On the home run to retirement - give me your top tips!

Spogchait

@NottinghamKnight @Audaxer It’s a Defined Benefit scheme but my statement gives me a valuation of the pot and I am fixated with drawdown as I know a couple of people who have retired with the same scheme recently and opted for that route rather than a guaranteed annual sum.

Spogchait

Just one more thing about the scheme, it used to be a final salary scheme,  but a few years ago an adjustment was made so that if I receive increases to salary they don’t count.  Calculations are based on my salary of a few years ago.

LHW99

You could contribute to a SIPP or personal pension instead of the AVC's. That could be accessed at 55, to let you get the main pension at 60 without reduction.

Audaxer

Spogchait said:

@NottinghamKnight @Audaxer It’s a Defined Benefit scheme but my statement gives me a valuation of the pot and I am fixated with drawdown as I know a couple of people who have retired with the same scheme recently and opted for that route rather than a guaranteed annual sum.

There are quite a few threads on this forum about transferring a DB pension and the risks involved. It might be a large transfer sum, but unless you are knowledgeable and confident in what you are doing, it's a lot of money to manage in drawdown to give you a good income that will last throughout retirement. A lot of people prefer the security of DB pension income, so I would suggest you research fully before making any decisions. 

Albermarle

Regarding the DB scheme, as Audaxer says transferring out of DB schemes is a popular topic on here, so you could do worse than scroll through a few pages looking for relevant threads . The practical difficulties of transferring are discussed in detail .
Some posters change their minds about transferring after looking into it in more detail.
Also in my opinion you should look at a DB pension primarily as an agreement to pay you a guaranteed income for life, that many people would give their right arm for. They  are generous pensions, largely paid for by the employer.
As a secondary issue, a DB scheme will offer you a CETV to buy you out of the scheme, that may or may not be a good idea for you to follow up.
I think sometimes the large CETVs often on offer blind people to what they are actually giving up , which is a guaranteed usually inflation linked pension for life , which would be very expensive to buy in the open market .

Spogchait

@Albermarle yes - I’m trying to get my head around all of this so I don’t end up like a rabbit in the headlights at the point I have to make decisions.  I have watched other people take the pension on a drawdown basis so have 10 years or so to monitor how they get on and learn more.  In the meantime, I’m keen to make good decisions that give me my best options in retirement.

ussdave

Spogchait said:

@Albermarle yes - I’m trying to get my head around all of this so I don’t end up like a rabbit in the headlights at the point I have to make decisions.  I have watched other people take the pension on a drawdown basis so have 10 years or so to monitor how they get on and learn more.  In the meantime, I’m keen to make good decisions that give me my best options in retirement.

Something you could do now whilst you're still researching is start putting a decent chunk into your AVC.  For some schemes like yours (e.g. USS, LGPS in some cases I think) you can take the AVC at the same time as your DB benefits, which then allows you to draw a large chunk of your AVC amount tax free (with the figures you've mentioned, this should be over £100k if you manage to hit that amount in your AVC).  It's worth finding out if you can do this as it is extremely beneficial if you can.  With salary sacrifice and the combined benefits each £100 of tax free withdrawal would only reduce your take home pay by ~£60.  So, ignoring growth for simplicity, a total reduction of £60,000 in your pay over the next 10 years would allow you to take a £100,000 tax free lump sum at retirement.

Spogchait

Hi @ussdave, yes as I understand it I am able to take the AVC part of the employees scheme as the tax free lump sum at the same time, so at a simple level I would get out what I put in +41% on top due to the tax break.  Could then use some of that to pay off what’s left of that mortgage.  I worry about putting too many eggs in one basket but even assuming no growth, the return on investment is fantastic if you think about that 40% on top and it would take a lot to diminish that.

Linton

So far the top tips have all been about finance. As important is how you are going to spend your time.  The joy at not working can quickly wear off so you need positive reasons to retire,  things to do that will occupy a significant amount of time for many years.  Pottering and watching daytime TV will probably not satisfy you.  Perhaps you have a bucket list of places you have never visited or experiences you have never had.  Maybe there are hobbies you will be able to take more seriously.  Perhaps voluntary work either using your work skills or something completely new may appeal.

OK, it is probably too early to come to any conclusions but certainly worthwhile to keep it in mind and think more deeply about later so that retirement becomes the start of an enjoyable and satisfying new life rather than just the end of the old one.

[Deleted User]

1. Personally I would not touch DB.
2. Sell the flat. If you want to move later on you can sell off the house and buy something else. There is no reason to have a massive chunk of your net worth in real estate (a house and a flat). Its risky. Prices go down as well as up.
3. Put all the extra money into investments using a tax efficient wrapper like SIPP.