Final salary transfer help

Benefriction

I was originally able to have my state pension at age 60. Now it has been put back to 65 really!!

jamesd

Benefriction wrote: »

I am nearly 60 and have a final salary pension which will give a small income and/or lump sum. The income level provided by the scheme is insufficient for me to retire upon comfortably. This means that I will have to continue working until age 65 when I receive my state pension.

Given this 11k and the state pension at age 65, would the combined £19k a year be sufficient? Will it be enough so you can afford to reduce it, say to the £15k if you took the lump sum and 7k on top of the 8k state pension?

As a person who is between 55 and 75 you can pay into a personal pension, get the tax relief and then take out 25% as a tax free lump sum. You can pay in a gross including tax relief) amount of either 3600 or your pay, whichever is higher, but no more than £40k a tax year. If you take a penny of the taxable 75% that remains in the pension your annual allowance for payments into this type of pension in your name by anyone is reduced to £4k per tax year. So you'd ideally do that at a time when 4k or less is all you'd want to pay in.

Because of the pension tax relief and your age it does not seem like a good idea to leave your existing savings in the ISA. Better to get the pension tax relief. We don't know the amount so it's not possible to say how this amount of money could help you to retire sooner.

You have a mortgage. It's usually possible to cut expenses by increasing the mortgage term into retirement. That can reduce your need for money in the six years to you reaching state pension age and the age to normal retirement age for the RBS scheme. You could even seek to increase the mortgage as part of this, to give you a lump sum to help living expenses until state pension age, then repaying out of the higher income level at that time. Or you could use an equity release mortgage instead of a standard one to give you more flexibility over when or if you choose to repay.

What is the normal retirement age for the RBS pension? What is the reduction for taking it earlier than NRA?

If you took the income from this pension and the maximum tax free lump sum, the lump sum is only 12.5 times the income given up. A 12.5:1 commutation like that is pretty poor, as you can see if you compare it to the 26.3 times transfer value calculated with the CETV rules. Borrowing with a mortgage and repaying with some of the £4k difference between 7k and 11k is probably a better move.

My guess is that a standard mortgage with end date around age 85 or equity release could let you retire now if you wanted to, but this depends on the income you need after allowing for the mortgage payments and how much you have in savings at the moment.

If you can fill in the missing numbers for savings now and the income you'd need long term in retirement we should be able to come up with some idea of what income you could take if retiring now.

jamesd

Benefriction wrote: »

I was originally able to have my state pension at age 60. Now it has been put back to 65 really!!

Probably 66 but this isn't another five year increase, just the one from twenty years ago that recently started to take effect.

Benefriction

Thank you all for the advice. But it still means entering into my old age on a very low income :-(
I was hoping there was an alternative especially with such a large cash transfer - I will have to see a pensions advisor

Benefriction

Tomorrow I will fill in the gaps. My situation is slightly more complicated in gat it is separated into two plans ie NatWest and RBS. There are two CETVs I can only give approxmations right now but it goes like this. Cash tf of approx £45k plus cash tf of £245k. The same applies if I stick with the defined benefits ie there are two small incomes/lump sums. I dont know if I can leave one on the system and take the other one out. I will get all the figures tomorrow thank you so much gor your help

Benefriction

Sorry for the typos

jamesd

Being split into two plans could actually be a good thing if you're allowed to do a transfer from one and leave the other one alone. That way you could take a transfer and still keep some of the guaranteed for life income from the other one. Definitely worth investigating!

Bootsox

Benefriction wrote: »

I am in the unfortunate group of women who have had their pension put back another 5 years. I dont have a recent statement but the last time I ce ked it was £155 per week

From the information you have provided it sounds like you may have been "contracted out" for a while due to your FS pension (which can reduce the nSP figure).

From the statement, does the £155 apply only if you continue to work until age 66 (and make regular NI contributions)?

If you retire prior to age 66 your nSP figure may be reduced.

atush

Benefriction wrote: »

I was originally able to have my state pension at age 60. Now it has been put back to 65 really!!

These plans were announced 20 years ago. have you been living under a rock?

I am affected, and I knew about it decades ago.

atush

Benefriction wrote: »

Thank you all for the advice. But it still means entering into my old age on a very low income :-(
I was hoping there was an alternative especially with such a large cash transfer - I will have to see a pensions advisor

Pay more into a pension now.

This is what many women have been doing for the last several decades as they knew they would not get their state pension at 60 but still wanted to retire then,