How much to live on

Nebulous2

Organgrinder said:

Clowance said:

Thanks for all replies, we are not transferring the DB pension but he seemed to think it may be better to combine several smaller DC pensions, which I am not convinced about anyway. He did say we could pay the income from the DB pension (not the tax free lump sum) back into another pension to avoid 40% tax which may or may not be useful. Incidentally when I have been trying to work out if  the tax free lump sum was really completely tax free, I found it almost impossible as everywhere I looked said only 25% tax free, it wasn't until I realised the rules were different for DB pensions to the more common DC ones that it became clear. 

I am currently doing just that.

I currently have three pensions in addition to my part time working. At the moment I am liable for approx £4k at the 40% tax rate so I make sure I put an amount into my DC pension to ensure I pay no tax at 40%.

This means that upon retirement I will have grown my DC pension pot to over £80k and have approx £60k in ISAs. (This is somewhat more than I had planned for originally from memory). I'll also have a DB pension of about £23k leading to a pension of £35k once the state pension kicks in.

This has meant a potential full retirement on the above figures at just over 60. I'm a teacher and our contribution rates are in my opinion sufficiently low that I have been able to put money in to my DC pot and my ISAs through a combination of stoozing (currenly £35k), offsetting the mortgage and using pension income.

As already mentioned, everyone's circumstances are different. As someone with children, using my DB pensions in a way that reduced the pension but grew the available assets made perfect sense. No point in me having a potential £43k pa pension at SPA and no savings to leave, compared with a forecast £120k in assets but a £35k pension. Yes I'd have £6.4k pa more each year after tax - but it would take me far too long to have anything to pass on to my children.

I retired at 59. By a quirk of transferring my pension from one public sector scheme to another, I didn't have an automatic lump sum at all. Moving from a more expensive area to a cheaper one provided a lump sum, intended to fund me through to state pension age. Staying on at work until 67 would have meant I was earning more in DB pension and state pension than I had ever earned in my life. I chose not to take a lump sum, and the public sector pension has had a couple of decent CPI increases since I retired. So I've no regrets about that decision. 

I quickly decided I wasn't ready for retirement and took a part-time job. I also discovered that I was reluctant to spend my capital, despite that being what it was earmarked for. I've been paying a fair bit of my earnings into a DC pension. 

Looking at stopping completely early next year, likely to have over £40k in a DC pension, and most of my lump sum intact. I will also have added another £1500 or so in DB pension. 

Once we reach State Pension Age I think it is likely that we will not spend all our income. 

So I'll have a similar outcome to you - by a different route. There's more than one way to skin a cat, as the saying goes!