A Paupers Pension Tale (Not many nuts to dig up)

bluenose1

harlequinnyc said:

Great advice, thanks so much. Great point about claiming credits for NI, as I am sole carer for my Mother. I will also look into the married couples tax relief. Unfortunately, no chance of VR for me. Really appreciate your input. 

If you are your mums Carer you need to check what Attendance Allowance you may be entitled to, not just for the credit, though if she is getting Pension Credit it may affect her additional benefits but worth looking into.
Not sure how much your DB pension will be but also consider putting your net earnings into a SIPP  in your last year in work if you can pull it out tax free in the next financial year, a good use of any savings.
in my last year of work I would put all my net earnings into a SIPP if I could pull it out tax free. Even if you pay tax it is still a 6.25% return on investment. 
Alsp look into the £2880 per year after retirement, especially if you are below tax threshold.

atush

Albermarle said:

Also been the pub twice though just for drinks which was another £72. 

Sounds like a good couple of sessions ! Especially if it was in Wetherspoons 

That was my thought, with just 2x sessions for 2 people.

stoplurking

[Deleted User] said:

I agree bluenose1. You cannot take a lump sum from a public sector DB pension and leave the pension payment for a later date. They have to be taken together. I am sure private sector DB schemes are similar. In the public sector you can retire and defer your pension to a later date (both lump sum and payment). One possible way way around this is to take a phased retirement (I did this as a member of the Teahers Pension Scheme.) However, the drawback is you have to keep working either with less responsibility or go part time. For example in the teachers pension scheme you were allowed to take anything up to 75% of your benefits but had to cut your income by at least 20%. I achieved this by giving up senior leadership responsibilities.

Absolute no brainer to pay voluntary NI for those remaining years. Every extra year paid for gives you about £5 a week extra for life.

Three years voluntary would cost about £2600 in total and would be recouped in under 4 years. Everything after that is profit. If you live to 80 (which is more than likely) you will receive £10140 extra if you claim from age 67. A bargain!

Baron Dale, sorry if this is a really stupid question- if a person leaves public sector and defers claiming the DB pension for, say, 5 years, is the deferred pension that would have been paid in those 5 years paid out (and taxed of course) when the pension is finally claimed? Thank you. 

sheslookinhot

stoplurking said:

[Deleted User] said:

I agree bluenose1. You cannot take a lump sum from a public sector DB pension and leave the pension payment for a later date. They have to be taken together. I am sure private sector DB schemes are similar. In the public sector you can retire and defer your pension to a later date (both lump sum and payment). One possible way way around this is to take a phased retirement (I did this as a member of the Teahers Pension Scheme.) However, the drawback is you have to keep working either with less responsibility or go part time. For example in the teachers pension scheme you were allowed to take anything up to 75% of your benefits but had to cut your income by at least 20%. I achieved this by giving up senior leadership responsibilities.

Absolute no brainer to pay voluntary NI for those remaining years. Every extra year paid for gives you about £5 a week extra for life.

Three years voluntary would cost about £2600 in total and would be recouped in under 4 years. Everything after that is profit. If you live to 80 (which is more than likely) you will receive £10140 extra if you claim from age 67. A bargain!

Baron Dale, sorry if this is a really stupid question- if a person leaves public sector and defers claiming the DB pension for, say, 5 years, is the deferred pension that would have been paid in those 5 years paid out (and taxed of course) when the pension is finally claimed? Thank you. 

No, however, it may have 5 years worth of escalation applied to the payout figure. It also may avoid  early payment reductions.

[Deleted User]

‘Baron Dale, sorry if this is a really stupid question- if a person leaves public sector and defers claiming the DB pension for, say, 5 years, is the deferred pension that would have been paid in those 5 years paid out (and taxed of course) when the pension is finally claimed? Thank you. ‘

Your pension will be what you have accrued up to the time you left plus any inflationary increases. If you claim before NRA there will still be an actuarial reduction. You can’t add to a pension if you have left that employment.

jimi_man

stoplurking said:

[Deleted User] said:

I agree bluenose1. You cannot take a lump sum from a public sector DB pension and leave the pension payment for a later date. They have to be taken together. I am sure private sector DB schemes are similar. In the public sector you can retire and defer your pension to a later date (both lump sum and payment). One possible way way around this is to take a phased retirement (I did this as a member of the Teahers Pension Scheme.) However, the drawback is you have to keep working either with less responsibility or go part time. For example in the teachers pension scheme you were allowed to take anything up to 75% of your benefits but had to cut your income by at least 20%. I achieved this by giving up senior leadership responsibilities.

Absolute no brainer to pay voluntary NI for those remaining years. Every extra year paid for gives you about £5 a week extra for life.

Three years voluntary would cost about £2600 in total and would be recouped in under 4 years. Everything after that is profit. If you live to 80 (which is more than likely) you will receive £10140 extra if you claim from age 67. A bargain!

Baron Dale, sorry if this is a really stupid question- if a person leaves public sector and defers claiming the DB pension for, say, 5 years, is the deferred pension that would have been paid in those 5 years paid out (and taxed of course) when the pension is finally claimed? Thank you. 

It does depend on the scheme. In the police scheme, there is no option to defer the pension and it gets paid the day you leave (if you've done 30 years, or 25 years and you're over 50). The fire service has similar rules. 

hugheskevi

stoplurking said:

if a person leaves public sector and defers claiming the DB pension for, say, 5 years, is the deferred pension that would have been paid in those 5 years paid out (and taxed of course) when the pension is finally claimed?

It depends on individual scheme rules, every scheme is different and almost all the areas of the public sector now have multiple legacy schemes.

Even within a particular area, eg, the Civil Service pension scheme, the various different current and legacy schemes all have very different rules. Under one legacy scheme a member who leaves before NPA and claims their pension after NPA would receive arrears back to NPA (without any interest), in other legacy schemes they would just receive the pension due from the date they claim it (no arrears or actuarial increase), and in the most recent schemes they would receive an actuarially increased pension.

Malthusian

Terron said:

The original 4% SWR figure is a useful rule of thumb for determining how much you need as a minimum in your pension pot (25 times your expected spend). It's not perfect but it is a good first target to aim for.

Exactly. But Michaels was speaking from the perspective of someone who is deciding how much they should withdraw from their pension fund, which means SWRs are irrelevant.

For people deciding whether they are paying enough into their pension fund in accumulation the SWR is a useful rule of thumb, for people who are deciding how much to withdraw out of their pension fund in retirement they are irrelevant.

At that point it makes more sense to look at Guyton-Klinger rules or do some proper cashflow modelling.

stoplurking

Thank you for the replies.  It is such a confusing area.  My DB pension is with civil service classic scheme, I left CS in 2000 and could have claimed my pension 4 years ago at age 60. When I asked the pension dept the question about arrears they said “your pension will be paid in arrears and backdated to your 60th birthday. Your annual pension will increase each year in line with inflation. However, the arrears payment will be calculated as if the pension had been claimed at 60, reflecting the correct inflation rates applicable”. This seems to suggest I will receive 4years’ pension if I claim it now but not sure if I’m reading it right. It isn’t a huge pension as I was low grade but 4 years of it is a nice amount even after tax. Maybe it’s wishful thinking. 

Sorry, I have only just started looking into my retirement options, which is  ridiculous,  I know. I previously thought I would work till SPA but things not good at work so I’m looking to exit. 

Terron

Malthusian said:

Terron said:

The original 4% SWR figure is a useful rule of thumb for determining how much you need as a minimum in your pension pot (25 times your expected spend). It's not perfect but it is a good first target to aim for.

Exactly. But Michaels was speaking from the perspective of someone who is deciding how much they should withdraw from their pension fund, which means SWRs are irrelevant.

For people deciding whether they are paying enough into their pension fund in accumulation the SWR is a useful rule of thumb, for people who are deciding how much to withdraw out of their pension fund in retirement they are irrelevant.

At that point it makes more sense to look at Guyton-Klinger rules or do some proper cashflow modelling.

I am sorry but that is nonsense. That was the original purpose of SWRs, and they are still a good starting point. Guyton-Klinger rules are a modified/refined version of determining a SWR (aimed at coming up with a higher initial expenditure. A cashflow analysis that takes into account the possible variations in future returns is also a variation of SWR. Both build on SWR work rather than replace it.