How much pension could I take at 55

Mick70

morning all

Finding my job ever increasing stressful to point not sleeping at times and have mild anxiety , really dont like where I work any more .

3 years until I am age 55  and i'm thinking more and more, could I retire then ?  like many folk I have older children going through college etc so much is dependant upon their circumstances and if need my help financially.

At that age I am likely to have a DB pension of  £30k , it currently stands at £28k.   I am also hoping my DC pot will be £200k by then (kicked out of my db scheme , but can access it, had protected rights) .

My question is, IF were to retire at 55 , how much of that pot could i take each year ?   i was thinking about £8-£10k per year ?

thanks
mick    

Dazed_and_C0nfused

Would you be taking the DB pension at 55 or leaving that until the schemes NPA?

MK62

Do you have a full new state pension coming at 67**?.........asking because it depends how long you want that £200k to last......at £10k pa drawdown, then "on average" it's unlikely it will last your whole retirement (though obviously that depends on how long your retirement is, which nobody knows)

**that SP age is under review last I heard......they "might" be bringing the rise to 68 forward some years which could affect you.

green_man

Firstly you probably need to find out what options you have with you DB pension.  What is its normal retirement age (the age at which you can draw the full value with no reductions).  What reductions are applied if you take it early etc.  (I’m assuming that £30k isn’t  available if drawing from 55?).

With the DC element, once 55 you can take as much as you like. But really the question is what is sensible to take so that it will fulfil your needs and  bridges the gap until you can draw your DB pension.   No one can tell you the answer, but your tax situation is one of the prime considerations.  If you stop work and have no other income you can draw £16760 per year from dc without paying any tax (25% tax free then 12570 tax free allowance) (assuming you have standard allowances).  

Also you can draw 25% tax free from you whole DB pot up front,  but this probably only makes sense if you have a critical need for that cash there and then, if you do that then you could only subsequently withdraw £12570 per year tax free from your pot (as you have already used the 25% tax free element).

Could you reduce hours and supplement with DC?   A good option for many.  

jimi_man

As I recall from previous threads Mick70’s DB pension has a protected age of 50 so I’m guessing that he’ll take it from 55? So the SIPP will just be used to top up/replace SP until SPA, which it should do looking at those figures. 

Audaxer

Mick70 said:

My question is, IF were to retire at 55 , how much of that pot could i take each year ?   i was thinking about £8-£10k per year ?

£10k per year increasing with inflation from a DC pot of £200k is 5% per year, which may not be sustainable for a long retirement. £8k at 4% is likely to be safer, but it depends on the sequence of returns from your portfolio. However if you qualify for the full State Pension from age 67 (currently around £9,340 per year) you probably won't need to drawdown much from your DC pot after that.

dunstonh

My question is, IF were to retire at 55 , how much of that pot could i take each year ?   i was thinking about £8-£10k per year ?

How does your draw rate fit with your modelling of your future plans and future expenditure?    You haven't mentioned that at all but what you spend and what you want to spend are vital bits of information.

How does your spouse/partner provision and requirements fit with this?

Grumpy_chap

I can't comment on the pension calculations but is there a middle-ground possible?
If the OP works out they can "afford" to retire at age 55, but would like to have more financially, is there a possibility to retie and then take a less stressful job than they have now?  That job would be to fund the "extras" rather than the necessities that the current job has to meet.

Mick70

jimi_man said:

As I recall from previous threads Mick70’s DB pension has a protected age of 50 so I’m guessing that he’ll take it from 55? So the SIPP will just be used to top up/replace SP until SPA, which it should do looking at those figures. 

I actually get the DB now , a handful of us were forced out of the scheme and it was triggered on reaching age 50, ideally I wanted to stay in the scheme to reach the 40 years but was not to be.   
so since then I have been paying as much into my dc pot as legally allowed ,  with my lump sum kept at arms length. 

My wife is self employed and up until 4 years ago had next to no pension provision , I am also paying as much as can afford to into her pension and ISA

we both qualify for full state pensions.

so If can get out at 55 , it sounds like 4% per year of the pot is the right amount to be taking out

Secret2ndAccount

I think you might be able to go with 5%. Let's investigate why...   Firstly, if you're not Mick70,  5% is pretty risky if that pot is all you've got to last you a lifetime. It would be borderline crazy to take 5% every year starting at 55, and hope it lasts. Could work out if the stock market plays ball, but equally, you could run out of money quite quickly. So, if you want to start at 5%, you have to be prepared to cut back a lot if the stock market doesn't grow.
Now, returning to your personal scenario, Mick70: Think about this: If you had your DB, plus two state pensions, would that be enough to get by, for the rest of your life? If so, then you are all set from age 68 (as long as you are both still around, but that's another molehill to consider). In this case, you can definitely withdraw at 5% - there's virtually no chance that you burn down the 200k in 13 years. You just have to accept that you re-evaluate at State Pension age, and decide again what you can do/want to do with the remaining part of the pot (which could be >100k or next to nothing).
Figure out a baseline number - can't live on less than this. Then figure out a comfortable number.
Figure out how you guarantee your baseline number for your entire lives. Look at what's left over.
Also think about your views on how you spend money. I plan to spend more now, and less when I'm eighty. Others see it differently - they are happy with their lot now, and want to pay for a gardener and a good care home later.
If you do all that, a picture should be forming about what you can do, and when.

5% is fine for a pot that's expendable. If it's vital money, and needs to last a lifetime, I would work on 2.5%. In both cases, you can increase your withdrawals every year in line with inflation.

Marcon

Mick70 said:

morning all

Finding my job ever increasing stressful to point not sleeping at times and have mild anxiety , really dont like where I work any more .

3 years until I am age 55  and i'm thinking more and more, could I retire then ?  like many folk I have older children going through college etc so much is dependant upon their circumstances and if need my help financially.

At that age I am likely to have a DB pension of  £30k , it currently stands at £28k.   I am also hoping my DC pot will be £200k by then (kicked out of my db scheme , but can access it, had protected rights) .

My question is, IF were to retire at 55 , how much of that pot could i take each year ?   i was thinking about £8-£10k per year ?

thanks
mick    

To clarify one point - protected rights are a thing of the past - you can safely ignore them, since they were abolished in 2012 and are now simply part of your overall DC pot.