How much to live on

GunJack

blue.peter said:

GunJack said:

When you've got DBs you're kinda stuck much closer to the NRAs of the schemes you're in

Well, that depends on the rules of the scheme. Most schemes will allow early retirement (possibly only with the trustees' agreement), but with a reduction in the pension payable. The rate of reduction should more or less reflect the effect of taking pension earlier - the shortened investment period, the lack of contributions between ER age and NRA, the poorer annuity rates at younger ages ('cos the fund has to last longer). Having said that, some schemes' early retirement reduction factors are fairer than others. The question is really whether you, as a scheme member, are willing to accept the lower pension payable on early retirement.

But this is, in effect, exactly the same question that arises in relation to a DC scheme: can I live on the benefits that the scheme will pay me now, or do I need to leave it for another year (or five)?

I know how they work, and I could have taken my deferred DB at 50 but with a 40-odd% reduction of it's value at that time. That would be so big to make it unrealistic to take, as that reduction is locked in for life. That's why I said what you quoted above - closer to or at NRA means much smaller if any reduction. As things stand, at a squeeze, that one deferred DB could cover us for all basic living costs (my £6k annual bills plus £6k for food, transport,etc.) at 60 with no actuarial reduction, without the second one. If I take it early it won't give enough to cover that.....

hugheskevi

blue.peter said:

Well, that depends on the rules of the scheme. Most schemes will allow early retirement (possibly only with the trustees' agreement), but with a reduction in the pension payable. The rate of reduction should more or less reflect the effect of taking pension earlier - the shortened investment period, the lack of contributions between ER age and NRA, the poorer annuity rates at younger ages ('cos the fund has to last longer). Having said that, some schemes' early retirement reduction factors are fairer than others. The question is really whether you, as a scheme member, are willing to accept the lower pension payable on early retirement.

But this is, in effect, exactly the same question that arises in relation to a DC scheme: can I live on the benefits that the scheme will pay me now, or do I need to leave it for another year (or five)?

I think a key issue with DB that is hard to get around is the lack of ability to take more out of the scheme for the period before State Pensions start to be be paid.

In many schemes, you can only take a lump sum by commuting pension, and that is often at extremely unfair rates that make the option extremely expensive. Some schemes were designed to pay more to State Pension age and then reduce, but I don't think that was particularly popular.

So it can be hard to smooth income for the period before State Pension age with just DB, and to do so will in many cases require the use of some other asset. Whereas for DC, you are in complete control of how and when you choose to take the pension.

GunJack

In both my DBs there is an automatic LS, the 2 together at 60 would be in the region of £70k with no commutation. No way I 'm commuting the deferred one (PCSPS, so a 12:1 rate), and on the current one it's 19:1 which also isn't spectacular. Another reason not to commute is the pension incomes are index-linked.  

sheslookinhot

I’m commuting some of my DB pension into a lump sum, primarily to ensure I remain a basic rate tax payer when my SP kicks in in 4 years time. A small SIPP will boost my income until my SP starts.

GunJack

sheslookinhot said:

I’m commuting some of my DB pension into a lump sum, primarily to ensure I remain a basic rate tax payer when my SP kicks in in 4 years time. A small SIPP will boost my income until my SP starts.

that must be a hellova DB amount if you're doing that to stay BR tax...

sheslookinhot

yes, it’s the Scottish rate for BR limit which is almost 7k less than the England and Wales, take off 10k SP and it’s about £33k.

[Deleted User]

I have just been offered another 2 day a week temporary contract at my former school from September to December continuing with pastoral support work. I will also do some exam invigilation (mainly mocks in the Autumn Term) Pleased to be asked back too.! The extra income will continue to go towards continuing home improvements as well as savings.

I am still waiting to check how much voluntary NI I will need to pay for the year 2020/21. Although I was earning some money, I still think I will need to top it up to make a full year. I check the government gateway site regularly but it continues to say the figures are not yet available. I seem to remember when I topped up a couple of years ago, (for two years after that I paid enough NI through employment), I had to wait until November. No worries and there is plenty of time. After this top up  I have 3 more years to contribute (will be 47 years in total as I was contracted out for many years).

The most I can get in today's figures, if I pay the 47 years, is £178.94 a week, just a few pence short of the full amount. I am very happy with that from the age of 66!

Madrick

Tracked expenditure for the past 6 months, including holidays, socialising and absolutely everything

Currently £1300 per month 

So rounded up to 16k per annum
Then factored in a 2% increase to requirement for inflation

Made all my calculations

Including a 1.5% annual increase to the following.. 

small (£2k pa)  DB pension
£200k DC pension
Small SIPP (currently £10k) but will be investing £2880 pa from next year
State pension in 7 years

Forecasted for 30 years until aged 90

And have around an extra £150 per month min on top..

Looking good to go from end of year

TallGirl

This thread is great I agree the pension board is a bit scary to get involved in. I'm posting as I've just been to see my IFA and this is my plan although I might want to go earlier then 60 we shall see.

I'm 51 my other half is 56 with a high earning potential but has just gone consultancy route so will be a while before she has any income. 

I've just gone part time I'm on £28k but if did go full time it would be £45k. I can just about  live on that as I'm mortgage free thank goodness. 

I had an inheritance so a few years ago most of it invested but did upgrade house by buying new one and doing it up to our spec. 

£20k in current works pension 
£244k in Sipp
£140k in SS ISA 
£51k in CIA which will be gradually moved into ISA
Also have a Local Gov pension which will pay out £3k pa and give £10k lump sum 

IFA estimates I can withdraw £24k a year from ISA and later on draw down from SIPP and works pension. Once I get my SRP I can reduce that. He calculated it should last until 95 with some left over at the end. I've got no dependants so would go to niece and nephew. Obviously leaving house to other half. 

I will obviously track my expenditure and see how I go and it also depends on other half if they manage to earn enough to generate some kind of pension as current on has £2k per annum from gov pension and a small works pension. 

What do you think of my plan am I missing anything? 

Thanks 

TG 

Madrick

Sounds good TG
You're in a better position than me and I'm 9 years older than your good self.
👍

So was the IFA working on you retiring in 9 years time at 60?

Were they assuming that you would be continuing to pay into your existing pensions until that time?

If you don't mind me asking...
How much did the IFA charge for the overview of your finances and retirement plan?