Retire in late 50’s

Justso65

Pat38493 said:

Justso65 said:

Dazed_and_C0nfused said:

I have a relatively good DB pension built up over around 20 years and I left that scheme about 17 years ago. I frequently get benefits quotations based on different retirement dates and my plan for the DB scheme is to take it at 67 and add my state pension to that. 

If you left 17 years it seems unusual/unlikely that the NPA would be 67.  Why exactly do you plan on taking this pension at 67?

My DB pension contracted out of SERPS and although that aspect confuses me when I check on the gov website I have a full NI history and I am informed I will get max state pension of, at today’s rates, about just under £10k.  

Is the just under £10k what you have actually accrued at 5 April 2022 or what you will accrue if you contribute to add NI year(s)?

Dazed_and_C0nfused said:

I have a relatively good DB pension built up over around 20 years and I left that scheme about 17 years ago. I frequently get benefits quotations based on different retirement dates and my plan for the DB scheme is to take it at 67 and add my state pension to that. 

If you left 17 years it seems unusual/unlikely that the NPA would be 67.  Why exactly do you plan on taking this pension at 67?

My DB pension contracted out of SERPS and although that aspect confuses me when I check on the gov website I have a full NI history and I am informed I will get max state pension of, at today’s rates, about just under £10k.  

Is the just under £10k what you have actually accrued at 5 April 2022 or what you will accrue if you contribute to add NI year(s)?

The only reason I plan on taking my DB pension at 67 is because pension delayed is pension increased.  I hopefully can fill the gap between now and 67 with my DC pot and take my guaranteed DB and state pensions together at 67.  It’s just a plan, not set in stone.

Regarding the state pension it is NI contributions accrued to date, 40 years.  Not projected accrual.  Fortunately as I was messing around as a student in the early 80’s I seemingly accrued NI credits.  I have then worked continually since 1986.  So the state pension is at its max as of now and I can’t increase any further with more NI contributions.

Thank you for yours and all the other responses.  “Pulling the trigger” seems an apt description.  It feels like I am doing exactly that if I retire now.  My plan has always been to retire in spring and take advantage of the spring and summer weather as I become work idle but leisure busy.  Engineering redundancy sounds just what I would like to do.  It may be possible but needs careful planning to get there.

JS. 

Just to be crystal clear on the state pension point, have you checked your state pension forecast on UK gov and made sure that it says that you cannot improve any further?  Usually there is a headline figure of 185.15, but then if you scroll down it might say something different like - you can get it to this value by contributing x more years.

If you were in a DB scheme for a long time you would have been contracted out so you would most likely need well over 35 years to get the full amount.

On the gov website it says I have 40 full years of contributions to date and one partial year.  It then says my pension forecast is £185.15 and it is “the most I can get” and “You cannot improve your forecast any more”. It also says “You’ve been in a contracted-out pension scheme” and a subsequent link says “Your COPE estimate is £49.01 per week” but that “this does not affect your pension forecast”.  So that £49.01 is part of what my DB will pay me.

Thanks again, JS.

Pat38493

Justso65 said:

Pat38493 said:

Justso65 said:

Dazed_and_C0nfused said:

I have a relatively good DB pension built up over around 20 years and I left that scheme about 17 years ago. I frequently get benefits quotations based on different retirement dates and my plan for the DB scheme is to take it at 67 and add my state pension to that. 

If you left 17 years it seems unusual/unlikely that the NPA would be 67.  Why exactly do you plan on taking this pension at 67?

My DB pension contracted out of SERPS and although that aspect confuses me when I check on the gov website I have a full NI history and I am informed I will get max state pension of, at today’s rates, about just under £10k.  

Is the just under £10k what you have actually accrued at 5 April 2022 or what you will accrue if you contribute to add NI year(s)?

Dazed_and_C0nfused said:

I have a relatively good DB pension built up over around 20 years and I left that scheme about 17 years ago. I frequently get benefits quotations based on different retirement dates and my plan for the DB scheme is to take it at 67 and add my state pension to that. 

If you left 17 years it seems unusual/unlikely that the NPA would be 67.  Why exactly do you plan on taking this pension at 67?

My DB pension contracted out of SERPS and although that aspect confuses me when I check on the gov website I have a full NI history and I am informed I will get max state pension of, at today’s rates, about just under £10k.  

Is the just under £10k what you have actually accrued at 5 April 2022 or what you will accrue if you contribute to add NI year(s)?

The only reason I plan on taking my DB pension at 67 is because pension delayed is pension increased.  I hopefully can fill the gap between now and 67 with my DC pot and take my guaranteed DB and state pensions together at 67.  It’s just a plan, not set in stone.

Regarding the state pension it is NI contributions accrued to date, 40 years.  Not projected accrual.  Fortunately as I was messing around as a student in the early 80’s I seemingly accrued NI credits.  I have then worked continually since 1986.  So the state pension is at its max as of now and I can’t increase any further with more NI contributions.

Thank you for yours and all the other responses.  “Pulling the trigger” seems an apt description.  It feels like I am doing exactly that if I retire now.  My plan has always been to retire in spring and take advantage of the spring and summer weather as I become work idle but leisure busy.  Engineering redundancy sounds just what I would like to do.  It may be possible but needs careful planning to get there.

JS. 

Just to be crystal clear on the state pension point, have you checked your state pension forecast on UK gov and made sure that it says that you cannot improve any further?  Usually there is a headline figure of 185.15, but then if you scroll down it might say something different like - you can get it to this value by contributing x more years.

If you were in a DB scheme for a long time you would have been contracted out so you would most likely need well over 35 years to get the full amount.

On the gov website it says I have 40 full years of contributions to date and one partial year.  It then says my pension forecast is £185.15 and it is “the most I can get” and “You cannot improve your forecast any more”. It also says “You’ve been in a contracted-out pension scheme” and a subsequent link says “Your COPE estimate is £49.01 per week” but that “this does not affect your pension forecast”.  So that £49.01 is part of what my DB will pay me.

Thanks again, JS.

In that case yes you are fine - the "you cannot improve your forecast anymore" is often the important bit.

Albermarle

Justso65 said:

Dazed_and_C0nfused said:

The only reason I plan on taking my DB pension at 67 is because pension delayed is pension increased. I hopefully can fill the gap between now and 67 with my DC pot and take my guaranteed DB and state pensions together at 67. It’s just a plan, not set in stone.

Have you checked this aspect in the scheme rules for your specific DB pension?

Not all DB schemes pay the pension between NPA and when it starts if you choose to claim it later than NPA.  So you could have typically lost out on 2-5 years of payments.

I have checked and I can delay my DB pension from when it was initially planned to start at 65 and I could if I wished start it earlier.  They recently sent me a quote for pension at 60.

If you delay taking the pension say for two years, then will it
1) Be significantly increased ( not just by inflation indexing) to compensate for not taking it for two years.
2) When you take it you will get an extra  lump sum equivalent to two years pension as compensation for not taking it at NRA.

The reason for the questions, is that some DB schemes happily allow you to delay taking the pension, but do not compensate you for doing so. In which case it is a very bad idea to defer it.

yp70479

I retired early at 56. DB pension plus additional AVCs. Hated my job - too much stress and corporate bulls**t - haven't regretted it for a second! Everytime I went passed my old office I would think "suckers!!".

Justso65

JamesRobinson48 said:

You say you have accrued a 'relatively good DB pension' and you also have 'around £500k in a DC pension'.  In that case, how close is your total pension pot to the Lifetime Allowance (LTA)?   Bear in mind that once you exceed the LTA, you're likely to be taxed at a penal rate on the excess amount.  There seems no point in making additional DC contributions, gaining (say) 40% tax relief on the amounts contributed, and then later having to pay (say) 55% tax on funds withdrawn.

For my part I did run into a severe LTA problem and, mainly for that reason, retired in my mid 50s.  I did not hesitate to do so, have remained more than solvent during many subsequent years, and have absolutely no regrets (apart from wishing I'd gone a little sooner).

I hadn’t considered the LTA until recently.  I always thought the LTA was for for people further up the financial ladder than me.  However, I understand that the LTA is calculated as

1. The value of my DC pot when I start drawing it.  Currently around £500k
2. My DB pot is also valued when I take it at a rate of 20 x the yearly pension + TFLS value.  Is that accurate?

If so, valuing my DB pension forecast now makes it just over £400k.  Now if I go longer that DB will increase with yearly increments and my DC pension would, hopefully, increase with contributions and investments.  So at the moment I believe I need to consider, based on planned retirement dates and current info on values, that I have used around £900k of my LTA.  Is that correct?  If so I don’t have much more wriggle room to stay under the LTA.

JS.

scobie

It’s an interesting question as a good earner myself (and I’m 58) to completely get the question raised, especially that fear of not earning still, even when you know innately that you will be comfortable. 

My D.C. pension isn’t huge (currently around) £380k but I have ISAs worth around £340k.  I will get a full state pension in 8 and a half years.  I also have an apartment in Bangkok which will generate £800 a month and will continue to appreciate (currently worth around £180k), a villa by a Thai beach (my intended retirement home) and the house I currently live in in the U.K. which is worth £440k with estimated rental income of £1700 a month. 

I realised the other day that I could generate income from that lot roughly equal to or slightly more than my current income. 

And yet I carry on, thinking those extra 2-3 years will make me even safer.  

I guess I’m lucky. It’s a nice problem to have.  

Pat38493

Justso65 said:

JamesRobinson48 said:

You say you have accrued a 'relatively good DB pension' and you also have 'around £500k in a DC pension'.  In that case, how close is your total pension pot to the Lifetime Allowance (LTA)?   Bear in mind that once you exceed the LTA, you're likely to be taxed at a penal rate on the excess amount.  There seems no point in making additional DC contributions, gaining (say) 40% tax relief on the amounts contributed, and then later having to pay (say) 55% tax on funds withdrawn.

For my part I did run into a severe LTA problem and, mainly for that reason, retired in my mid 50s.  I did not hesitate to do so, have remained more than solvent during many subsequent years, and have absolutely no regrets (apart from wishing I'd gone a little sooner).

I hadn’t considered the LTA until recently.  I always thought the LTA was for for people further up the financial ladder than me.  However, I understand that the LTA is calculated as

1. The value of my DC pot when I start drawing it.  Currently around £500k
2. My DB pot is also valued when I take it at a rate of 20 x the yearly pension + TFLS value.  Is that accurate?

If so, valuing my DB pension forecast now makes it just over £400k.  Now if I go longer that DB will increase with yearly increments and my DC pension would, hopefully, increase with contributions and investments.  So at the moment I believe I need to consider, based on planned retirement dates and current info on values, that I have used around £900k of my LTA.  Is that correct?  If so I don’t have much more wriggle room to stay under the LTA.

JS.

Yes, and if you consider that your DC pot will continue to grow during future years which could be many - in your situation you are quite likely to have LTA risks at some point in future, especially if you carry on working and putting in the max into the pension.  No panic because exceeding the LTA is not the end of the world, contrary to media hype - it can be managed and it's a nice issue to have.  LTA tax is only paid upon events called "crystallization" which are generally the points where you proactively decide to take amounts from the pension (that's a simplification but just to make the point that you won't suddenly receive a huge tax bill).

Lots of LTA threads on this board - including a couple running in the last few days.

Now this all assumes that the LTA doesn't change - it might go up, or down, or disappear or whatever according to who we vote for!

In any case like other posters, if I was in your situation I would be composing my resignation letter instead of writing on this forum  

Nebulous2

I've had a beer or two, so please excuse that, but what are you going to do on retirement? 

I stopped almost two years ago, on considerably less money than you have, at 59. 

However, despite having most of my needs met by a DB pension I found I wasn't ready to retire. I took a part-time job that I really enjoy on a very part-time basis. 


So are you ready? 

Rather than focusing on a job you don't like, what will replace it?

If your identity is wrapped up in what you do, rather than who you are, that could be difficult. 

I did my sums, decided I could afford to go, but then discovered that was only the beginning of the journey......

Pat38493

JamesRobinson48 said: It might make sense to defer any further DC contributions until you are within a year or two of actually drawing your benefits, so that when the time comes you could home in on LTA as closely as possible.

Might is probably the operative word here because for example if the employer is matching your contributions, even if they will eventually be subject to LTA you are probably still better off.  Just something to think about and investigate further but the main point here is that according to what you have posted, it appears that financially speaking, you are very much financially independent and therefore you can retire whenever you feel like it.

Nebulous2 point is a very good one in the sense that you need to think about what you are actually going to do in retirement.  I guess it also depends on how much your work is fulfilling your social needs - if you are just working purely to put money in the bank, you probably don't need to do that anymore, and for sure there will be a journey to see what you want to do in future but it's something that has to happen some time anyway.  If on the other hand you have a lot of daily work colleagues that you consider as friends and your daily work is a big part of your self worth, it may be different, but I didn't get that impression from your first post.

I guess because this is the moneysavings forum, there is not much posted here about the psychological journey into retirement.  There may be other forums or places here people discuss that a lot more.

bostonerimus

I retired in my early 50s. I made sure I did it entirely debt free ie no mortgage etc. and planned out my expenses and income sources in detail. The other important thing to plan for is what you will do from day to day and how to replace the social aspects of work that you will give up, if those are important to you. So hobbies , friends and family are all important.

I’m very happy with my own company, but I have good friends that I meet up with regularly to go to the cinema, theater or just to the pub. After 3 years I started some part time work to help out a colleague and that’s nice as I make my own schedule. An early retirement is an opportunity to maybe pursue interests that you couldn’t while you worked, good luck