Can anyone help

sarah_h_4

I am looking at taking early retirement from my final salery pension. I will leave at 56 and am not sure how to work out what my overall losses will be from going early. I have got a forcast which says I will loose about £1500 a year on my pension but how do I work out how much this might be in real terms over my retirement years.


Hope someone out there can help.

[Deleted User]

You could start by working out the crossover point of you being better off. For example if your unreduced pension would be 7500pa (from age 60) and your reduced pension would be 6000pa (from age 56), the crossover age would be 76 (as 20 x 6000 = 16 x 7500). This can be refined to allow for the increases in your pension and the present value of the payments (ie that payments now are worth more to you than payments received in the future). This is just the mathematical issue - the are other things to consider too eg do you need the pension now, your tax position now and in the future etc etc.

sarah_h_4

Hi there Anactuary, thanks for the reply.
The answer to your questions are as follows.
No I do not need the income from my pension now but will in the future. My prescent tax position is I am still with in the 30% tax ban but if I took my pension I would need to be carefull to stay there and not creep into 40%

dunstonh

If you dont need the income now then it wouldn't be sensible to commence the pension whilst there is a penalty for doing so. Indexation will be maintaining its real value more or less and the penalty will be applied for life so best wait.

My prescent tax position is I am still with in the 30% tax ban

There isn't a 30% band. Basic rate is 22% currently with higher rate at 40%.

sarah_h_4

Hi there, Thatnks for your reply. Sorry to mislead you I was thinking about the £30K sealing when you move into the 40% band.
As I have a final salery pension I would not have a penalty for retireing early I would just have less years service. I have been offered another job and would reinvest my pension every month to prepare for my retirement at some time. What I am trying to work out would be my pertential losses from the early retirement to build these into my new pay deal. For instace if I stant to loose £1000 a year by leaving my prescent job what kind of an increase in salery would I need for the next 4 years to make this up ?

[Deleted User]

sarah_h wrote: »

As I have a final salery pension I would not have a penalty for retireing early I would just have less years service.

Most final salary schemes would impose an early retirement reduction - typically 4% to 6% pa (simple) for each year the pension is taken before normal pension age (NPA) eg if NPA is 60, you're going at 56 and the reduction is 5%pa, the total reduction would be 20%.

sarah_h_4

Hi there,

Because of long service I have protected rights and can retire anytime after 55 with no penalty reductions just loss of any years I dont work up to 60. So I would ahave a 4 year shortfall on the years and also 4 years cost of living rises which wouldn't be on my final salery now but wold be in 4 years time. It is these unknown bits I dont know how to calculate, also how do you guestimate how long you are going to live post retiremnt.

EdInvestor

Will your pension be indexed for inflation when in payment?

What will your total salary be (pension plus job) if you take it now?

kennyboy66_2

If its any help the current life expectancy for women who are 65 is 84.6 years.
At 56 this will be marginally less, but not much, I'd guess at 84 point something.

Also this has been consistently underestimated in the past.

Of greater relevance is your health, family history and where you live (life expectancy much higher in middle class surrey than working class Govan in Glasgow to use an extreme example).

sarah_h_4

Hi there Ed,

sarah_h_4

Hi there Ed,

I estimate my pension to be around £10K which will be index linked and my new post will bring me a salery of around £45K but I could ask that part of this in bonus payments or in some other form of perk.

In answer to your post Kennyboy, I am reasonable health Bit overweight but dont smoke or drink(am a bit boring) Am not quite middle class Surrey more middle class Yorkshire, have a reasonably healthy life style(could be better but could be worse)

Iwould hope to reach my 80's and the plan is in my 60's to retire to a lazy life in the sun. This is the reason I want to be sure I am getting the best from my retirement money.

I should add that if I take my pension now I would be looking to invest the money every month because we will still have enough to live on without it.

Can I also just add here Thanks a lot to the people who have offered advice.