How much to live on

Albermarle

. Then for every £1 you give up you get £12 as a tax free lump sum. So giving up £1,500 yields £18,000.

Be aware that a commutation rate of 12 ( typical for a public sector pension ) is a poor deal financially.
Although the lump sum is tax free, the pension will increase with inflation. So the break even point is 10 to 12 years . Someone 60 years old has a 50% chance of reaching around 84. So on average you would have lost at least 12 years of the £1500 + inflation pension income by taking the lump sum.

I think I may be better putting my £150 a month mortgage overpayment into a high interest account rather than paying it off my mortgage , so that's something I need to do. 

Probably a regular saving account would be best to do this. They normally have better interest rates because you are restricted on how much you can add.
Regular savings accounts 2023: Earn up to 7.5% (moneysavingexpert.com)

Organgrinder

Totally agree....on the commutation.factor. 

In comparison I got 21 on company DB schemes so I've not reduced my teacher pension at all.

Albermarle

Organgrinder said:

Totally agree....on the commutation.factor. 

In comparison I got 21 on company DB schemes so I've not reduced my teacher pension at all.

The comparison between 12 and 21, is even starker when you take into account that normally the public sector pensions increase more in line with inflation than most private sector ones, which are normally capped.

[Deleted User]

As I have said many times maximising the lump sum is a very personal decision. It suited my needs and worked for me. To be honest the commutation factor was not something I considered. For me, the decision enabled me to be debt and mortgage free, have a decent back up in the bank and still have an adequate pension. My well being and peace of mind trumped maximum financial gain. In fact maximising the lump sum made the easing down possible.

Also my pension set up is very simple I have my teacher's DB pension, a very small income choice annuity and from next July my state pension. I will have paid 47 years of NI by April 2024 which includes voluntary contributions by DD for the current financial year. This means I will receive, at current figures, £203.08 pence a week which after so many years contracted out is great as it is literally only a few pence a week short of the absolute maximum.

Of course I was fortunate by being a member of good occupational scheme and working a good number of years with a reasonable salary.

I will say and really do not mean to offend criticise anyone when I state that, although I obviously thought about what I was going to do, I did not 'agonise' over it. Once my mind was made I went ahead. At the time I was not a member of these forums. Even if I had been, I would have taken the same course, as it was the correct one for me.

From age 59 I worked several part-time contracts but only on my terms. The additional earnings helped me to pay additional years NI and carry out some home improvements without having to use my back up. However, I didn't have to work which put me in a stronger position as the powers that be knew I could take it or leave it. From June I finished completely and continue to feel comfortable with my decisions since 2013.

Organgrinder

[Deleted User] said:

As I have said many times maximising the lump sum is a very personal decision. It suited my needs and worked for me. To be honest the commutation factor was not something I considered. For me, the decision enabled me to be debt and mortgage free, have a decent back up in the bank and still have an adequate pension. My well being and peace of mind trumped maximum financial gain. In fact maximising the lump sum made the easing down possible.

Also my pension set up is very simple I have my teacher's DB pension, a very small income choice annuity and from next July my state pension. I will have paid 47 years of NI by April 2024 which includes voluntary contributions by DD for the current financial year. This means I will receive, at current figures, £203.08 pence a week which after so many years contracted out is great as it is literally only a few pence a week short of the absolute maximum.

Of course I was fortunate by being a member of good occupational scheme and working a good number of years with a reasonable salary.

I will say and really do not mean to offend criticise anyone when I state that, although I obviously thought about what I was going to do, I did not 'agonise' over it. Once my mind was made I went ahead. At the time I was not a member of these forums. Even if I had been, I would have taken the same course, as it was the correct one for me.

From age 59 I worked several part-time contracts but only on my terms. The additional earnings helped me to pay additional years NI and carry out some home improvements without having to use my back up. However, I didn't have to work which put me in a stronger position as the powers that be knew I could take it or leave it. From June I finished completely and continue to feel comfortable with my decisions since 2013.

Totally agree with this. If I stayed till 67 my pensions after tax would be almost £3,500 per month, which is significantly more than I earn now! As nice as this sounds, it would mean working full time till then and having a mortgage till then. 

Both my natural parents died young. My natural father died at 62. My natural mother 69.

This influenced my decision. My part time income is £3150 per month after tax (with mortgage but effectively paid off). My retirement income £2,600 a month with out a mortgage (both pre and post SPA).

Prior to making the decision my take home was approx £2,800, again with a mortgage.

So for me this is more than enough and my wife's prediction is approx £1,400. 

My hope is I get the opportunity to travel a bit and to become fluent in another language. To not chase a retirement figure is a relief and I'm so glad I looked into the possibility of cutting my hours and aiming for a better quality of life.

Organgrinder

louby40 said:

Organgrinder,  I'm wondering whether a phased retirement may suit me, but a bit confused as to how it works and whether I'd benefit financially.

I'm 55 next February and would like to go part time but still have a mortgage so it's not really financially plausible yet. My mortgage is also fixed at 2.3% until 2027. I'm overpaying at the moment and it should be £34k when the fixed rate ends. I think I may be better putting my £150 a month mortgage overpayment into a high interest account rather than paying it off my mortgage , so that's something I need to do. 

I've been teaching fulltime for 27 years and am ready to think about reducing my hours and then retiring at 58/59. 

Do you get your  lump sum when you do a phased retirement? I find it all very confusing with paying tax on a pension/ salary etc. 

One thing I forgot to add. The teachers pension website has a lot of info on things like actuarial reductions for early/phased retirement. Some things just need to be searched for. If there's any thing you can't find let me know and I'll tell you where to look. Your first port of call though is your benefit statement.

louby40

Thanks Organgrinder, I regularly check my benefit statement. 

MarzipanCrumble

Can I make a plea that those of you who are a couple (whether married or in a partnership) please, please look at the viability of the 'pension poorer' partner financially if the 'pension richer' partner dies first.  It is really, really important and if still working one or both it is never too late to pay into a SIPP.

Albermarle

MarzipanCrumble said:

Can I make a plea that those of you who are a couple (whether married or in a partnership) please, please look at the viability of the 'pension poorer' partner financially if the 'pension richer' partner dies first.  It is really, really important and if still working one or both it is never too late to pay into a SIPP.

If the owner of a DC pension pot dies they can leave all of it to a named beneficiary, usually their partner, but can be anybody. If it is a DB pension then usually the annual payments to a spouse will be usually reduced by 50%. If there is no spouse, civil partner etc then probably there will be more payments at all.
So two quite different scenarios.

However there is another good reason not to have too much pension imbalance even when both are alive, and that is so both can make full use of their personal tax allowance when taking a pension income.

You do not have to be working to pay into a pension and get tax relief. However you are limited to adding £3600 gross pa.

Organgrinder

When i first started considering a phased retirement one of the things I did was look at my wife's funds. 

From my DB pensions she will get a total of approx £8,500. If I pass away any time from now she'll get a lump sum of around £70K and be mortgage free. This would be on top of her salary or pension.

At age 61 when she hopes to retire this would give her a retirement income of over £2000 a month after tax.

I simply would not have considered my own plans in isolation.