Decided life really is too short so time for pension @ 55.

Korkyb

I don't know my "number" nor do I know "exactly" what income my pension will provide but decided this week that its time to step down from my job at 55 and (technically) become a "pensioner".

In my favour is:

- 36 odd years in my NHS pension.
- I'm on a reasonable salary which obviously comes in handy with a final salary pension scheme.
- mortgage paid off & no other debt.
- 55k savings.
- wife currently still working part time but retiring (at 55) in 18 months on a 10/11k (ish) DB pension (with £30k ish lump sum) & another £2k pension & £6k lump sum to follow when she hits 60.


The reason I don't know exactly what my pension will be is because I went part time a year ago & now work a lot more unsocial hours. I obviously know what I've earned in the last 12 months but I'll have to wait & see exactly how that translates into pensionable pay.

By taking my pension at 55 I will take an 18/19% hit on my pension (I don't have "special status" so am subject to actuarial reduction) but I can live with that.

My back of fag packet calculations show that I should be in line for (worst case scenario) just under £23k and best case just over £25k annual pension. (so minimum lump sum of 69k).

I'm also in the position due to my profession that I can continue to work in a lower grade job ad hoc so if I feel I need extra dosh I can get off my butt & earn some.


I've been meaning to work out my "number" for a while but havent got round to it.

As our household income based on work pensions alone will be £33k+ and we should also (after pension lump sums) have £150k savings to dip into I'm comfortable that we wont starve especially if we make it to state pension age (wife & I will both get max SP).

One other factor I've considered is the fact that the NHS pension increase each year is based on the Consumer Price Index which is going to be astronomical this financial year. This (I believe) will mean that I should get a decent bump up in my pension in April 23 even though I'll only have been getting my pension part of the financial year.

I will of course have to find a hobby to prevent her indoors finding too many jobs for me at home!!

Also not sure what would be way to manage the £150k ish we will have in savings after lump sums are paid - we are likely to spend £30k ish on home improvements so will be left with approx £120k.

Roll on October when my (current) job ends and my pension begins!

Dazed_and_C0nfused

With so much DB pension have you checked your State Pension forecast to make sure you will actually have accrued the standard £185.15 by the time you stop earning?

It's important you read the full thing, not just the headline figure.

tacpot12

My partner was in a similar position to yourself, and retired at 55, but he used his savings and a small DB pension transfer (from his first job which was outside of the NHS) to delay taking his NHS pension, and hence avoid the actuarial reduction. (He's been able to make his savings and 2nd pension last for 5 years as he only has a cheap hobby.)   

I would recommend delaying takin your NHS pension by spending most of your savings to live for a couple of years, and then restock them with your lump sum. You could also apply for a 0% Purchase Credit Card. If you make as many purchases as you can using that card, you will be able to avoid dipping into your savings, and potentially make them last another year. You might need to put off doing the home improvements until you get your pension lump sump to make this plan work. This approach might reduce your actuarial reduction to 10% rather than 18/19%, which will make a big difference to your income, and will also increase the size of the  lump sum. (You can get credit cards with 0% Purchase periods of upto 24 months.)
 
If you can eak your savings out for 28 months, then this is better than making them last 24 months as the actuarial reduction is calculated based on the number of months that you retire early. The NHS documents tend to talk about 4% per year, as this is easier for people to get their heads round, but the calculation is done based on the number of months early that you retire, so even one month delay makes a difference. 

You should be able to get your pension amount from your Total Reward Statement (TRS), but it will always be out of date as the NHS employers don't supply last year's data until around July; check in the Autumn for the most accurate figure, but be aware that your actual pension will always be more than you see on the TRS.

My partner took up dinghy sailing as his hobby and because he has avoided buying his own boat, the cost of sailing seems to be just a wet-suit, boots and annual club membership.

frugal90

"I would recommend delaying takin your NHS pension by spending most of your savings to live for a couple of years, and then restock them with your lump sum."

makes sense

Thrugelmir

Korkyb said:

One other factor I've considered is the fact that the NHS pension increase each year is based on the Consumer Price Index which is going to be astronomical this financial year. This (I believe) will mean that I should get a decent bump up in my pension in April 23 even though I'll only have been getting my pension part of the financial year.

Increased taxation and the general rise in prices on virtually everything will result in the increase in pension evaporating. 

Albermarle

Thrugelmir said:

Korkyb said:

One other factor I've considered is the fact that the NHS pension increase each year is based on the Consumer Price Index which is going to be astronomical this financial year. This (I believe) will mean that I should get a decent bump up in my pension in April 23 even though I'll only have been getting my pension part of the financial year.

Increased taxation and the general rise in prices on virtually everything will result in the increase in pension evaporating. 

Although will be in a better position than a typical private DB scheme, with a cap of 3 or 5 %.

drummersdale

Albermarle said:

Thrugelmir said:

Korkyb said:

One other factor I've considered is the fact that the NHS pension increase each year is based on the Consumer Price Index which is going to be astronomical this financial year. This (I believe) will mean that I should get a decent bump up in my pension in April 23 even though I'll only have been getting my pension part of the financial year.

Increased taxation and the general rise in prices on virtually everything will result in the increase in pension evaporating. 

Although will be in a better position than a typical private DB scheme, with a cap of 3 or 5 %.

Agree with this but presumably inflation will eventually normalise whilst the pension would be uplifted by the expected 9-10% in perpetuity? Taxes of course will never go down…

SouthCoastBoy

drummersdale said:

Albermarle said:

Thrugelmir said:

Korkyb said:

One other factor I've considered is the fact that the NHS pension increase each year is based on the Consumer Price Index which is going to be astronomical this financial year. This (I believe) will mean that I should get a decent bump up in my pension in April 23 even though I'll only have been getting my pension part of the financial year.

Increased taxation and the general rise in prices on virtually everything will result in the increase in pension evaporating. 

Although will be in a better position than a typical private DB scheme, with a cap of 3 or 5 %.

Agree with this but presumably inflation will eventually normalise whilst the pension would be uplifted by the expected 9-10% in perpetuity? Taxes of course will never go down…

Yes  something of an anomaly if you are in deferment you could get a 10% pension rise whereas if still employed the pension increase could be a lot less as would be base on current salary e.g. 1/49ths for lgps

drummersdale

SouthCoastBoy said:

Yes  something of an anomaly if you are in deferment you could get a 10% pension rise whereas if still employed the pension increase could be a lot less as would be base on current salary e.g. 1/49ths for lgps

So if you were in receipt of a Civil Service pension (my scheme but not a pensioner yet) of say £25,000 per annum and the CPI rate applied was 10% would your pension not rise to £27,500? Or Is that too simplistic and it’s more nuanced than that?

michaels

frugal90 said:

"I would recommend delaying takin your NHS pension by spending most of your savings to live for a couple of years, and then restock them with your lump sum."

makes sense

Not sure it makes much odds if the reduction is 'actuarily fair'

zagubov

michaels said:

frugal90 said:

"I would recommend delaying takin your NHS pension by spending most of your savings to live for a couple of years, and then restock them with your lump sum."

makes sense

Not sure it makes much odds if the reduction is 'actuarily fair'

Are they saying that the savings won't rise with inflation like the pension will, so might as well live off that for now.