AVCs and pension planning

daffodil20

Thanks again for all this advice.  I am aware of the need to take my 1995 bit of pension when I'm 60 as I will gain no benefit from leaving it there until I'm 67.  I will definitely look at those references and do some reading.  And I'll now read around the idea of a SIPP as well to see how that looks!  All very helpful thanks.

phynix_uk

You need to apply your logic fairly. On one hand you state that you're going to wait to draw your 2015 section until SPA (67), in order to avoid any early retirement factors but on the other hand you question the time it will take you to recoup the £££ spent to buy the additional pension. The same logic needs to be applied. 

If you draw your pension early (say 65), you receive income for 2 extra years. Ultimately, the benefit will be passed onto additional income at age 67 but you're already 2 years down. Work out what your net pension would be for those two years and what the actual increase in net income would be if you deferred the pension until 67. It's also possible you'd be a non-taxpayer between 65-67 meaning the income would be free from tax but not at state pension age. 

Typically the NHS pension early retirement factors are around 5% per annum so whilst you might receive 10% less at 65 you'd receive 2 extra years of income. You'll probably find the time it take you to recoup those 2 years is somewhere north of 12 years meaning you'd be close to 80 before you win.

daffodil20

phynix_uk - I see what you mean - I will look into the 'reductions' that apply for early retirement.  It may be worth the reduction for the 2 years of income that I would get by taking it early.  Thank you.

Deladuro

daffodil20 said:

phynix_uk - I see what you mean - I will look into the 'reductions' that apply for early retirement.  It may be worth the reduction for the 2 years of income that I would get by taking it early.  Thank you.

Really interesting thread that covers many of my own questions.

I'm due to 'retire' for 24hrs next month, collect my 1995 NHS pension and continue working full-time for the next few years (I'm just turning 55) whilst making contributions to the 2015 CARE scheme.

I can see I have lots of research to do regarding the best options for boosting my (2nd) pension, whilst leaving some options open in case I feel the need to step away before state pension age.

That last point about the calculations required for reductions if you decide to go before 67 (or whatever age it gets to) is something I'll also be looking at.

Good luck daffodil20.  It's a steep learning curve...

Moonwolf

This was my non expert analysis for spending more on additional pension when I looked at it.  Some things have changed but it might help.

https://forums.moneysavingexpert.com/discussion/comment/78669411#Comment_78669411

Deladuro

Moonwolf said:

This was my non expert analysis for spending more on additional pension when I looked at it.  Some things have changed but it might help.

https://forums.moneysavingexpert.com/discussion/comment/78669411#Comment_78669411

Did you ever look at a combination of ERRBO & additional purchase?

On first glance it looks as though it can be done - but there would be some interplay between both meaning that either the amount of additional purchase would be lower - or buyout payments would be more?

There seems to be very little information to allow you to calculate this yourself - all advice points to contacting the pensions people (SPPA in my case) for a quotaton.

Moonwolf

Deladuro said:

Moonwolf said:

This was my non expert analysis for spending more on additional pension when I looked at it.  Some things have changed but it might help.

https://forums.moneysavingexpert.com/discussion/comment/78669411#Comment_78669411

Did you ever look at a combination of ERRBO & additional purchase?

On first glance it looks as though it can be done - but there would be some interplay between both meaning that either the amount of additional purchase would be lower - or buyout payments would be more?

There seems to be very little information to allow you to calculate this yourself - all advice points to contacting the pensions people (SPPA in my case) for a quotaton.

No I didn't, not in detail, but I know exactly what you mean.  There are a couple of places where it tells you that you can't have as much additional pension if your have ERBBO.

daffodil20

Hi Moonwolf, I read your other thread which was very helpful.  Can I just ask you something though to help me clarify all this in my head?  How does the ERRBO work out if you retire earlier than the 'buy-out' timescale of 1-3 years?  You said "I will be able to take my 2015 NHS pension at 65 without actuarial reduction and retire even earlier using my DC pot as a bridge".  Isn't the cost of the ERRBO based on a decision about when you plan to retire?  So if you leave earlier than say 64 (if your SPA retirement age is 67) won't that mess up the payments you've made? I've assumed you would have to be sure you were going to work up until the ERRBO date of retirement.  Or have I got that wrong?

jamesd

I usually think it's better to turn lifestyling off and switch when the timing is right for you.

A basic and good self-select choice is a global equity tracker fund. I've used the one in SL's workplace pension substantially myself.

For equity funds in general you'll need to deal with routine drops of 20% and very bad year drops of 40% or so. Overall growth but it's a rollercoaster in reverse with lots of downs in the upward trend. That's unacceptable just before you're planning to spend the money so switching to a bond fund a year or three in advance of each year's drawing tends to be prudent.

saucer

jamesd said:

I usually think it's better to turn lifestyling off and switch when the timing is right for you.

A basic and good self-select choice is a global equity tracker fund. I've used the one in SL's workplace pension substantially myself.

For equity funds in general you'll need to deal with routine drops of 20% and very bad year drops of 40% or so. Overall growth but it's a rollercoaster in reverse with lots of downs in the upward trend. That's unacceptable just before you're planning to spend the money so switching to a bond fund a year or three in advance of each year's drawing tends to be prudent.

Welcome back James…we haven’t seen much of you in these parts recently.