Early retire or defer

colmel16

I will be 59 in a couple of weeks and have decided to jump ship from local government job. i do not need the pension or lump sum at the moment,(covered by separate DC pot). early retirement will cost around 30% reduction (£2400 down to £1600 per annum). can anyone tell me the payback period for taking the pension early against deferring it .NRA 67. thanks

FIREDreamer

colmel16 said:

I will be 59 in a couple of weeks and have decided to jump ship from local government job. i do not need the pension or lump sum at the moment,(covered by separate DC pot). early retirement will cost around 30% reduction (£2400 down to £1600 per annum). can anyone tell me the payback period for taking the pension early against deferring it .NRA 67. thanks

Back of fag pack calculation

You gain £1,600 x 8 = £12,800.00 to age 67

From 67 you lose £800 per annum compared to what you would have got by not early retiring.

£12,800 / £800=16 years

67 + 16 years = age 83

If you live beyond age 83 you lose out by early retiring.

However you might value more money early on in your retirement?

Sarahspangles

colmel16 said:

I will be 59 in a couple of weeks and have decided to jump ship from local government job. i do not need the pension or lump sum at the moment,(covered by separate DC pot). early retirement will cost around 30% reduction (£2400 down to £1600 per annum). can anyone tell me the payback period for taking the pension early against deferring it .NRA 67. thanks

The LGPS early retirement factors aren’t ‘punitive’, as FIREDreamer shows. If you have an average lifespan you get a similar amount out.

I’m assuming you don’t have service pre-dating 2008 if your NRA is 67 so there’s no consideration about Rule of 85 entitlement. But you do mention a lump sum - are you aware that if there isn’t a built in Pension Commencement Lump Sum for your service, there’s an argument against taking a lump sum as the commutation rate is poor?

colmel16

Due to not needing the tax free lump sum my aim is to avoid taking it or taking the minimum allowable if that is possible