It's time to start digging up those Squirrelled Nuts!!!!

michaels

NedS said:

Sea_Shell said:

QrizB said:

Sea_Shell said:

Kim1965 said:

Can you remind me of your ages? Cannot remember if you have any db pensions to pick up before sp age? 

I'm 51 and DH is 56, as at year end.

DH has DB pensions due to kick in at 65, at about £9k in today's money (indexed, can't remember the exact details - it's up thread, somewhere  )

By the time both SP are added in, we should have ~£25k, in today's money.

I'm older than you but younger than DH, while Mrs QrizB is your age. I've a DB pension with a NPA of 65 too, but am considering taking it early (with an actuarial reduction) since between it and two SPs we'll potentially have too much income once we get to 67/68.

Have you thought about this at all?

We have, but we go round in circles a bit with deciding what's "best".

At the end of the day, DH knows that he'll pay 20% tax eventually, but won't hit the higher rate.   Neither will I. *

So as long as he maximises his PA each year, won't it all "come out in the wash" eventually?

Let's hope we're not just shuffling deckchairs on the Titanic 😉



* Assuming nothing drastic is done with the rates/rules/allowances.  Who knows!! 😲

Yes, I think it's about smoothing income in retirement so you aren't struggling to make ends meet for 10 years (55-65) and then have more money than you know what to do with post 65 as DB + SP kick in (we are in the same position!).* Rather than taking DBs early, we will potentially raid the SIPPs more heavily as we approach DB/SP age (assuming the security of DB income still looks as attractive then as it does now), but we are lucky to have that flexibility in our plan.

If you're "shuffling deckchairs on the Titanic" then the ship is likely going down regardless of whether you smooth income or not (I do love that phrase!)

* Assuming we both live

I would look at this plan carefully in terms of losses to tax.  Better to make sure you use your annual allowance every year unless your reduction factors are actuarily unfair.

ALARA343

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

Albermarle

ALARA343 said:

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

4.5% is on the higher side but not by much. The only point worth noting for anybody thinking about taking a DB pension early, is that the reduction is not always exactly linear. So for example it might be 8% for two years early, but 20% for 4 years early. Some big public sector schemes publish the info I think, but in the private sector it can be difficult to get the same info.

jimi_man

Albermarle said:

ALARA343 said:

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

4.5% is on the higher side but not by much. The only point worth noting for anybody thinking about taking a DB pension early, is that the reduction is not always exactly linear. So for example it might be 8% for two years early, but 20% for 4 years early. Some big public sector schemes publish the info I think, but in the private sector it can be difficult to get the same info.

I always thought it was compounded and so it was the other way round - less for five years for example. So at 4,5% a year, over five years it works out at 20.6% instead of 22.5%. 

Albermarle

jimi_man said:

Albermarle said:

ALARA343 said:

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

4.5% is on the higher side but not by much. The only point worth noting for anybody thinking about taking a DB pension early, is that the reduction is not always exactly linear. So for example it might be 8% for two years early, but 20% for 4 years early. Some big public sector schemes publish the info I think, but in the private sector it can be difficult to get the same info.

I always thought it was compounded and so it was the other way round - less for five years for example. So at 4,5% a year, over five years it works out at 20.6% instead of 22.5%. 

It can vary between schemes, the actuaries of the scheme can take a view on the cost of early retirees. There is no standard calculation AFAIK

NedS

For CS Alpha, the rate improves the earlier the pension is taken. 5.5% in first year (67 to 66), dropping to 3.5% for the individual year going from 61 to 60 (average 4.47% over the 7 years)

In fact there is also significant variation within months - taking Alpha 1 month early incurs a 0.2% drop whereas 2 months early incurs a 0.7% drop, so 0.2% for the first month and 0.5% for the second. In fact that seems like such a good deal, I may just take my Alpha pension 1 month early as the break even point is 41.5 years and I'm unlikely to live to 108.5

Sea_Shell

ALARA343 said:

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

As we don't have children, we need to bear in mind probably needing more £, later, as we'll have more need for paid help with stuff.  Even just routine stuff like gardening, cleaning, DIY etc etc, which children may have been able to help with, before we even get into any "care" needs.


We do have 5 niblings though...so might have them to call on.  Better keep them sweet😉

german_keeper

Sea_Shell said:

ALARA343 said:

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

As we don't have children, we need to bear in mind probably needing more £, later, as we'll have more need for paid help with stuff.  Even just routine stuff like gardening, cleaning, DIY etc etc, which children may have been able to help with, before we even get into any "care" needs.


We do have 5 niblings though...so might have them to call on.  Better keep them sweet😉

We have 3 of the little beggars, all technically adults. The eldest, 27 years old, lives in Manchester and has done for a few years now. How domesticated she is I don't really want to think about. To be fair over the years when we have been round it all looks reasonably unferal (is that a word?). The other two, 23 and 19, are still with us and I would settle for a reasonable level of proficiency with washing machine and dishwasher, not to mention basic training in turning lights off. Gardening, cleaning, DIY? Blimey that feels like light years away!! 

NedS

Sea_Shell said:

ALARA343 said:

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

As we don't have children, we need to bear in mind probably needing more £, later, as we'll have more need for paid help with stuff.  Even just routine stuff like gardening, cleaning, DIY etc etc, which children may have been able to help with, before we even get into any "care" needs.


We do have 5 niblings though...so might have them to call on.  Better keep them sweet😉

Yes, I've seen that first hand with my parents. Whilst they have been fortunate to be able to stay in their own home, their spending is ever increasing as they are no longer able to do things for themselves and have to pay someone for every little task that requires doing. They have a carer, gardener, cleaner, chiropodist, handyman... all of whom are in regular attendance. They are funding their own little mini-economy!
They talk about U-shaped spending in retirement - they are definitely near the top of the second leg of the U

Albermarle

NedS said:

Sea_Shell said:

ALARA343 said:

For my db (LGPS) there is roughly 4.5% reduction for every year you take it early and a 2.5% per year reduction in the lump sum. 
I plan on taking it 5Y early as the extra years in payment outweigh the reduction for at least 20Y by which time I shan't care much about whether the decision was right. 
The SIPP would be a last resort with the hope of passing it on to the children. 

As we don't have children, we need to bear in mind probably needing more £, later, as we'll have more need for paid help with stuff.  Even just routine stuff like gardening, cleaning, DIY etc etc, which children may have been able to help with, before we even get into any "care" needs.


We do have 5 niblings though...so might have them to call on.  Better keep them sweet😉

Yes, I've seen that first hand with my parents. Whilst they have been fortunate to be able to stay in their own home, their spending is ever increasing as they are no longer able to do things for themselves and have to pay someone for every little task that requires doing. They have a carer, gardener, cleaner, chiropodist, handyman... all of whom are in regular attendance. They are funding their own little mini-economy!
They talk about U-shaped spending in retirement - they are definitely near the top of the second leg of the U

Yet many posters to the forum, often say you need to spend, spend, spend, when you first retire, because once you are over 70, your spending/activity drops to near zero and by the time you are 80 you will be beyond caring ( which is rubbish for most 80 year olds)
I think this U shape is definitely more realistic.