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

xylophone

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.

You are still some  four or five years younger than SPA - is your situation that you are on a very modest salary (and expect this to continue up to SPA)?

See

https://www.litrg.org.uk/working/employment/nic-employees

You may very well be in line for a full NSP.

What exactly did your state pension forecast show as "estimate to 5/4/23"?

Incidentally, if you are working, is there a reason why you are not a member of a workplace pension scheme?

If your husband decides to retire before Scheme Normal Retirement Age (in his case is this aligned with SPA?) then his pension will be actuarially reduced - he may prefer to avoid this by using savings (and your  salary) to bridge the gap to scheme pension and SPA.

On the other hand, this would deplete your emergency funds - would you still be able to finance a new boiler say or unexpected dental treatment? A relative of mine recently broke a tooth and ended up with two root canal treatments and tooth repair - his wallet is over £1,400 the lighter....

With regard to commuting pension for lump sum, this  is a decision for you to take after weighing up all the circumstances.

There are times where it can suit somebody to take as large a PCLS as possible.

For example, somebody with a generous DB pension and a decent commutation factor  who has a particular purpose in mind, 

funding a medical student offspring through University say or world travelling for a year or funding a house purchase etc.

Your husband's pension is modest and in the event that he should predecease you, your widow's pension would be very modest.

That said, combined with a full or virtually full NSP, it would take you above PC level for a single person.

How important is the tax free PCLS to your future plans when set against the loss of index linked income?

Secret2ndAccount

Personally, I would not take any lump sum at 12:1. They are offering you £12 lump sum for every £1 annual pension you give up. So, after 12 years you will be worse off. In truth, the lump sum is tax free, and much of the annual pension is likely to be taxed, so maybe 16 yrs is more like your break even point. Still, you would be giving up a guaranteed sum every year, for as long as you live (and going up every year to keep place with inflation). That's a pretty comforting guarantee, and many people wish they could get a pension like that.
If the offer was 20:1 or more, I might be seeing it the other way. At 12:1 you need to have a very good use for the lump sum.
For info, despite the logical argument above, many people jump at the chance to get their hands on a huge lump of cash. A bird in the hand, and all that. There is some argument that you can enjoy the money more when you are younger. I would prefer to enjoy the money for longer. It all hinges around that rate of 12:1. It's just a poor trade-off.

Freedomforever

Sarahspangles said:

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.

I’m exceptionally grateful that you’ve taken the time to read and comment on my post, thank you.
Your words definitely bring clarity to our situation and offer positive vibes regarding our future.
This advice is friendly and thought provoking and going forward will enable us to make the most appropriate and informed decision for ourselves possible. Sincere thanks again 😊

Freedomforever

Secret2ndAccount said:

Personally, I would not take any lump sum at 12:1. They are offering you £12 lump sum for every £1 annual pension you give up. So, after 12 years you will be worse off. In truth, the lump sum is tax free, and much of the annual pension is likely to be taxed, so maybe 16 yrs is more like your break even point. Still, you would be giving up a guaranteed sum every year, for as long as you live (and going up every year to keep place with inflation). That's a pretty comforting guarantee, and many people wish they could get a pension like that.
If the offer was 20:1 or more, I might be seeing it the other way. At 12:1 you need to have a very good use for the lump sum.
For info, despite the logical argument above, many people jump at the chance to get their hands on a huge lump of cash. A bird in the hand, and all that. There is some argument that you can enjoy the money more when you are younger. I would prefer to enjoy the money for longer. It all hinges around that rate of 12:1. It's just a poor trade-off.

Thank you for taking the time to clearly explain the 12.1 process and exactly how this impacts on the remainder of one’s pension. This is definitely a no brainer, long term income before lump sum wins the day! This advice is invaluable, I'm smiling and most appreciative, thanks again!

Freedomforever

xylophone said:

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.

If your husband decides to retire before Scheme Normal Retirement Age (in his case is this aligned with SPA?) then his pension will be actuarially reduced - he may prefer to avoid this by using savings (and your  salary) to bridge the gap to scheme pension and SPA.

On the other hand, this would deplete your emergency funds - would you still be able to finance a new boiler say or unexpected dental treatment? A relative of mine recently broke a tooth and ended up with two root canal treatments and tooth repair - his wallet is over £1,400 the lighter....

With regard to commuting pension for lump sum, this  is a decision for you to take after weighing up all the circumstances.

There are times where it can suit somebody to take as large a PCLS as possible.

For example, somebody with a generous DB pension and a decent commutation factor  who has a particular purpose in mind, 

funding a medical student offspring through University say or world travelling for a year or funding a house purchase etc.

Your husband's pension is modest and in the event that he should predecease you, your widow's pension would be very modest.

That said, combined with a full or virtually full NSP, it would take you above PC level for a single person.

How important is the tax free PCLS to your future plans when set against the loss of index linked income?

Great appreciation for your time and contribution in highlighting any potential life challenges and offering solutions/advice.
After chatting all thoughts and options through my husband and I feel so much happier.
All comments received on my original post and offered so freely, now give us a far clearer understanding enabling us to make informed and knowledgeable decisions. 

Thanks again, huge gratitude!

atush

Freedomforever said:

nsionWise 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 

You can open a personal pension for yourself.  If you earn, you can put in 100% of those earnings in a pension less tax.  So say you earn 100, you put in 80 and the govt will round it up to 100 with tax relief.  If you ear zero, you can still contribute 2880m wgich will be grossed up to 3600 with tax releeif.  You can do this every year up until retirement.

atush

I would pay for voluntary contributions using any savings you have, or get a part time job.

Freedomforever

atush said:

I would pay for voluntary contributions using any savings you have, or get a part time job.

Appreciate your suggestions, thank you.

Dazed_and_C0nfused

Freedomforever said:

Secret2ndAccount said:

Personally, I would not take any lump sum at 12:1. They are offering you £12 lump sum for every £1 annual pension you give up. So, after 12 years you will be worse off. In truth, the lump sum is tax free, and much of the annual pension is likely to be taxed, so maybe 16 yrs is more like your break even point. Still, you would be giving up a guaranteed sum every year, for as long as you live (and going up every year to keep place with inflation). That's a pretty comforting guarantee, and many people wish they could get a pension like that.
If the offer was 20:1 or more, I might be seeing it the other way. At 12:1 you need to have a very good use for the lump sum.
For info, despite the logical argument above, many people jump at the chance to get their hands on a huge lump of cash. A bird in the hand, and all that. There is some argument that you can enjoy the money more when you are younger. I would prefer to enjoy the money for longer. It all hinges around that rate of 12:1. It's just a poor trade-off.

Thank you for taking the time to clearly explain the 12.1 process and exactly how this impacts on the remainder of one’s pension. This is definitely a no brainer, long term income before lump sum wins the day! This advice is invaluable, I'm smiling and most appreciative, thanks again!

Just to add to that, the £12 (tax free) PCLS he would get is a one off.

The £1 pension given up is lost every single year.

But in year 2 it's really £1.05 he has lost as that £1 pension would get the annual LGPS inflation related increase.

Year 3 would be say £1.10 he misses out on and so on.

So by the time he gets his Telegram from the King for his 100th birthday that £12 has become very expensive.

Freedomforever

Dazed_and_C0nfused said:

Freedomforever said:

Secret2ndAccount said:

Personally, I would not take any lump sum at 12:1. They are offering you £12 lump sum for every £1 annual pension you give up. So, after 12 years you will be worse off. In truth, the lump sum is tax free, and much of the annual pension is likely to be taxed, so maybe 16 yrs is more like your break even point. Still, you would be giving up a guaranteed sum every year, for as long as you live (and going up every year to keep place with inflation). That's a pretty comforting guarantee, and many people wish they could get a pension like that.
If the offer was 20:1 or more, I might be seeing it the other way. At 12:1 you need to have a very good use for the lump sum.
For info, despite the logical argument above, many people jump at the chance to get their hands on a huge lump of cash. A bird in the hand, and all that. There is some argument that you can enjoy the money more when you are younger. I would prefer to enjoy the money for longer. It all hinges around that rate of 12:1. It's just a poor trade-off.

Thank you for taking the time to clearly explain the 12.1 process and exactly how this impacts on the remainder of one’s pension. This is definitely a no brainer, long term income before lump sum wins the day! This advice is invaluable, I'm smiling and most appreciative, thanks again!

Just to add to that, the £12 (tax free) PCLS he would get is a one off.

The £1 pension given up is lost every single year.

But in year 2 it's really £1.05 he has lost as that £1 pension would get the annual LGPS inflation related increase.

Year 3 would be say £1.10 he misses out on and so on.

So by the time he gets his Telegram from the King for his 100th birthday that £12 has become very expensive.

Yes my goodness! Well all this clarity just continues to confirm these government pension schemes are not as generous as we first thought. Although safe apparently! 🤞🏻
May we all remain blessed with good health even if we no longer get to experience receiving the coveted British Telegram and now especially from a king, but which one? I smile 😃 

Thank you for taking the time to add your insightful information and the smiles to my face!