Take VR and retire early?

devildolly

Avid reader of this forum for ages, but now have a reason to post to see what others might do in our situation. 

Myself, 40. Full time, salary of ~£68K, rental income £5000 per year. DC pension currently at £250K. I pay 4% + £250 AVC monthly, employer £8%. 

Husband, 52. Salary ~£70k, rental income £5000 per year. DB pension frozen least year. If taken at 60, £38K per year or £30k + £200K TFLS. Small DC pot which we are not using in calcs for now. 

Mortgage on house £290K, 14 years left. Mortgage on BTL £145K (property worth £250K). IO, will sell in the next 3-4 years when our deal ends as its not worth it anymore. Some capital gains to pay when we sell, but likely will clear £80K when we do. Savings low (£4K) due to massive house renovation we have recently completed and we are starting to build this up again. 

Sadly all parents have departed with the last one being fairly recent. Inheritance from this estate not sorted yet but likely to be somewhere between £400-500K. 

Here is the point of this post. Husband has been given the option of voluntary redundancy. Due to his DB closing, part of the agreement here was if made redundant within 5 years of the closure, then he could start taking his pension with no early penalty. As we understand it (TBC with a call this week) this is the age 60 figure I state above. Redundancy package is pretty poor but this number isn't playing a huge role in our decision making (£72K of which £12K is PILON), but it would help top up his pension to current income levels for a few years. We plan to either pay the mortgage off when our deal ends or reduce it heavily, depending on how investments are doing at that point. Without the mortgage, his lower pension and my salary are more than enough to live off, without considering the investments we will have. 

He planned to probably look at retiring at 55 anyway as we knew we would have the inheritance behind us to make this viable. This has now thrown a (possibly welcome) spanner in the works.

Here is the crux, we have 2 weeks to decide! We have the funeral of the parent this week, and so its all quite a lot to deal with. We are considering this as two decisions, the financial and the emotional (he has to be happy to go at a fairly young age, which I think he is, he would love to be a 'house husband'!)

Other info - state pension for husband will be 3 years short, we will pay these up. I have 9 years to add, plan to keep working for at least 10 years, possibly go part time at some point. 2 kids, one adult is flown, one at primary.   

What would others think of the above, what else would we need to consider in making the decision? As its VR, they may still say no even if he applies which we are fine with (then we plan for his age 55 exit), but do need to make sure that if they say yes, its the right decision for us. 

Appreciate we are in a pretty fortunate position, but any advice most welcome. 

Dazed_and_C0nfused

Other info - state pension for husband will be 3 years short, we will pay these up. I have 9 years to add, plan to keep working for at least 10 years, possibly go part time at some point. 2 kids, one adult is flown, one at primary.  


Why can't he get NI credits for Child Benefit instead of buying additional years?

devildolly

Dazed_and_C0nfused said:

Other info - state pension for husband will be 3 years short, we will pay these up. I have 9 years to add, plan to keep working for at least 10 years, possibly go part time at some point. 2 kids, one adult is flown, one at primary.  


Why can't he get NI credits for Child Benefit instead of buying additional years?

Good point. I currently claim and do the tax return for this, but this is not something we had considered. Thanks!

Cobbler_tone

There is a lot for you to consider and difficult to understand the full context and set of circumstances...e.g. what is the impact of having a 'house husband' with your youngest and family dynamic. Are you planning to keep working? A joint income of £138k at a young age is a lot to 'give up'. My DB closed in 2021 but he can still heavily contribute to whatever they put in its place.
You must be a 40% tax payer too. Being on similar money I haven't paid 40% tax for some time by utilising my pension. Might be emotionally tougher for you to do at a younger age but would consider increasing from 4%. You're husband certainly should be considering it. My run rate is £6-7k a year less tax than I was paying. I'd certainly be mitigating rental income at 40%.

Sounds as though you will keep working, so will everyone be happy with that?

My gut feel (especially if VR package isn't very good) is for him to continue working to at least 55 and hammer into the DC pot. It would give you time to address the personal situation of sorting your inheritance. I would also personally clear the mortgages, solely to give a clearer picture. 
We earn slightly less, sold our second home and paid off our primary mortgage. No kids.
It makes it a lot easier to see our future. At 55 and 52 were aren't quite ready yet but it is definitely on our radar to either retire or reduce the daily grind. The old accumulation to decumulation debate is real! 

The other thing is...if he is working in an environment of VR, chances are he can either position himself in a position to get it again at some point, or that decision will be taken out of his hands.

MX5huggy

IF (and it’s a big if) the pension offer is as you state it. To simplify the offer is £38k per year not to go to a job for the next 8 years. Or £70k per year to keep going to the job. That seems like an easy choice to me. 

Consider what’s the inflation protection on the pension, what is it?
Consider an organisation that is willing to pay this much to reduce head count will likely move to less generous offers and forced redundancy later.
He doesn’t have to actually retire and any new job would only have to pay £32k to get him back to equal income. 

cfw1994

Good luck with an emotional time ahead.

Frankly, had I been offered VR at 52, I’d have leapt at the opportunity.  It didn’t arise, & I was forced to resign at 57…

You’re a long time dead, as a wise person once opined 😉
Always the option for him to consider more work, but most people I know who have retired wonder how they found time to work.

I do have a pal who was made redundant against his (mostly his wife’s!) wishes.  His manner of leaving clearly niggled, & he tried for another role in the industry, then gave up and got a job delivering drugs for a local chemist - yes, a legal drug dealer!  Finally gave up after a couple of years to join the team of Unemployables 😎

Like a-holes, everyone has an opinion, but that’s mine 🤣

devildolly

Thanks @Cobbler_tone If husband was home, we no longer have £450 childcare each month, and wont have to fork out £180 a week to cover the school holidays. We would also get more than 10 days off together a year (13 weeks school holidays vs 12 weeks leave between us don't math!), so the benefits on this side are huge. Fine with me working and him home. He is the default parent anyway, despite salaries being similar (I also get bonuses but don't ever count these in salary) mine is the 'bigger' job so its always worked this way for us.

I can increase my AVCs, but with the current mortgage and childcare combined at the moment, I cant afford to put more in. I could if we didn't have the childcare, even more so when the mortgage is gone. 

And yes, VR or CV come up every few years but he is usually not offered, we suspect they go for 'cheaper' options. 

devildolly

MX5huggy said:

IF (and it’s a big if) the pension offer is as you state it. To simplify the offer is £38k per year not to go to a job for the next 8 years. Or £70k per year to keep going to the job. That seems like an easy choice to me. 

Consider what’s the inflation protection on the pension, what is it?
Consider an organisation that is willing to pay this much to reduce head count will likely move to less generous offers and forced redundancy later.
He doesn’t have to actually retire and any new job would only have to pay £32k to get him back to equal income. 

Yes, agree he could get a job again. I did say he could consider this a career break rather than retirement, and your comment about only needing £32K is a good one. Inflation protections is RPI (I think, again, lots of paperwork to go through this week). I also get a dependants pension of 2/3rd so its not bad. 

Cobbler_tone

devildolly said:

Thanks @Cobbler_tone If husband was home, we no longer have £450 childcare each month, and wont have to fork out £180 a week to cover the school holidays. We would also get more than 10 days off together a year (13 weeks school holidays vs 12 weeks leave between us don't math!), so the benefits on this side are huge. Fine with me working and him home. He is the default parent anyway, despite salaries being similar (I also get bonuses but don't ever count these in salary) mine is the 'bigger' job so its always worked this way for us.

I can increase my AVCs, but with the current mortgage and childcare combined at the moment, I cant afford to put more in. I could if we didn't have the childcare, even more so when the mortgage is gone. 

And yes, VR or CV come up every few years but he is usually not offered, we suspect they go for 'cheaper' options. 

I can see it isn't a straight forward decision. I would be a little concerned if you genuinely can't afford to increase pension contributions on that joint income. You are missing out on so much 'free' money. This would be my no.1 priority for both of you. In real terms the childcare costs are a drop in the ocean compared to your husbands salary but you might see more time together as valued a lot more.
I guess the VR would give him 18+ months net money and time to resolve your inheritance situation.
I would just think carefully (which you clearly are) as with £150k gross coming in and affordability issues over increasing a minimum pension contribution, you clearly have some very meaty monthly outgoings. 

MX5huggy

He won’t pay NI on the pension, so that’s another £2000 ish on plus side. 

I don’t see any particular down side to this at all. 

pterri

devildolly said:

MX5huggy said:

IF (and it’s a big if) the pension offer is as you state it. To simplify the offer is £38k per year not to go to a job for the next 8 years. Or £70k per year to keep going to the job. That seems like an easy choice to me. 

Consider what’s the inflation protection on the pension, what is it?
Consider an organisation that is willing to pay this much to reduce head count will likely move to less generous offers and forced redundancy later.
He doesn’t have to actually retire and any new job would only have to pay £32k to get him back to equal income. 

Yes, agree he could get a job again. I did say he could consider this a career break rather than retirement, and your comment about only needing £32K is a good one. Inflation protections is RPI (I think, again, lots of paperwork to go through this week). I also get a dependants pension of 2/3rd so it’s not bad. 

RPI, is that limited? Mine is RPI up to 5%