Looking to retire early….not a huge pot?

chalkybar

 Hi all, hoping all you knowledgeable people can advise if I’m not being too naive?
currently 62, working full time in an office earning just under £40k. Definitely need to improve the life balance, some (manageable) health issues and really want to retire soon.
i have as below
A workplace (db?] pension from previous employment, during the ‘90s, advising £8k/year (cetv of 160k)
ISA with 65k,
NEST pension £35k
Savings bond £20k
cash in bank £10k
Plus £10k inheritance to be received within next 14 days ( this wasn't expected, but will be very welcome)
full years for NI, for a state pension, although I think there may be a contracted out deduction.

no mortgage or debts. A partner with very similar finances too, so household bills/living costs etc will be shared.

I had planned to retire in a couple of years but wondering if, with the surprise inheritance I may be able to bring it forward to early next year?
thinking I can comfortably live off of the savings without needing to touch any pensions until really needed….is that the best way to go?
what do you think is the best arrangement of funds, add to my ISAs or put more into a pension (NEST) or similar, is it too late for that?
We’re not looking for world cruises, and don’t have an expensive lifestyle…..just want a better balance and to get off the treadmill.
Having said that, if anything came by, I’d be happy for an uncomplicated part time job just to top up the coffers if possible.

I’ve tried to read as much pension stuff as possible, but my head hurts now 😬 thanks all.

molerat

full years for NI, for a state pension, although I think there may be a contracted out deduction.

There is no contracted out deduction from your forecast, what you see is what you get, you need to understand what you see though.  That said, everyone retiring from now on with a full history should be receiving the full pension.

What is the NRA of the DB pension ?

How much do you need per year ?

Are you married ?

Making the most of your tax free amount could be wise so accessing some pension whilst you can take it tax free may be an idea.

Marcon

chalkybar said:

 Hi all, hoping all you knowledgeable people can advise if I’m not being too naive?
currently 62, working full time in an office earning just under £40k. Definitely need to improve the life balance, some (manageable) health issues and really want to retire soon.
i have as below
A workplace (db?] pension from previous employment, during the ‘90s, advising £8k/year (cetv of 160k)
ISA with 65k,
NEST pension £35k
Savings bond £20k
cash in bank £10k
Plus £10k inheritance to be received within next 14 days ( this wasn't expected, but will be very welcome)
full years for NI, for a state pension, although I think there may be a contracted out deduction.

no mortgage or debts. A partner with very similar finances too, so household bills/living costs etc will be shared.

I had planned to retire in a couple of years but wondering if, with the surprise inheritance I may be able to bring it forward to early next year?
thinking I can comfortably live off of the savings without needing to touch any pensions until really needed….is that the best way to go?
what do you think is the best arrangement of funds, add to my ISAs or put more into a pension (NEST) or similar, is it too late for that?
We’re not looking for world cruises, and don’t have an expensive lifestyle…..just want a better balance and to get off the treadmill.
Having said that, if anything came by, I’d be happy for an uncomplicated part time job just to top up the coffers if possible.

I’ve tried to read as much pension stuff as possible, but my head hurts now 😬 thanks all.

Forget reading pension stuff (not often you see that suggestion on this forum!). Focus instead of how much you are spending now, and how much you would need to live on if you retire. Only you know the answer to the first part of that question, and only you can make educated guesses about how spending pattern might/could change in the future.

A £10K inheritance surely isn't going to be life changing in terms of allowing you to retire a couple of years early?

Establish all the facts before going any further eg get a state pension forecast and find out what you'll get and whether you need to fill any gaps in previous years/make further contributions to get a full state pension: https://www.gov.uk/check-state-pension

At what age can you take your DB pension without a reduction for taking it early? The CETV is irrelevant, so ignore that unless you are seriously thinking of taking the daft - sorry, complex - step of transferring a guaranteed income for life to something with no guarantees.

In short, do the homework and you'll be a lot further forward, and more confident, which in turn will enable you to take better informed decisions with which you and your partner are likely to be comfortable.

SVaz

Well you could open a Sipp and pay in some of your savings and get an immediate 25% uplift of tax relief.
You can pay in up to your gross salary minus whatever you/your employer pay into Nest.
That could give you a nice boost, if you put say £20k before 5 April then £20k after 6 April , that’s £10000 extra for little effort.
You could then take £16500 a year income,  paying no tax for 3 years if you use UFPLS withdrawals. 

You would also get paid some interest keeping your Sipp in cash.   

chalkybar

Thanks all for your input….
In answer to some Qs above,
I’ve looked online for the db NRA…it’s quite a confusing website. But on my personal statement it says that retirement can be from age 60 without reduction, although past annual figures are stating 63 as my retirement age???  In other info it’s given NRA as 65, but I think that refers to current employees?
me and my partner are not married, although we are both joint house owners - we have discussed the possibility of getting hitched, due to inheritance issues should one of us pass on or become ill.
I've done a few quick sums for household & car, fixed costs, coming in at about £1200 per month - with an added contingency of about £250-400 to cover repairs, future car replacement etc…..
as stated this is split between us both.
the reasoning of the retirement earlier was that we had both planned to retire at 65 (late 2027) that being when our mortgage finished. But we have gradually cleared it already with adhoc payments. With the additional £10k inheritance I could maybe bring that forward to mid 2026?

QrizB

chalkybar said:

... we had both planned to retire at 65 (late 2027) that being when our mortgage finished. But we have gradually cleared it already with adhoc payments. With the additional £10k inheritance I could maybe bring that forward to mid 2026?

Most of the time, investments will earn more than mortgage interest costs. So it's often suggested (on this board at least) that spare cash should go into your pension and not being used to pay down your mortgage.

As you might imagine, opinions on the Mortgage-Free Wannabe board tend to differ!

Linton

chalkybar said:

Thanks all for your input….
In answer to some Qs above,
I’ve looked online for the db NRA…it’s quite a confusing website. But on my personal statement it says that retirement can be from age 60 without reduction, although past annual figures are stating 63 as my retirement age???  In other info it’s given NRA as 65, but I think that refers to current employees?
me and my partner are not married, although we are both joint house owners - we have discussed the possibility of getting hitched, due to inheritance issues should one of us pass on or become ill.
I've done a few quick sums for household & car, fixed costs, coming in at about £1200 per month - with an added contingency of about £250-400 to cover repairs, future car replacement etc…..
as stated this is split between us both.
the reasoning of the retirement earlier was that we had both planned to retire at 65 (late 2027) that being when our mortgage finished. But we have gradually cleared it already with adhoc payments. With the additional £10k inheritance I could maybe bring that forward to mid 2026?

It would seem that after SP age you will be fine since 2XSP on its own should be sufficient for day to day living.  That leaves the gap between retirement and SP age. You would seem to have sufficient from your DB income and savings.  

BUT...

What happens when one of you dies, especially if it's you dying first fairly early in your retirement?  Would the survivor have enough income to support the lifestyle they are used to? This I think needs careful thought.  Would your partner get a widow's pension? If the pension includes one do the rules require you to be married before you take the pension?. Do you really want to use a significant amount of your savings for early retirement?

chalkybar

Again, thanks for all the info, etc……I hadn’t even looked at a SIPP. I’d always thought they were for people with a lot of funds and needed to be set up at least 20-30 years prior to retirement. 

Is it really possible that I could open one now….this late in the game?   Any suggestions for where to look at, or at least what not to go for please.?

a question please, sorry, probably showing my ignorance….but as far as my db stating an £8k salary (from age 60?) does that mean I could start taking that at any time….or does it benefit me in any way to leave that for as long as possible. I thought that leaving any retirement funds for as long as possible is always the best option. If so, come next year is it better to take this £8k year, when I stop work, and just top up with a bit of cash savings as need be, and invest any remaining savings?
Apologies for all the Qs, but this is such a minefield, and not having unlimited funds I want to make sure to do the right thing….or at least not go head first down the wrong path.
would it benefit me to see a recommended adviser…..I did look into this a few years ago, but the general consensus seems to be that they’re generally not interested in those with limited funds.

Phossy

You can take your DB now.  I'd get a projection from your old employer as to what it will be if you choose to retire now, but let's assume it is £8k/ year. 

In 5 years time you will have a state pension, so you will have ~ £20K income. If your partner is the same age and similar finances then I'll assume that is another £20K, so £40K income by 67 (so ~£3000/ month), which seems more than sufficient based on the figures you say you need on a monthly basis

That means you have 5 years to bridge a difference of £8K minimum (your DB) with the £130 K you have and any monies your partner has. It feels like you are in a position to retire, but you need to run the sums.

DRS1

One reason people don't take their pension while still working is that it pushes their income up into a higher tax bracket.   That may not be true for you depending on how much taxable interest you are earning and any other income you may have but you will be knocking on the door of higher rate income tax if you take the DB pension now.

It may be worth comparing quotes for taking it at 62 and 63 (assuming that is your NRA) and perhaps at 66 (if that is when you aim to stop work).  There may be a bit of late retirement factor for the 66 quote.

And it is definitely worth checking the "spouse's" pension point raised earlier.  You may not want your OH having to debate the details with the pension scheme administrators after you are gone.

crv1963

chalkybar said:

Again, thanks for all the info, etc……I hadn’t even looked at a SIPP. I’d always thought they were for people with a lot of funds and needed to be set up at least 20-30 years prior to retirement. 

Is it really possible that I could open one now….this late in the game?   Any suggestions for where to look at, or at least what not to go for please.?

a question please, sorry, probably showing my ignorance….but as far as my db stating an £8k salary (from age 60?) does that mean I could start taking that at any time….or does it benefit me in any way to leave that for as long as possible. I thought that leaving any retirement funds for as long as possible is always the best option. If so, come next year is it better to take this £8k year, when I stop work, and just top up with a bit of cash savings as need be, and invest any remaining savings?
Apologies for all the Qs, but this is such a minefield, and not having unlimited funds I want to make sure to do the right thing….or at least not go head first down the wrong path.
would it benefit me to see a recommended adviser…..I did look into this a few years ago, but the general consensus seems to be that they’re generally not interested in those with limited funds.

SIPPs aren't just for folk with lots of money. Yes it is possible to open one and get the tax benefits.

I suggest- contact the DB pension people find out when this is accessible with no reductions and how much it pays and if there is any tax free lump sum with it. If this is payable now without reduction then take it. If this pushes you to HR tax then saving from earnings into SIPP mitigates this through the tax relief system up to the point you retire.

I would do as SVas suggested and move savings to SIPP, indeed this is something my wife is doing as she gets 1.5% on savings whereas she will get the 25% uplift in her SIPP. £10000 becomes £12500 and repeat next financial year, as long as you earn enough for the contribution made.

I would also seriously consider marriage if you and your partner want this, this way each can inherit the others property/ pension without IT, also your then wife may be entitled to a Survivors Pension from your DB Pension but you need to check first.

We worked out how much we estimate we need in retirement, looked at what we had saved in various places and then how we could increase the sums saved and for us SIPP was a no brainer. We also looked at when we wanted to go. Also we looked at what we want to do in retirement and made some significant alterations to our home- loft conversion to create a hobby room for my wife, getting a Rhino greenhouse and doing garden alterations for me. This was helped by still being in employment as costs are always more then estimated!

I can't suggest where or who to go for your SIPP, I would ask either on this thread or start a new thread for this specific topic. I can only say we use Hargreaves Lansdown and are happy with the ease of website and the telephone service when we contact them. I don't know if they are better than anyone else or worse just they suited what we wanted at the time we opened our SIPPs.

Good luck and it isn't as complex as some might think but it does make my wifes eyes glaze over!