Pension plans for an early retirement

enthusiasticsaver

Your plan sounds fine. You will have a 2 or maybe 3 year funding gap between 57/58 and 60 when you will get your pensions so the nearer you get to retirement the more cash you will need to build up in case the market is low. You do not want to be forced into liquidating your private pension or s and s isa if we are in a downturn. It sounds like you will be fine after 60 but need to work out how to get the £86k to £130k you will need for the first two or three years. So certainly you should invest in a combination of private pension and s and s isas now but coming up to the last 5 years before retirement we started to hold some money back in cash fixed rate bonds, one maturing each year. So far we have not had to draw on our sipps or stocks and shares isas.

atush

I think yoru plan is sond, but as others have said iw ould up your pension contribs into a DC or AVC to use up all your HRT relief.

But i w ould also say that 3K is not enough of a cash reserve, so putting away 500/m into that would also be a good idea- at least until you have a larger cash sum. Then SS&S isas

jamesd

richieboy wrote: »

Or maybe there is a better way and we can retire even earlier :T

In general the core way to do it is to plan to make personal pension contributions that you start to draw on then take the defined benefit pensions at their normal retirement age to avoid actuarial reduction. To go earlier than 55 you add non-pension investing usually in an ISA and draw on that until age 55.

Current interest rates mean that transfer values out of defined benefit pensions are very good in most cases. In that situation a better combination can be non-pension savings to cover the years until age 55 then a transfer out of the DB pension to a personal pension. In your case allowed for the LGPS but not CS because CS is unfunded. Transfer values probably won't be as high when you get to 55 and it probably isn't a good move to transfer before retiring.

The transfer values at the moment mean that it can be possible to retire well before age 55. Maybe 50 in your case, depending on how much non-pension money you an accumulate to cover your income need until 55.

To see some worked examples of this sort of planning, look at the ones linked from this post.

In general what you'll find is that the transfer of the LGPS pension will allow you to retire earlier on a substantially higher income, but in exchange you'd have to accept the potential for that income to drop if investment performance was at the bottom end of the historic range. The willingness to accept that variability is one of the key things that determines whether it's a suitable approach or not. Someone who wants the certainty will take the lower DB income and later retirement go get it. Deferring the state pension can get useful guaranteed income but not 24k worth, around 4-8k per person is about its potential, so maybe 16k between you if you defer for ten years each. regular buying of annuities of maybe ten thousand or twenty thousand every year or two can also be useful sometimes as a way to gradually shift to more guarantee income as you get older and less healthy causing annuities to become increasingly competitive with drawdown on income level per Pound.

A common mistake for this sort of planning is overpaying on a mortgage and thereby depriving yourself of money you need before age 55. Better strategy is to extend the term of even borrow more to maximise the amount available before 55. Big paying off fits best after state pensions are in payment.