sense check: partial retirement

Bearhop

Hello all,
I am presently working full time as a civil servant, and am a member of the classic pension scheme. I will be 60 next year, at some point shortly before my  birthday I move to Alpha. I have worked as a civil servant for more than 30 years and my pension will be a reasonable sum, certainly by the time I receive my state pension (almost the maximum) I will be ok, funds-wise. 
But what to do between 60 and SPA? I am considering taking partial retirement, drawing my pension and working 2/3 days a week for a couple of years before retiring fully. I have a "bridging fund" to manage the years to SPA of 67. 
Because I am not very financially literate, I can't quite figure out whether this is the best thing to do, compared to carrying on past 60, perhaps reducing my hours to about 80%, and not drawing my pension until I fully retire, again after a couple of years. I can't see what advantage there is in not drawing my pension at 60, part from building up more pension in Alpha. But perhaps I am not looking at this the right way round, and am missing something. 
Can anyone see flaws?
thanks

MX5huggy

I think you need to put some actual numbers on this for you or us to see what outcomes you might have. The obvious thing todo is to take more lump sum to tie yourself over to SPA.

If you have non pension savings then you should be spending these and ploughing actual salary into pension now (either additional work benefits or a SIPP). You immediately benefit from minimum 6.25% increase once tax relief is added and you get 25% tax free out. 

Alternatively if you have savings defer taking your pension for a few years. 

Nebulous2

I'm in the midst of some of this. These decisions are not all financial. Some of it is about what gives you peace of mind.

I had a job with a reasonable pay that I was no longer enjoying and a LGPS pension. At Christmas I decided to leave - at 59. I was determined to work part-time and applied to the health service. We have enough money to carry us through to state pension age with a minimal income, or even without one, so I could have deferred my pension to 65 when I wouldn't have an actuarial reduction. 

Despite knowing the money is there I've found it difficult to adjust to not having an income, and I've decided to take my pension now.  I've swapped a job I was not enjoying for one with less responsibility that I really like, but felt in some way obligated to take on extra shifts to replace my lost income. My DB pension isn't massive, but having pared back our expenses it would be enough to live on without the part-time job and without running down our capital.

I still need two years NI payments to bring me to a full state pension, so my plan would be to work part-time, two days on and five off, instead of the reverse, for two years to help me get those two years NI without making voluntary contributions. 

In short - I could stop completely and financially could have deferred my pension, but neither of these would sit well with me. Two years part-time as a phased retirement with the security of a regular DB income just feels right for me. 

green_man

Have you worked out how much you actually need to live on?

Could you manage on 3 days a week work supplemented by some of your savings?  If so that will probably be a better option than drawing your pension early.

what's the ‘normal/standard’ retirement age on your pension?  If you draw earlier than the standard age there will be a reduction in benefits. 

NedS

Have you attended one of DWPs Retirement/Pensions workshops yet where they will outline your possibilities for you? I believe they are open to any DWP employee over the age of 55.

drummersdale

Similar to @Bearhop and @Nebulous2 I am a CS and will have completed 40 years this October - the majority in Classic with a couple of years in Alpha - I am contemplating taking partial retirement around the beginning of June next year when I will be around 59 and a few months - so will lose a small % by way of actuarial reduction for going before 60 - but will be able to access my lump sum.  My wife is 5 years younger so although she could go at 55 she would lose a significant chunk from both pension and lump sum so my plan (although I realise many things can get in the way of a plan) would be to carry on working for 3 days a week for at least another 3 years when she would be around 58 and perhaps be in a position to take her pension and lump sum - if my maths are correct we would have a combined CS pension of around £36k plus whatever lump sum we have retained after paying off remaining mortgage etc to see us through until I was 67 when we would get another c£9k a year.

As I say that's the (very loose) plan but only time will tell if it pans out....

SOLOMAN

As others have said, difficult to pass comment without more facts, your combined income (if you have spouse/partner), your future intentions, travel, hobbies etc. I took CS partial retirement after 20 years last year (60)..... after a full career in the forces and then straight into CS at 40. Working 22.5 hours per week, I have found what I believe (for myself) to be the perfect life/work balance, as I very much still get a buzz out of the work. With 20 years in Classic and Mil Pension, I'm earning close to what was my full time salary prior to taking partial retirement - helped of course by not paying National Insurance on those pensions. As soon as you take partial retirement, you can of course take your full pension, the lump sum (tax free) and then you will continue paying into your Alpha Pension until you take full retirement. Everybody's circumstances, desires and ambitions are different, but for what it's worth, I have many colleagues in a similar position (partial retirement) who think that moving to partial retirement is an ideal path for transitioning into full retirement. Good luck. 

femalemonarchfemalecanine

you might want to consider McCloud, where you will have the choice of Alpha or Classic for the years up to 2023.

However, I took partial a few months ago and already it is the best decision I ever made. I feel so much better in every way. We're all different of course, but I honestly don't know anyone who has partially [or fully] retired who regrets it, so as long as you can afford it of course, I' d say go for it.

Wentthedaywell?

I don’t know the CS pension, I’m in the LGPS but probably there are similarities. I took flexible retirement at 60 and work half a week. In my case I’m actually taking home more than if were working full time.

I think I’m right (happy to be corrected) there was no advantage in deferring taking my pension, though I did have some protection. Taking it early wasn’t financially punitive, nor deferring it financially rewarded; the actuarial reduction for taking it early is a straight quid pro quo for having it for longer. A bird in the hand etc…

Apart from the financial aspects I would highly recommend flexible retirement rather than cliff-edge. It lets you adjust, psychologically and in terms of work responsibilities, to letting go of your working life and to forge new ways of spending your free time. I wouldn't underestimate the change, even for people looking forward to retirement.

Also, I now know I can comfortably live on my work pension (I'm saving all my salary) and that the state pension, when I get it, will be there to provide the extras like nice holidays etc.

zagubov

Absolutely look into flexible retirement. I've posted before about how on average the happiest retirees are those still working part-time , and of those, the happiest are those working in a familiar field rather than a new one.

Partially retiring ticks all those boxes. You keep financial security (including pension benefits plus social contacts and networks/ social support networks, daily routines, better work-life balance, better transfer of skills/knowledge)

I can't speak for everybody but I don't believe that there needs to be a definitive cut off between life stages such as education, employment and retirement and think they should be blurred and gradual transitions rather than suddenly ended.

I retired and went straight back to work, full-time initially then reduced my hours/days in later years. By far the best decision I could have made.

GunJack

Wentthedaywell? said:

I don’t know the CS pension, I’m in the LGPS but probably there are similarities. I took flexible retirement at 60 and work half a week. In my case I’m actually taking home more than if were working full time.

Normally, in CS, your gross for pension+continued working cannot exceed your gross salary at the point of partial retirement, so your takehome increase should be due to no NI or pension contributions on the pension income. I've got older mates who have had to work less hours than they intended on partial retirement to keep within the gross limit.