Husband retires officially in 2026 - Looking at our options for retirement.

Freedomforever

2nd_time_buyer said:

In terms of the lump sum, you say:
- you are in good health.
- either way, you will have a relatively low guaranteed income
- For the lump sum of £10-15k you will forego £800 to £1200 i.e. you would break even in only 12 years from not taking the lump sum (perhaps even sooner of there is index linking on the annual pension). 

From the information you have provided it wound point towards maintaining as much annual income as possible. 

Thank you, our insight to pension matters is currently fairly limited, I don’t quite understand what you mean by breaking even in only 12 years?
I agree our guaranteed income will undoubtedly be low. 

Just for clarity are you saying your advice is not taking a lump sum?

xylophone

When seeking free advice from Pension wise we were informed 
“You need to have a UK based defined contribution pension (not a final salary or career average pension).”

The guidance from PW is not aimed at people like your husband who are members of a defined benefit (final salary/career average) pension scheme.

https://www.gov.uk/pension-types#:~:text=There are 2 main types,ve worked for your employer

Then the situation is that in around two years time, your husband can expect an index linked pension of around £9000 a year ?

Should he predecease you, a widow's pension of around a third of this will be payable?

Further comments would be possible if you would answer the questions in my previous post.

Have you/your husband read the Scheme Guide for his pension?

Which scheme is it?

Freedomforever

Bostonerimus1 said:

What type of pensions do you have and have you done a detailed budget? If you have Defined Contribution pensions how are they invested and what percentage of your pension pot do you plan to spend each year? Have you done a state pension forecast and how old are you both?

Marcon said:

Freedomforever said:

We have saved towards a personal pension and transferred this to current employers pot. 

Not big earners, this pension will pay round about £6,700 per annum, possibly £7,000.
The pension has not been amalgamated to this current job. This additional pension would be around £2,000 if hubby works until September 2026.
When we work the figures out hubby could choose to take lump sum say between £10 - £15 thousand. This obviously reduces the annual income by between say £800 - £1,200 (not exact figures, but you get the picture)
We are in good health currently, what do we do, what do, did forum members do? 

If hubby retired say in next six months we could live frugally/comfortably on savings, waiting to draw pension in 2026. However we are wondering as many retirees don’t always get to enjoy their retirement or benefits carefully saved for. Will it be worth retiring and drawing pension in near future and not waiting to add a small amount to what we’ve already accumulated.

I think we may be just above pension credit level when all is said and done.

Final thoughts…
So do we take a lump sum or keep the annual income as high as possible or do we take the hit and retire asap?
Really appreciate your thoughts so we can move forwards with making a decision, thanks! 🤔

What are you trying to achieve - ie what are your priorities? Asking what other people have done is completely unhelpful if their objectives and circumstances differ from yours, and only gives false comfort (or needless alarm!).

Thanks Bostonerimus1
Husband is part of a CARE pension scheme (government) We will have a set monthly income, the average annual income is quoted in my original post above.

Yes husband has full state pension, I have slightly less.
Husband is 66 in 2026 and can claim his state pension, I can claim mine in 2028.

Thankyou Marcon for your comment. I guess my post is reaching out to get a general understanding if members of the forum think drawing a lump sum is advisable for people such as ourselves. 

I agree what works for one maybe not so for another.
Our priority is to be as wise as possible with how we proceed.
As you’ll appreciate our knowledge regarding pensions is currently fairly limited.

Freedomforever

Marcon said:

Freedomforever said:

NoMore said:

SP - State Pension
DC - Defined Contribution

Your husbands CARE scheme IS a defined benefit pension. The amount he contributes is not related to the amount he will receive, unlike a DC pension.

I see thanks for explaining. 

When seeking free advice from Pension wise we were informed 

“You need to have a UK based defined contribution pension (not a final salary or career average pension).”

Your husband has a career average pension, but do you have any defined contribution pensions? If so, you could have a PensionWise appointment, which would increase your general understanding of the pensions minefield!

No unfortunately just my husbands. Our son has suggested perhaps taking paid for pension advice.
Originally our thought was we were a little reluctant to spend out for advice on such a small pension.
Perhaps we should reconsider.
I suppose I wondered if forum members here would shake up our thinking and then we’d be able to decide whether taking a lump sum is unwise and just stick to the full annual income available?

Thanks 

Bostonerimus1

Freedomforever said:

Bostonerimus1 said:

What type of pensions do you have and have you done a detailed budget? If you have Defined Contribution pensions how are they invested and what percentage of your pension pot do you plan to spend each year? Have you done a state pension forecast and how old are you both?

Marcon said:

Freedomforever said:

We have saved towards a personal pension and transferred this to current employers pot. 

Not big earners, this pension will pay round about £6,700 per annum, possibly £7,000.
The pension has not been amalgamated to this current job. This additional pension would be around £2,000 if hubby works until September 2026.
When we work the figures out hubby could choose to take lump sum say between £10 - £15 thousand. This obviously reduces the annual income by between say £800 - £1,200 (not exact figures, but you get the picture)
We are in good health currently, what do we do, what do, did forum members do? 

If hubby retired say in next six months we could live frugally/comfortably on savings, waiting to draw pension in 2026. However we are wondering as many retirees don’t always get to enjoy their retirement or benefits carefully saved for. Will it be worth retiring and drawing pension in near future and not waiting to add a small amount to what we’ve already accumulated.

I think we may be just above pension credit level when all is said and done.

Final thoughts…
So do we take a lump sum or keep the annual income as high as possible or do we take the hit and retire asap?
Really appreciate your thoughts so we can move forwards with making a decision, thanks! 🤔

What are you trying to achieve - ie what are your priorities? Asking what other people have done is completely unhelpful if their objectives and circumstances differ from yours, and only gives false comfort (or needless alarm!).

Thanks Bostonerimus1
Husband is part of a CARE pension scheme (government) We will have a set monthly income, the average annual income is quoted in my original post above.

Yes husband has full state pension, I have slightly less.
Husband is 66 in 2026 and can claim his state pension, I can claim mine in 2028.

Thankyou Marcon for your comment. I guess my post is reaching out to get a general understanding if members of the forum think drawing a lump sum is advisable for people such as ourselves. 

I agree what works for one maybe not so for another.
Our priority is to be as wise as possible with how we proceed.
As you’ll appreciate our knowledge regarding pensions is currently fairly limited.

OK son your husband's pension will be a Career Average Revauled Earnings defined benefit pension which means the pension amount is related to the career average salary and you will get 2 state pensions, so your annual income could be ~25k. Is that enough? Do a detailed budget and see how much you will be spending. Do you have anyother sources if income or savings and investments in things like ISAs? Do you have any debt or a mortgage? and what would you do with the lump sum if you took it? 

Freedomforever

https://forums.moneysavingexpert.com/profile/xylophone

Thank you for your contribution, as a newbie to this forum the way in which responses work is a learning curve. Every time I tried to answer your questions a red bar appeared saying as a newcomer I was unable to post links. These were actually links within your message. 

I tried removing your links but was unable to do so.

If you read through some of the responses to other forum members of my original post I’ve answered most of your points raised I believe.

Yes we have read the details of the scheme, the booklet is only marked as local government pension scheme. 

You are right my husband would not expect an index linked pension of above £9,000 annually.

The widows pension you mentioned is accurate yes.

What do you think about drawing a lump sum, obviously this would reduce the annual pension payment.

Is it wiser to take the full annual pension available without any lump sum payments?

Freedomforever

Bostonerimus1 said:

Freedomforever said:

Bostonerimus1 said:

What type of pensions do you have and have you done a detailed budget? If you have Defined Contribution pensions how are they invested and what percentage of your pension pot do you plan to spend each year? Have you done a state pension forecast and how old are you both?

Marcon said:

Freedomforever said:

We have saved towards a personal pension and transferred this to current employers pot. 

Not big earners, this pension will pay round about £6,700 per annum, possibly £7,000.
The pension has not been amalgamated to this current job. This additional pension would be around £2,000 if hubby works until September 2026.
When we work the figures out hubby could choose to take lump sum say between £10 - £15 thousand. This obviously reduces the annual income by between say £800 - £1,200 (not exact figures, but you get the picture)
We are in good health currently, what do we do, what do, did forum members do? 

If hubby retired say in next six months we could live frugally/comfortably on savings, waiting to draw pension in 2026. However we are wondering as many retirees don’t always get to enjoy their retirement or benefits carefully saved for. Will it be worth retiring and drawing pension in near future and not waiting to add a small amount to what we’ve already accumulated.

I think we may be just above pension credit level when all is said and done.

Final thoughts…
So do we take a lump sum or keep the annual income as high as possible or do we take the hit and retire asap?
Really appreciate your thoughts so we can move forwards with making a decision, thanks! 🤔

What are you trying to achieve - ie what are your priorities? Asking what other people have done is completely unhelpful if their objectives and circumstances differ from yours, and only gives false comfort (or needless alarm!).

Thanks Bostonerimus1
Husband is part of a CARE pension scheme (government) We will have a set monthly income, the average annual income is quoted in my original post above.

Yes husband has full state pension, I have slightly less.
Husband is 66 in 2026 and can claim his state pension, I can claim mine in 2028.

Thankyou Marcon for your comment. I guess my post is reaching out to get a general understanding if members of the forum think drawing a lump sum is advisable for people such as ourselves. 

I agree what works for one maybe not so for another.
Our priority is to be as wise as possible with how we proceed.
As you’ll appreciate our knowledge regarding pensions is currently fairly limited.

OK son your husband's pension will be a Career Average Revauled Earnings defined benefit pension which means the pension amount is related to the career average salary and you will get 2 state pensions, so your annual income could be ~25k. Is that enough? Do a detailed budget and see how much you will be spending. Do you have anyother sources if income or savings and investments in things like ISAs? Do you have any debt or a mortgage? and what would you do with the lump sum if you took it? 

Yes the income you mention above is as will be. Is it enough you ask, it’s a case of needs must.  
We are used to lower income levels, with the occasional boost.
Thank you for your time, your comments are constructive and thought provoking, this is so helpful and much appreciated.

We have no debt or mortgage, we do have savings which is why we were wondering if my husband could retire earlier. This years ISA would possibly provide one year’s income.
The lump sum I guess would be if we decided to move and used towards those costs.
My husband would love a garden, we currently have a small courtyard.
Other thoughts are don’t move, travel a little in the UK and enjoy the sightseeing, walks etc.

A lump sum is not essential it’s whether it’s beneficial to have or better/wiser to only take the pension available as a monthly income.

xylophone

You are right my husband would not expect an index linked pension of above £9,000 annually.

Typo?

Then as a start, before commutation, your husband  would expect a pension of around £9000 a year.

https://www.lgpsmember.org/help-and-support/tools-and-calculators/lump-sum-calculator/

The commutation rate (£12 of lump sum for each  £1 of pension foregone) is not generous. 

By taking the lump sum, your husband is foregoing the annual guaranteed index linking on that amount of his pension.

It appears that you yourself have only the state pension - you mention that the estimate at 5/4/23 was slightly under a full new state pension.

Are you currently paying (or being credited) with NI so that this current year will be a full year?

Otherwise, have you looked into whether it is worth making voluntary contributions to bring you up to a full NSP?

You mention being "slightly over" pension credit level.  With two state pensions and your husband's LGPS pension, (not to mention assessable savings) you would be be considerably over Pension Credit level.

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs48_pension_credit_fcs.pdf

Freedomforever

xylophone said:

You are right my husband would not expect an index linked pension of above £9,000 annually.

Typo?

Then as a start, before commutation, your husband  would expect a pension of around £9000 a year.

The commutation rate (£12 of lump sum for each  £1 of pension foregone) is not generous. 

By taking the lump sum, your husband is foregoing the annual guaranteed index linking on that amount of his pension.

It appears that you yourself have only the state pension - you mention that the estimate at 5/4/23 was slightly under a full new state pension.

Are you currently paying (or being credited) with NI so that this current year will be a full year?

Otherwise, have you looked into whether it is worth making voluntary contributions to bring you up to a full NSP?

You mention being "slightly over" pension credit level.  With two state pensions and your husband's LGPS pension, (not to mention assessable savings) you would be be considerably over Pension Credit level.

Thank you, this is very helpful. I’m absolutely thrilled to hear we are considerably above Pensioner Credit level.
We've saved as much as possible over the years towards my husband’s pension/retirement, this is reward enough to know it’s not all been in vain.

Yes I will have a credit towards my state pension this year but voluntary contributions are not affordable unfortunately.
Not to worry slightly under is fine.

So reading through your response again it feels like taking the lump sum isn’t in our best interests. 

Would you agree?
Just need to decide if hubby is able to retire before 2026 which of course will slightly reduce that £9,000 figure.

Sarahspangles

Although we all know family and friends who sadly didn’t live long in retirement, most people do, and you say you’re currently both well.  So you need to plan for the good scenario, which is drawing your state pensions and your husband’s personal pension for a long time.

Presumably your income will fall when your husband does retire, have you tried living on that budget? That will tell you whether you can afford to ‘borrow’ from your future selves by taking cash from the personal pension to bridge the gap through to state pension.

You also need to factor in your capital and income if he passes away before you - sadly this is the most common scenario - and whether you would need to downsize if you don’t have some savings, e.g. for house repairs or to replace a car. That will help you with decisions about moving.

There are other scenarios, like you both working part time until both his pensions start payment, that way you would have some ‘playing out’ time before you’re fully retired, and could top up your pension as well.