Give me a nudge - either way!

Nebulous2

I'm 57, 58 in February. I've built up a pension of £27k in an lgps fund, almost £20k from end of March with an actuarial reduction. No lump sum. I earn £42k, but also get some travelling expenses that largely offset my vehicle costs.

I work for a government agency as a senior advisor. I started on a new payscale 2 years ago, which means I get an increment each year in addition to any annual payrise. We're in the middle of a downizing plan which means we're likely to get to next June or so with £160k cash.

My other half has around £5k a year of disability benefits and a very modest DB pension of just under £2k which can be drawn from 60. She is a year younger than me.

We both expect to get full state pension at 67.

I had intended working for some time and have a strong work ethic, but my face no longer fits and I'm growing disillusioned. Strangely, despite the organisation being in turmoil I don't have enough to do and nobody seems prepared to give me more work.

I've calculated that staying on beyond June will increase my annual pension by £150 for each month I stay and my cash fund would rise by £1000 a month. Our 'number' is £2200 net per month, or almost £27k per year.

We have a phased retirement scheme at work. We need to give 6 months notice. I could do that from March, asking to go to 3 days from late September. That allows drawing part of my pension and continuing to build a pension on a reduced salary. I dont have figures, but could net as much as I currently do for 3/5ths of the work.

So what do you think? Do the figures stack up safely to stop completely in June? Would you work longer to be safe? Would you consider the phased retirement to avoid the cliff edge?

kinger101

£150 increase in annual pension is quite a lot for a month's work. It would take £3,750 in a DB pension to achieve the same.

I'd avoid taking actuarial reductions. Stick it out a bit longer (maybe on reduced hours), and then live off cash until pension kicks in.

Nebulous2

kinger101 wrote: »

£150 increase in annual pension is quite a lot for a month's work. It would take £3,750 in a DB pension to achieve the same.

I'd avoid taking actuarial reductions. Stick it out a bit longer (maybe on reduced hours), and then live off cash until pension kicks in.

Part of that increase is additional pension in the current CARE scheme, part of it is a reduction in the actuarial reduction and part of it is an increase in the final salary part because of higher salary.

My final salary component is paid in full at 65 and my CARE component is paid in full at SPA currently 67. So I have to go to 67 to avoid any actuarial reduction, though 65 would avoid most of it. Retiring at SPA would give us more money in retirement than we currently have.

Thinking about what you have said - working to 60 either full or part-time and not claiming my pension would mean living off our capital - which would easily sustain us to 65.

Dazed_and_confused

We both expect to get full state pension at 67

It would be prudent to actually check both State Pension forecasts on gov.uk.

Lots of posters on here have assumed they will get the full (new) State Pension without realising the new rules don't apply to them as they are under transitional rules. Like you and your other half are.

You could be due to get more than £168.60 or it could be much less. If so you may have sufficient time to make up it up to £168.60 but the sooner you check this the more informed you will be.

Happier_Me

I'm in the LGPS scheme on £49k and I don't accrue anywhere close to £150 so I would double check your figures. You will be accruing 1/49th of your monthly salary, less actuarial reduction.

I'd also look at the 85 rule and how this affects you. To have accrued as much in the scheme as you have I'd expect you have some 2008 pension benefits, which may well be protected from actuarial reduction from the age of 60, assuming your years service plus age equals 85 or more.

enthusiasticsaver

As you are in a contracted out scheme this may affect your state pension. I retired at 58 (also in the LGPS) and found I was 4 years short in spite of working since 18 until 58 and claiming child benefit for the 2 years I spent raising young children so no interruption in NI contributions. I have managed to gain an additional 2 years by claiming NI credits from my DD for looking after my grandchildren. Don't assume full SP without doing the government gateway check.

On the subject of retirement it depends very much on what you will be using to plug the gap between retirement and your DB pension paying out. Do you have other savings? We took the actuarial reductions on both my DH and my pension given we would have an additional 8 years (retirement age 66) of the pension and the reductions were not as much as expected. We are also in the fortunate position of receiving a higher income at SPA than we did when working so went when we could afford to rather than waiting for a higher pension.

Why no lump sum? Surely you will be taxed on £20k whereas if you take the lump sum that will be tax free and more tax friendly as the annual DB will be lower hence less tax.

Marcon

Nebulous2 wrote: »

We have a phased retirement scheme at work. We need to give 6 months notice. I could do that from March, asking to go to 3 days from late September. That allows drawing part of my pension and continuing to build a pension on a reduced salary. I dont have figures, but could net as much as I currently do for 3/5ths of the work.

So what do you think? Do the figures stack up safely to stop completely in June? Would you work longer to be safe? Would you consider the phased retirement to avoid the cliff edge?

If you don't have the figures, how can anyone comment on whether they stack up?

mgdavid

I'd hang in there a bit longer. If they want you out then it will cost them, to your benefit!

Nebulous2

Marcon wrote: »

If you don't have the figures, how can anyone comment on whether they stack up?

I asked the scheme for a pension forecast based on leaving at the end of March 2020. That came in just under £20k. It didn't include my 19/20 payrise and as I won't be ready to leave until June at the earliest I'm confident in £20k. I had not seriously considered phased retirement until I read an article posted here about happiness in retirement.

What I don't have is a forecast for phased retirement. These are only available through HR, by applying for it. We need to give 6 months notice, and say how many hours we want. During that 6 months they give a decision on whether they will grant it and provide the figures. Applicants can then decide whether to accept the offer or not. I'd get 3/5 my salary plus a proportion of my accrued pension. I'd still accrue further pension on my new lower salary.

Nebulous2

Dazed_and_confused wrote: »

It would be prudent to actually check both State Pension forecasts on gov.uk.

Lots of posters on here have assumed they will get the full (new) State Pension without realising the new rules don't apply to them as they are under transitional rules. Like you and your other half are.

You could be due to get more than £168.60 or it could be much less. If so you may have sufficient time to make up it up to £168.60 but the sooner you check this the more informed you will be.

Thanks I've checked before and was about 3 years short due to being contracted out. Will recheck. My wife had full entitlement.

Nebulous2

enthusiasticsaver wrote: »

As you are in a contracted out scheme this may affect your state pension. I retired at 58 (also in the LGPS) and found I was 4 years short in spite of working since 18 until 58 and claiming child benefit for the 2 years I spent raising young children so no interruption in NI contributions. I have managed to gain an additional 2 years by claiming NI credits from my DD for looking after my grandchildren. Don't assume full SP without doing the government gateway check.

On the subject of retirement it depends very much on what you will be using to plug the gap between retirement and your DB pension paying out. Do you have other savings? We took the actuarial reductions on both my DH and my pension given we would have an additional 8 years (retirement age 66) of the pension and the reductions were not as much as expected. We are also in the fortunate position of receiving a higher income at SPA than we did when working so went when we could afford to rather than waiting for a higher pension.

Why no lump sum? Surely you will be taxed on £20k whereas if you take the lump sum that will be tax free and more tax friendly as the annual DB will be lower hence less tax.

I had thought taking the actuarial reduction and stopping sometime after June would be best. That indexed £20k is probably more valuable to us for lifestyle reasons over the next 7 years to 65 when the actuarial reduction ceases for most of it than the unreduced amount will be then.

I moved all my pension into the 2009 scheme on joining in 2012. That means my final salary component is all based on 60ths with no lump sum. I can commute pension to get one, but prefer the income. I have 32/60ths final salary.

At 31/3/20 my final salary component will be subject to 29% reduction and my care component to 34%. They have to be taken together.

We'll have £160k in cash from early next tax year from a property sale. I won't be stopping until that is banked.