly higher income once all state and personal pensions are available. No point in skimping today if you'll have ample money to repay later and just need to time-shift it to an earlier time.

atush

Basically you both need to get state pension statements saying how much S2P you have, as that will be added to the current basic SP to make your foundation amount.

When if your Oh's official leaving date (ie does he go now or in 3 months etc)? AS pay since apr 6th will have NI, but not a full year?

How much is his redundancy? Is it over the tax free amt of 30K? If so, put the overage into a pension.

When do you plan to stop work? When is your pension payable?

[Deleted User]

Thanks for your helpful replies. No redundancy pay on this occasion i'm afraid, he was in public service and lost his job on 7th May! He had previously had a long career in IT and got made redundant from that 8 years ago. He invested his redundancy money then so we have some ISAs - about £50k.

I'm planning to work another 5 years until i'm 60.I was self-employed for a long time so my pension provision has been sporadic but I work in a school now so am in the LGPS. I will take my pension at 61 probably. His pension is from his IT days and he says he thinks he was contracted out for some of the time.

We will get up to date pension statements and see where we stand. I currently work long hours in a very stressful job so am hoping to at least be able to go part-time at 60. Our mortgage is paid off. Will definitely look into into buying additional pension years from next year too - thanks for the heads up on that

atush

Sorry, that does not make complete sense. Public service employees do get redundancy (or get to take their pensions w.o reduction). Where did the 50K come from, that redundancy or another? All money over 30K is taxed so would have better put into a pension?

how much will your pension be reduced if you take it at 61? Iw ould not buy additonal pension if you are taking it 4 years early, I would instead put it into AVcs (if salary sacrifice) or into a PP and use that money to retire on w.o taking your LGPS so early?