Savings or pension

eskbanker

Bobinyorkshire said:

it would feel very odd not to have an income

One aspect you may wish to consider is that this is likely to have an impact on your credit status, in that if you're unable to declare a verifiable income, this may restrict your options if you need access to new credit facilities....

Bobinyorkshire

Thank you, that's useful to know.

There are no credit purchases planned in the next 2 years, but I will look into that.

Do you think I may need to inform my credit card supplier or do you think as long as I pay off it monthly they will not care?

Eco_Miser

eskbanker said:

Bobinyorkshire said:

it would feel very odd not to have an income

One aspect you may wish to consider is that this is likely to have an impact on your credit status, in that if you're unable to declare a verifiable income, this may restrict your options if you need access to new credit facilities....

I have successfully opened a current account with a declared income of zero, and others with just a few thousand investment income. These were about ten years ago, so criteria may have changed.  Also I didn't need credit facilities, they just came with the account.

eskbanker

Eco_Miser said:

eskbanker said:

Bobinyorkshire said:

it would feel very odd not to have an income

One aspect you may wish to consider is that this is likely to have an impact on your credit status, in that if you're unable to declare a verifiable income, this may restrict your options if you need access to new credit facilities....

I have successfully opened a current account with a declared income of zero, and others with just a few thousand investment income. These were about ten years ago, so criteria may have changed.  Also I didn't need credit facilities, they just came with the account.

I'm sure I was reading recently on the pensions board that some were in this position and others were consequently ensuring that they had all the cards and accounts they felt they'd need before opting out of regular income, but the prospects of locating any such threads via the largely inoperable forum search facility is remote!

Albermarle

 allowing my pension to accumulate by annual uplift and reduction in penalty seems the best option

Although these DB pensions are reduced if you take them early , you of course get the pension for more years , so in theory at least you do not really lose out overall.

Each scheme calculates the 'penalty ' differently though , about 4 to 5% a year is usual I think . Clearly 4% is better than 5%

Bobinyorkshire

It was really all about the savings made by not paying income tax on an regular 'wage' from a pension taken early when I have savings readily available which could be used as an 'income' in the interim. Especially when the interest on the savings pay at such a poor rate (this money was earmarked for a house move which never happened and has instead given me the opportunity to finish work earlier instead) 

kidmugsy

Bobinyorkshire said:

It was really all about the savings made by not paying income tax on an regular 'wage' from a pension taken early 

Another way to look at it is that you will be giving up the opportunity to enjoy several years worth of the part of the DB pension that will pay 0% income tax because of your Personal Allowance against income tax.  Remember that once your State Pension begins you will be paying income tax on it too.

In your shoes (what little I know of them) I'd be weighing up (i) Taking the pension early - unless the actuarial reduction is a killer, versus (ii) deferring the pension and taking a part time job, or a self-employed job, to exploit the Personal Allowance in the period before you start the DB pension.

The capital you'd intended to spend on your living costs could mostly be put as quickly as possible into tax shelters such as ISAs and perhaps personal pensions of one sort or another.  If part of that capital is still available when you reach state pension age you could even use it to fund your deferring your state pension for one or two years.  That will tend to offset the actuarial reduction that you suffered on your DB pension.

mick08

Being 1995 scheme, do you not have to take the best of the last 3 years, therefore have to take it when you're 57 years old?

Thrugelmir

Albermarle said:

 allowing my pension to accumulate by annual uplift and reduction in penalty seems the best option

Although these DB pensions are reduced if you take them early , you of course get the pension for more years , so in theory at least you do not really lose out overall.

Each scheme calculates the 'penalty ' differently though , about 4 to 5% a year is usual I think . Clearly 4% is better than 5%

Then there's the loss of CPI inflationary increases on top which over 30 years or so could compound into a sizable amount. 

Bobinyorkshire

Hi Kidmugsy,

That’s a really great idea. So if I understand correct; earn up to personal allowance and use savings to supplement to lifestyle and try to take pension nearer 60.

Could I ask what DB means?

Also, would any NI paid add to state pension years?