Bridging the gap early retirement to state pension

Intend retiring in around 2 and a half years at 60

Have LGPS DB pension.  Lump sum from that and SSAVC.  Projection is total from LGPS and AVC will be around £85K. Annual pension of around £26,000(before tax)

Plan to use lump sum to supplement pension.

Wonder on the best approach with lump sums to bridge the gap to SPA. Intend speaking to a IFA next year.  

Initial thoughts are put around £10,000 K from lump sum into bank account to cover year 1 gap.. Set up savings accounts at age 60 1 year, 2 year etc so when at end of year 1 of retirement take the Year 1 savings to supplement annual pension and so on to year 5. 

For years 6 and and 7, set up an ISA at the start of retirement, to cover that. Then SP kicks in at 67. 

Welcome thoughts on my approach and if your circumstances were similar (early retirement and use of lump sum to bridge gap), what you did

Comments

  • Moonwolf
    Moonwolf Posts: 479 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    If you can open a SIPP or add to your SSAVC from now (I know there are rules about using LGPS AVC at the same time as the DB element but I don't know what they are so you will need to check) rather than an ISA you might end up with more money.

    You will get an immediate tax break on anything that you pay in presumably of 20% unless you are a higher rate taxpayer.

    You can then draw down £16,760 each year you aren't working, totally tax free. (£12,517 personal allowance plus the 25% tax free)

    This should give you more money for the same input.


  • Albermarle
    Albermarle Posts: 27,303 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    Intend speaking to a IFA next year.  

    With 'only' £85K and with no plans to invest more/add to it in future, you may find not many IFA's will be that interested and/or their minimum charge will be relatively high compared to the sum.

    You seem to have a decent enough plan anyway, 

    For years 6 and and 7, set up an ISA at the start of retirement, to cover that. Then SP kicks in at 67. 
    Presume you mean a S&S ISA?
    For the savings in previous years you will probably be better off having some of it in cash ISA's to avoid paying tax on the interest.

    Remember you do not want to run down your savings completely. Always useful to have an emergency fund.
  • gwynlas
    gwynlas Posts: 2,181 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Look at your expenditure and how that can be reduced remember you will not have the cost of commuting, work lunches or business clothing.
    Think of ways of supplementing your retirement income. One friend takes on seasonal retail roles another is a paid part time deputy manager in a charity shop.
    You could set youself up a a dog walker, part time gardener, handyperson house sitter or domestic cleaner if you would prefer to be self employed
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.2K Banking & Borrowing
  • 252.8K Reduce Debt & Boost Income
  • 453.2K Spending & Discounts
  • 243.1K Work, Benefits & Business
  • 597.5K Mortgages, Homes & Bills
  • 176.5K Life & Family
  • 256.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.