Which month is best to retire in

mark55man

pensionpawn said:

TVAS said:

If in Month 12 you have no taxable income taken from April Month 1 to Month 12 March. Take drawdown income in Month 12 even if you had income in the previous 12 months.

The reason being twofold. Before your state pension kicks if you are in that fortunate position if you take income in Month 12 you will have the totality of your personal tax allowance £12,570, this also applies to each tax threshold so £50,270-£12,571 =  £37,699. This is because pension tax is cumulative just like PAYE tax so the allowance is divided into 12 months so if it is not used in month one it will be added to month 2 and so on. It also means any under or overpaid tax is sorted quicker in the following because you took income at the end of the previous tax year. 

Surely you just 'pay yourself' one twelfth of the PA per month or advise HMRC that you are 'retired', receive no other income than from your pension(s), and pay any tax due in month 12?

I thank you can do that, but some providers charge per withdrawal, so MSE'ers have a year in cash as a buffer and then top that up once a year based on expenditure.  I'm toying with that line of thought, but despite my retirement being quote imminent , I am still quite aggressively invested so I plan to deal with the problem of cash management at a later date - for now I am looking to grow ahead of wealth preservation, although I am more cautious and more fund based than this time last year.   

zagfles

hemeloid said:

I think for completeness it is worth mentioning that with those with DB pensions, there may be rules in play that could affect timing of retirement, such as application of actuarial reduction and application of annual indexation.

Yes see this thread, timing of taking DB pension can make a big difference: https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1

mark55man

Thank you @zagfiles for that link - my company closed its DB scheme for new contributions/benefits Mid year over a decade ago, and the end date is a couple of months before my birthday.  In that timeline ie Start of year ...> anniversary of DB becoming deferred --> my Birthday --> end of year - where would I find out the relevant factors - ie are they common CPI etc or scheme specific.   

Over about 7 years my schedule is roughly equally spread : End work / start on DC drawdown ..> start of DB drawdown (no lump sum) ..> State pension (hopefully nor more drawdown except that need to navigate LTA (not a current worry bead ) but I hope to fully crystallised and drawing enough by that point), so I have time to fiddle about and finesse the DB payment so no forced timetable

deejaybee

I'm self employed, and my plan ( asit stands now ) is to stop working around November 2025.

I will have paid income tax & NIC " on account" towards the following tax year ( 26-27 ) via self assessment, so will i have to wait until the end of the 25-26 Tax year to reclaim overpaid Tax/NIC  ?

zagubov

There's even more restrictions in some jobs. In education there are only three dates a year you can resign. If you're due to retire you should pick the first of these dates that is after your birthday and is best for you, your employers and most of all, your students.

To avoid this disrupting the end of year for the students, I think the employers prefer you to go on the 31st August but this incentivises the staff as well as this may include the longer holidays (which are useless to teachers anyway as you're force to pay top dollar if you travel at that time).

sheslookinhot

zagfles said:

hemeloid said:

I think for completeness it is worth mentioning that with those with DB pensions, there may be rules in play that could affect timing of retirement, such as application of actuarial reduction and application of annual indexation.

Yes see this thread, timing of taking DB pension can make a big difference: https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1

Hello 
can you explain this timing of taking DB pensions for a simpleton. What is the significance of your actual retrial date. Is it relative to you birth date, anniversary of joint the scheme or some other date ?
( I would intend to retire 6 May 2022, birthday and joined scheme both in August. I will defer taking pension until April 23 to benefit from a Late Retirement Factor.)

zagfles

mark55man said:

Thank you @zagfiles for that link - my company closed its DB scheme for new contributions/benefits Mid year over a decade ago, and the end date is a couple of months before my birthday.  In that timeline ie Start of year ...> anniversary of DB becoming deferred --> my Birthday --> end of year - where would I find out the relevant factors - ie are they common CPI etc or scheme specific.   

Over about 7 years my schedule is roughly equally spread : End work / start on DC drawdown ..> start of DB drawdown (no lump sum) ..> State pension (hopefully nor more drawdown except that need to navigate LTA (not a current worry bead ) but I hope to fully crystallised and drawing enough by that point), so I have time to fiddle about and finesse the DB payment so no forced timetable

Usually the occupational pension revaluation orders are used, https://www.legislation.gov.uk/uksi/2020/1332/made

A new one is published every year, basically next year's will compound the above rates with this Sept's CPI. (there's also a cap but unlikely to be breached unless inflation takes off).

Some schemes have RPI hardwired into their rules even for revaluation in deferment, so they'll use RPI rather than CPI post 2011 so the factors are higher. Don't think a table for this is published anywhere, but you can manually work it out using RPI indices, see the spreadsheet here https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23 just divide last Sept's figure by the figure for the Sept either in the year before you left if you take it late in the calendar year (after the anniversary of leaving), or the Sept in the year of leaving if you take it earlier in the year. That will get you the factor, so take off 1 and multiply by 100 to get the % in the way the revaluation orders are published above.

Your birthday makes no difference unless it's the birthday that takes you to the normal pension age of your scheme, sometimes the scheme will revalue to that point and then provide late retirement increases that account for inflation in some other way. Note that some scheme will have different NPAs for different parts eg some service is based on a NPA of 60 and the rest 65.

But if you just want to know if timing will make a big difference, check the Sept inflation in the year you left, download spreadsheet here:

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

If the Sept inflation was high, then retiring late in the year would make a significant difference. If it was negative (as in one of the examples in the linked thread), then you could be better off retiring earlier in the year.

But also need to account for early retirement reductions or late retirement increases in the calculations, which are down to the scheme and vary a lot. Then of course there's the GMP which revalues completely differently...

zagfles

sheslookinhot said:

zagfles said:

hemeloid said:

I think for completeness it is worth mentioning that with those with DB pensions, there may be rules in play that could affect timing of retirement, such as application of actuarial reduction and application of annual indexation.

Yes see this thread, timing of taking DB pension can make a big difference: https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1

Hello 
can you explain this timing of taking DB pensions for a simpleton. What is the significance of your actual retrial date. Is it relative to you birth date, anniversary of joint the scheme or some other date ?
( I would intend to retire 6 May 2022, birthday and joined scheme both in August. I will defer taking pension until April 23 to benefit from a Late Retirement Factor.)

It's explained in the linked thread, and above. It's complicated, I can't explain it any better than I already have. What specifically don't you understand? Or give an example.

zagfles

zagubov said:

There's even more restrictions in some jobs. In education there are only three dates a year you can resign. If you're due to retire you should pick the first of these dates that is after your birthday and is best for you, your employers and most of all, your students.

To avoid this disrupting the end of year for the students, I think the employers prefer you to go on the 31st August but this incentivises the staff as well as thus may include the longer holidays (which are useless to teachers anyway as you're force to pay top dollar if you travel at that time).

Should read the travel board. Those who don't work in schools but have school age kids are also restricted to the school holidays for travel, and most get far less holidays than teachers. But there are loads of ways of getting cheap holidays in the school holidays, we've done it for the last 15 years. For instance late August is generally off peak in Europe, many countries go back to school mid August. If you're in northern England can get good deals from Glasgow when the Scots are still in school. Easter holidays vary in England so can get good deals for UK holidays or flights going from somewhere where schools are still in. Flights in the summer holidays aren't usually more expensive than other times, as people go at different times, so the family on holiday hardly makes a dent in the passenger numbers especially going to a non traditional holiday destination.

You won't get the very cheapest deals in the school holidays but loads of ways of getting good value holidays, as long as you're prepared to put a bit of effort in rather than just looking at package holidays from your local airport.

Not an issue for us anymore with kids at uni, but now there are far worse blockers to travel!

Apologies way OT!

SouthCoastBoy

My wife is a TA which is a very poor salary, but at the same time has to take holidays during school time, so a combination of low pay and expensive holidays means we only go abroad every 4 or 5 years and a domestic holiday one every couple of years.