The Final Countdown - any advice

enthusiasticsaver

I am now just over thirteen months away from retiring early on my 58th birthday (or technically the day before). This is 8 years early as my NRD for my LGPS is February 2026.

My OH retired on his 58th birthday in October last year so we now have his pension sorted and the monthly pension after tax for him is £1750. At the moment we are receiving extra tax payments back (overpayments due to ex company car) so last pension payment was around £1k more than expected. I only work part time (2.5 days pw) and earn around £920 a month so significantly smaller pension for me. I can take my LGPS pension from age 55 and if I draw on it from my 58th birthday I will receive around £450 per month (no tax). I have significant capital (£120k) to fill the gaps both in current accounts, national savings bonds and stocks and shares isas. We are also selling a second property this year (one third is mine) and I will be splitting it between me and our two adult daughters (£90k). My husbands lump sum remains invested and will not be touched for foreseeable future. No mortgage on our main home which is worth around £260k. No other debt and two cars worth around £25k combined. Our expenditure is around £1500 per month on average so OHs pension is more than enough along with investments and savings accounts.

Any advice for the last year of work? A few things I need to consider is whether it is worth leaving my LGPS scheme untouched until my 60th or 66th birthday. At the moment the projections say I will receive £7800 per annum if I don't take it until 2026 so around a 35% reduction by taking it 8 years early. However I will get the benefit of having it for an extra 8 years. I will be getting full quotes after February as the website projection tool says I need to give 12 months notice and not to rely on website projection.

I also have an old Barclays GMP which starts paying out in 2020 and that will be around £3800 per annum. State pension age is 2026 (age 66) and the online calculator says I will get £155 per week and have full contributions. OH gets his in 2024 and will get £165 per week.

I have friends who have retired and of course OH. I have a gym membership and National Trust which I will continue with. I read, garden, enjoy walking and theatre and cinema visits. I play the piano and we have one daughter and son in law and granddaughter living in same town and we look after granddaughter (age 1) 1 day a week. Other daughter lives in Bristol. We plan to do some bigger holidays in 2018 and 2019 and have booked a few family and shorter trips this year and trips up to London and Bristol and Midlands to visit family. I am confident I will have no problem filling my time. Just need to make sure finances healthy. I, luckily enjoy good health so far.

Anyone got any pearls of wisdom for final countdown for early retirement?

Wentthedaywell?

I'm in a similar position, hoping to retire early (at 60) in the autumn, so will be interested in your replies.

I set up an AVC a couple of years back and am putting the maximum into that each month. I intend to take it all as a tax free lump sum under the older LGPS rules. It's got tax advantages both and out, so an AVC is worth considering for a final savings push.

Will you and your husband get the full state pension? I won't, having been contracted out, so I am going to pay contributions myself until SP. It's certainly well worth while doing so.

Good luck, I look forward to read what replies you get. There are some very knowledgeable people here; I've had better information from this thread than I have from my pensions department.

Triumph13

The obvious thing is to open a PP or SIPP and contribute 100% of your salary for this tax year and the next. You will then be able to take it back out tax free in the period before your state pension starts.

OldBeanz

+1 - for a PP or SIPP, a shame you did not do this 2 years ago.

Normally on here it is advised to defer taking DB pensions as long as possible but as you will be a tax payer when your State Pension is paid then it makes sense to draw it when you finish work.

Sterlingtimes

OldBeanz wrote: »

Normally on here it is advised to defer taking DB pensions as long as possible ...

Mathematically, it would be better for me to defect one of my DB pensions. My concern is that death in deferment makes a very poor payout, 150% of own payment to pension plus credited interest. With a wife 12 years younger I would be putting negating a widow's pension that would far exceed a annuity bought with the lump sum payment.

k6chris

Triumph13 wrote: »

The obvious thing is to open a PP or SIPP and contribute 100% of your salary for this tax year and the next. You will then be able to take it back out tax free in the period before your state pension starts.

How does that work? I though only 25% would be tax free??

OldBeanz

Her LGPS is only paying £450pcm or £5400 pa so she could take the money out gradually ensuring she does not exceed her tax allowance. The starting rate of tax is going up to £12500 meaning that anyone can take £16,600 tax free (or £8,800 in this case). This only became viable post the 2014 review and is ideally suitable for those in DB pensions who are retiring in line with their older spouse.

Moby

k6chris wrote: »

How does that work? I though only 25% would be tax free??

I'm in the LGPS as well and the Prudential have an AVC scheme connected to it which allows you to take 100% of the AVC pot as tax free cash, as long as the total lump sum you take isn’t more than 25% of the total value of your LGPS benefits taken. The Govmt stopped this a few years ago for new applications but then someone told me it was possible again? It would be worth checking it out.

enthusiasticsaver

OldBeanz wrote: »

+1 - for a PP or SIPP, a shame you did not do this 2 years ago.

Normally on here it is advised to defer taking DB pensions as long as possible but as you will be a tax payer when your State Pension is paid then it makes sense to draw it when you finish work.

Yes I figured that too. Initially I will be a non tax payer when I am only getting my LGPS db Pension and then still hopefully when I get the Barclays one in 2020 but my state pension will push me into paying tax in 2026 so I figured claiming my pension early would be better from a tax point of view.

enthusiasticsaver

Moby wrote: »

I'm in the LGPS as well and the Prudential have an AVC scheme connected to it which allows you to take 100% of the AVC pot as tax free cash, as long as the total lump sum you take isn’t more than 25% of the total value of your LGPS benefits taken. The Govmt stopped this a few years ago for new applications but then someone told me it was possible again? It would be worth checking it out.

Yes I have an AVC pot with the prudential and am eligible to take this tax free. I am not sure what to do with that as we will not need it initially and I would rather leave it invested for now. This is what happened with my OHs pension and he took the 25% tax free lump sum and we reinvested it in stocks and shares (initially by using ISA allowance and the rest we will bed and isa over the next few tax years).

enthusiasticsaver

Triumph13 wrote: »

The obvious thing is to open a PP or SIPP and contribute 100% of your salary for this tax year and the next. You will then be able to take it back out tax free in the period before your state pension starts.

As I will be a non tax payer prior to me taking the state pension and I don't pay much tax now (only earning around £12.5k) I am not sure how this benefits me? If I put £10k in a SIPP which is something I am considering do I gain anything from this beyond putting it in my usual stocks and shares portfolio(ISA)?