Retire at 55?

ajbell

I would like to retire at 55 in 3 years time.
No mortgage or debt and a reasonable amount of savings (50k).


I have 2 final salary pensions, one of which I am still paying into (current employer). also have a SIPP with about £6K in which I pay around £300 a month in to.


My deferred FS pension will pay me around £10k at 55 or £12,5k at 60. Have just had a CEVT done and have been offered £433k.


My current FS pension will pay around £3k at 55 and has a CEVT value now of £120k and will probably be around £170k by 55.


So given that I want to retire at 55 not 60 do I take the cash which is not reduced for age and a bigger TFLS or the reduced income?.


I could get £560k - £600k which would give me around £150k lump sum and £400k+ to invest in drawdown.


What income could I get from £400k and would you go this way given that I don't to work to 60.

kidmugsy

My instinct would be to consider diversifying my income so that I'd have one DC pension, one FS pension, and eventually one state pension. The trouble is that your two FS pensions are rather unbalanced with one worth about three times the other.

Are both FS schemes in good nick financially? Have you any objective reason to expect an unusually short or long life? Are you married: are you interested in your widow's provision? Are you concerned about leaving unspent pension capital for your children? Do you have any compelling use for (a) a large capital sum in retirement, or (b) maximised annual income in retirement?

How would you feel about using DC money to bridge gaps so that (i) you could avoid an actuarial reduction on taking one of the FS pensions early, and (ii) you would spend capital as income in the short term until your State Pension began?

ajbell

Not married and no interest in inheritance.
Just thinking that because FS pensions are reduced if you take them early and that you get poor TFLS, that I might be better to take the cash and max TFLS and invest the remaining £400K+.
Is that enough to live on?.
No health issues and schemes are in decent condition.

mgdavid

35 years is a long time to be retired and may throw up all sorts of circumstances you haven't thought of. Who knows what fiendish government policies or taxes might exist in that timeframe? It's fair to say the State pension might look very different, could be means tested.
What's your Number i.e. how much annual income will you need to enjoy a decent retirement?
What provision are you planning for care in old age with failing health or faculties?
First work out your longterm plan, then work out how to fund it!

robin61

I would personally be very reluctant to transfer a DB scheme.

Why not invest in a DC scheme over the next 3 years. You could do that from earnings or use your existing capital. You would benefit from the tax relief and you could then use the DC scheme to live off for a while and defer taking your DB scheme.

From next year you can effectively get £15,333 per annum out of a DC scheme without paying tax if it's your only income.

PensionTech

CEVT value now of £120k and will probably be around £170k by 55

What makes you think that? CETVs are based on market conditions at the time, and they are also discounted. If the net discount rate is negative (which can happen when long-term inflation expectations outstrip current gilt yields, depending on scheme strategy) then your CETV will go down as you approach retirement age, particularly if short-term inflation actually experienced in the interim is lower than long-term expectations (as has been the case for the last few years). Not only that but the market conditions that underpin CETV calculations can vary wildly, which is why CETVs calculated in the last few months since the referendum - particularly in August - are very significantly higher than they were at the end of the year. Anything can happen by the time you reach 55 in three years' time. Don't bank on your CETV going up like this.

ajbell

PensionTech wrote: »

What makes you think that? CETVs are based on market conditions at the time, and they are also discounted. If the net discount rate is negative (which can happen when long-term inflation expectations outstrip current gilt yields, depending on scheme strategy) then your CETV will go down as you approach retirement age, particularly if short-term inflation actually experienced in the interim is lower than long-term expectations (as has been the case for the last few years). Not only that but the market conditions that underpin CETV calculations can vary wildly, which is why CETVs calculated in the last few months since the referendum - particularly in August - are very significantly higher than they were at the end of the year. Anything can happen by the time you reach 55 in three years' time. Don't bank on your CETV going up like this.

Its on my Pension providers website as a prediction of the CETV at 55, its not what I think or believe, it is just their prediction.
But I understand your point.

PensionTech

Its on my Pension providers website as a prediction of the CETV at 55, its not what I think or believe, it is just their prediction.

That is surprising. I guess they must be basing it on what your transfer value would be if you were 55 now using current market conditions, but if I were them I would never take the risk of raising expectations like that.

ajbell

It's a new thing with our FS that they will now let you take the cash equivalent at retirement.
Seems strange to me also but they have given us all a talk on it and mailed us a card with the website details on it.Checked it out and the CETV is there along with the normal benefits.

robin61

ajbell wrote: »

It's a new thing with our FS that they will now let you take the cash equivalent at retirement.
Seems strange to me also but they have given us all a talk on it and mailed us a card with the website details on it.Checked it out and the CETV is there along with the normal benefits.

That would make me very suspicious. Ask yourself why would they want you to do this ? Who's interests are they looking after ?

ajbell

Yes I know but this is a fully funded ftse 100 company scheme. Although closed to new starters for some years now.