Best time of year to retire?

pimento

I am thinking of retiring within the next 12 months or so. I have a defined benefit scheme through my work.
Is there a better time of the year to retire from a tax perspective? I know that my lump sum will be tax free but I will also qualify for 12 weeks severance pay and as I'm a higher rate taxpayer I wondered if it would be better to retire at the start of the financial year.

I also have a season ticket that will expire in March 2019 that will give me no refund should I cancel it before then.

Does it really make a difference? As I have a choice when to go (as long as I give 2 months notice) I thought I might as well make it as advantageous to me as possible.

kidmugsy

pimento wrote: »

I am thinking of retiring within the next 12 months or so. I have a defined benefit scheme through my work.
Is there a better time of the year to retire from a tax perspective? I know that my lump sum will be tax free but I will also qualify for 12 weeks severance pay and as I'm a higher rate taxpayer I wondered if it would be better to retire at the start of the financial year.

I also have a season ticket that will expire in March 2019 that will give me no refund should I cancel it before then.

In your shoes I'd retire at the beginning of the new tax year, with enough unused holiday stored up to mean you needn't travel to work after the ticket expires. Then you'd get your severance pay on advantageous tax rates AND that bit of pay would qualify you to make a useful 19/20 contribution from your earnings to a personal pension of some sort.

Meantime you should probably be contributing as much as possible to pensions in 18/19 if that saves you plenty of higher rate tax, assuming that you have no problems with AA and LTA.

I also think that slogging through a last winter at work would be much more bearable if you know that come the Spring you will have escaped.

marlot

If you still need some years of NI for your state pension, you could consider going at the end of May. That also gives you some extra bank holidays paid (Easter and the two May holidays).

(A higher rate taxpayer will have paid enough NI by then to cover the year).

pimento

kidmugsy wrote: »

In your shoes I'd retire at the beginning of the new tax year, with enough unused holiday stored up to mean you needn't travel to work after the ticket expires. Then you'd get your severance pay on advantageous tax rates AND that bit of pay would qualify you to make a useful 19/20 contribution from your earnings to a personal pension of some sort.

Meantime you should probably be contributing as much as possible to pensions in 18/19 if that saves you plenty of higher rate tax, assuming that you have no problems with AA and LTA.

I also think that slogging through a last winter at work would be much more bearable if you know that come the Spring you will have escaped.

Hi. Thanks for that.
I don't really understand what AA and LTA are or what 19/20 contributions are.

Unfortunately, all my annual leave will be used up (and some) as our holiday year at work runs from the 1st of April.

pimento

marlot wrote: »

If you still need some years of NI for your state pension, you could consider going at the end of May. That also gives you some extra bank holidays paid (Easter and the two May holidays).

(A higher rate taxpayer will have paid enough NI by then to cover the year).

I checked this just last week and when I can (finally) draw the state pension in 2027, I will get £164.35 a week. If I haven't died by then.

p00hsticks

marlot wrote: »

If you still need some years of NI for your state pension, you could consider going at the end of May. That also gives you some extra bank holidays paid (Easter and the two May holidays).

I agree about the NI but not so sure of your point about the bank holidays. If it's like most employers where holidays are 'x days plus bank holidays' then bank holidays come out of your annual leave allowance so if there aren't any before you leave you'd end up getting the money instead.



Of course, it all depends on when the holiday year is calculated from

MallyGirl

my employer certainly doesn't work like that for bank holidays.

MallyGirl

pimento wrote: »

Hi. Thanks for that.
I don't really understand what AA and LTA are or what 19/20 contributions are.

Unfortunately, all my annual leave will be used up (and some) as our holiday year at work runs from the 1st of April.

AA - annual allowance. You can't pay in more than £40k to a pension even if you earn more than that.
LTA - Lifetime allowance circa £1million. If you go over than in a pension you get hit with 55% tax so if you are nearing it you stop putting money in.
19/20 contributions - if high rate tax payer then working for just a couple of months will pay enough NI for a full extra year of pension (if you are short)

pimento

MallyGirl wrote: »

AA - annual allowance. You can't pay in more than £40k to a pension even if you earn more than that.
LTA - Lifetime allowance circa £1million. If you go over than in a pension you get hit with 55% tax so if you are nearing it you stop putting money in.
19/20 contributions - if high rate tax payer then working for just a couple of months will pay enough NI for a full extra year of pension (if you are short)

Thank you. I don't think I have to consider either of those.

atush

For you, i'd go in the next tax year. And before you do, boost any AVC or DC pension you might have with extra cash/investments you might have.

For us, the idea is to go after annual bonuses are paid

Triumph13

With a full NI record, and going straight onto a decent DC pension, there isn't really a 'right' time to go. If such a thing exists, just choose a quiet time at work so you have time to hand things over without more stress than necessary.