Retire at 62?

DiggerUK

John1965 wrote: »

Would like to retire in just over 8 yrs aged 62. To bridge the 5year gap to 67 .............

You don't mention if you are planning to buy the five years shortfall on state pension. As you would still be buying an index linked addition to your state pension, it would be money well spent I'd say.
All you need to do for that to happen is put by enough for the purchase in a safe place. Premium bonds would be perfect, (and who knows)
It would have to be deducted from your spending plans for the 62/67 years..._

Edit, have you had an SP forecast yet, it could be you might have enough years at 67, or not be the full five years short..._

John1965

Thanks for the replies. A few things to consider. The idea of holding cash in a SIPP is appealing as this will guarantee the amount that I require in 8 years time? I am sure that 18k per year will be sufficient for the 5 year gap. I had considered accessing my LGPS earlier but thought the reduction would be too much?I will contact scheme for an indication.

John1965

My SP forecast states that I will be eligible for full amount (£164 per week) with another 3 years contributions therefore I thought I would stop NI contributions when I retire in 8 years. Please let me know if this is accurate.

Dazed_and_confused

Please let me know if this is accurate.

We can't see your forecast so don't know.

But, as someone under the transitional rules who has probably been contracted out for sometime it is entirely plausible for you to not currently be entitled to the full new State Pension of £164.35 but additional years contributions post April 2016 can make up this shortfall.

So if you plan to stop work in 8 years you would have to pay another 8 years worth of National Insurance but they might stop benefitting you, from a State Pension perspective, in another 3 years.

At least it seems you won't need to purchase additional years after you retire which some people choose to (to get to the £164.35).

seacaitch

xylophone wrote: »

There is the inflation risk from staying in cash but at least you would know how much you had to play with.

Rule changes + inflation risk are the greatest potential pitfalls, particularly the risk of greater than anticipated inflation somewhat disrupting the plan, bearing in mind the 13 year span from the OP making the first £ of their intended 8 years SIPP contributions and withdrawing the last £ after 5 years of drawdowns.

To help mitigate this inflation risk (by converting it to investment risk etc) I personally would consider using the first half (ie ~4 years worth) or so of the intended 8 years of SIPP contributions to purchase a/some conservative collective investments. My candidate list for consideration would be topped by the suggestion to split these purchases 50/50 across CGT/PNL (Capital Gearing / Personal Assets trusts). The investment horizons for these investment trust purchases would extend from ~6 to 13 years, average ~9.5 years, which for relatively conservatively positioned collectives I would be happy about.

You might wish to think about which SIPP platform would enable these investment trusts to be purchased and held most cheaply. It may well be that performing the accumulation on one platform and switching to another for the drawdown might be cheapest.

For the cash portion (the other half of the contributions), which would have an "investment" horizon of 0 to ~6 years, it may be worth considering using some of it to buy something such as Vanguard Global Short-term Corporate Bond index fund to eke out a very slight return (in exchange for some investment risk), but it depends on you being able to minimise any transaction and platform fees.

Just some ideas of things for the OP to consider for finessing the plan....