Ill heath retirement at 43 .....

starrieshillane

Hi all
I am sitting here, cup of coffee in hand deep in thought as to my current and future situation. 

Earlier this week it was confirmed that I am to be IHR from the police after 18 great years of service. My last day is the 28th February. Unfortunately I was diagnosed with a brain tumour in 2014. I have recovered following surgery and in good health albeit a few minor personality changes. I think I’m much funnier than I was before but others don’t agree lol. After 6 years of trying very hard to achieve what I did before, I had to accept that I was never going to achieve that. 

I am capable of working, but as I can’t for fill  the roles of the office of constable it means I am being retired. Im unlucky I had a brain tumour but feel lucky I have been given this opportunity of a new chapter....

So what to do...

My pension figures:
82k max lump sum (22%)
13 .2k per year 

I will be approx £800 down per month. I do have the ability to make that up as I have had a little photography /graphic art business for several years as an aside to my job. I can go full force into that which would be something I want to do. I can also seek employment and I am happy to do that if required. 

As I would like to build my business I want to utilise my lump sum to get a monthly return and take some pressure off. 

My current financial situation:

Mortgage balance 116k value approx 190k.  I'm on a fixed rate of 3.05 until June 23. I do not reside there I have consent to let . My mortgage is  £766 per month , my rental income is £795. It just ticks over as I did not want to sell it when I started a new relationship.

I currently rent with my partner and children. 

As a couple we are not in a position to buy as unfortunately they haven’t been that ‘switched on’ with debt Managment before and their credit rating is pretty appalling ( work in progress). It is not an option to move into my property as jointly we have three children and we simply would not fit in it !

My debt 
£1400 on a balance transfer credit card - solely taken out to reduce and not used for any purchases. 

£11k for our two family cars, albeit we split the monthly payment  50/50.
£800 approx tax bill on its way for my mortgaged property. 

£500 on a retail card. 

£500 left on a mobile plan for handset. 
 & my mortgage 

What to do ... possibles...

1. Use lump sum to invest in a flat / apartment to do up & rent or Airbnb that would give me a top up a month. Easier said than done but I do enjoy property managment as I manage my patents cottage on Airbnb. 

2. Would I be better knocking a chunk off my mortgage? . I can only pay 10% of the balance without incurring any fees. I do need to call the, and find out what those fees are..
I can either reduce the term with a lump sum. I have used a calculator to show if I paid 75k I can reduce the term to six years left. Or I can reduce the monthly payment to £300 which will then give me the Monthly ‘top up’ ( £380 after tax & ins) I would prefer. 

Sorry I have gone on a bit but wanted to give you an idea of my situation ... I guess I’d like to hear what would others be considering in my situation  , am I on track ?off track ? am I missing an opportunity, I’ve not mentioned ISA’s / savings accts . Should I be focusing more on that possibility ...

Appreciate anyone’s thoughts and advice . At the end of the day knowledge is power isn’t it !? 

Cath

Albermarle

My pension figures:
82k max lump sum (22%)
13 .2k per year 

If you do not take the lump sum , presumably you would get a higher income pa? Do you know what that is?

Presume the pension is linked to annual inflation ?

Is the pension payable from end of February this year ?

starrieshillane

Hi 
thank you ..... 
Yes I would get approx £200 more a month. I thought it would be more , but no. In my mind I can get a better return if I took the commutation. Also although I'm healthy now I can’t ignore the fact my brain may misfire in the future, that was another reason I thought that taken my full commutation was best... 

Pension is index linked 

First pension payment due 1st March. 

Cath 

starrieshillane

starrieshillane said

Hi 
thank you ..... 
Yes I would get approx £200 more a month. I thought it would be more , but no. In my mind I can get a better return if I took the commutation. Also although I'm healthy now I can’t ignore the fact my brain may misfire in the future, that was another reason I thought that taken my full commutation was best... 

Pension is index linked 

First pension payment due 1st March. 

Cath 

Exact amount per month would be £275 more without commutation 

Dazed_and_C0nfused

4% gross guaranteed, presumably inflation linked in some way.

3.2% after basic rate tax.

Can you hedge your bets and meet half way by taking a smaller lump sum?

Albermarle

In normal circumstances the equation would be in favour of taking the higher pension. The inflation linking is the key point . Most people underestimate the effect of inflation and the cost of keeping up with it. However I can understand in your case that taking the lump sum looks a more attractive option. Although you have been unlucky with your health , at least you are lucky to have this guaranteed income for life . If you had been in the Private sector, you would probably have zilch.
Firstly pay off any interest generating debt ( store card) - then I think paying off part off the mortgage could be a good idea ,The interest rate is relatively high and if something did happen to you then there would be less needed to keep making the mortgage payments for your partner/children. Just an idea, no doubt others will have their opinions.

starrieshillane

Dazed_and_C0nfused said:

4% gross guaranteed, presumably inflation linked in some way.

3.2% after basic rate tax.

Can you hedge your bets and meet half way by taking a smaller lump

Can you explain the first two parts for me lol . Probably for the same reason they won’t keep me lol ! 

Yes I am willing to do anything , I just want the knowledge that I am making the best decision available if you know what I mean ! 

Cath           

starrieshillane

Albermarle said:

In normal circumstances the equation would be in favour of taking the higher pension. The inflation linking is the key point . Most people underestimate the effect of inflation and the cost of keeping up with it. However I can understand in your case that taking the lump sum looks a more attractive option. Although you have been unlucky with your health , at least you are lucky to have this guaranteed income for life . If you had been in the Private sector, you would probably have zilch.
Firstly pay off any interest generating debt ( store card) - then I think paying off part off the mortgage could be a good idea ,The interest rate is relatively high and if something did happen to you then there would be less needed to keep making the mortgage payments for your partner/children. Just an idea, no doubt others will have their opinions.

Yes that’s a good point re leaving family with the debt of the mortgage ... thank you

LHW99

You mention you rent, but you have a place you own with a mortgage. Why buy somewhere else to rent out? Could your place be done up and rented out? You would find out what renting entailed.

starrieshillane

LHW99 said:

You mention you rent, but you have a place you own with a mortgage. Why buy somewhere else to rent out? Could your place be done up and rented out? You would find out what renting entailed.

Hi 
Yes I have rented out my mortgaged house for the last 4 years , it is a bit of a headache when something goes wrong, but so far it hasn’t put me off .... so far ! 

Dazed_and_C0nfused

starrieshillane said:

Dazed_and_C0nfused said:

4% gross guaranteed, presumably inflation linked in some way.

3.2% after basic rate tax.

Can you hedge your bets and meet half way by taking a smaller lump

Can you explain the first two parts for me lol . Probably for the same reason they won’t keep me lol ! 

Yes I am willing to do anything , I just want the knowledge that I am making the best decision available if you know what I mean ! 

Cath           

If you were to put £82k in the bank and could get 4% it would give you £3,280/year (£273/month).

£3,280 extra pension would attract basic rate tax of 20% so only £2,624 in your pocket (£2,624 is 3.2% of £82k).

You cannot get 4% interest so what could you do that would guarantee 4%?