Decision on month for retirement - what to take into account

Wobble101

I’m planning to retire next year, at 60, funding this through two DHB pensions taken early and top ups from saving,

My question is about the precise timing of taking the pensions. My birthday is in July, and I’d assumed this would be the trigger point - but on chatting with a friend found myself wondering why not April onwards, making the most of the spring. Clearly the amount I would get per month would go down marginally (both because I’m taking the pension earlier and because - in relation to my current scheme - I’m paying in for a few months less). 

I suppose what I’m wondering is whether your date of birth has some special significance when pension amounts are being calculated - and that waiting until I reach a nice round 60 is significantly better than being three months shy of it. Or perhaps this is just something that will vary by scheme, in which case I’ll just need to check. 

I hope this makes sense - any reflections welcome. 

ali_bear

There is some commonly received wisdom about retiring at the end of a tax year, late March, if you have the freedom to choose. But it does depend on your personal and financial circumstances. Are you still earning, are you concerned about making the most of your income tax allowances, when does your DB or state pension kick in,  have you got cash to live off for a while, what do you plan to do once retired, etc. 

For me it is important to use my tax allowances effectively, so I plan to have taxable income of at least £12570 in the tax year of retirement before stopping work. Then I will have flexibility in what I decide to do next. 

Mark_d

I think pension calculations are based on your age in full years, so if you take your pension in April you'd get the same payout as if you retired on your 59th birthday this July.

Personally I'm not looking forward to giving up work.  Assuming I still have my health, I will find a way to keep working - whether that be working every other month, or working part time and taking my laptop with me wherever I go.

garyelder

End of March keeps things separate 

Albermarle

Be aware that timing when a DB pension will start paying is not that easy. Most take some considerable time to process the request, and some DB pension administrators have a poor reputation for response times etc
So probably 3 months notice is a minimum for many, and it could easily end up twice as long as that if you were unlucky.

HedgehogRulez

Ensure that your personal allowance is being used effectively. I’d suggest leaving July

leosayer

I've heard it said that it's best to wait to commence a DB pension after the anniversary of joining the scheme, due to the way that deferred pension increases are calculated.

I don't know if it makes a material difference and of course, each scheme is different.

cfw1994

Also as an aside on the best time of year to go….
Just remembered I asked this 6years ago!
https://forums.moneysavingexpert.com/discussion/6065262/best-time-of-year-to-retire-uk/p1

Sarahspangles

Wobble101 said:

I’m planning to retire next year, at 60, funding this through two DHB pensions taken early and top ups from saving,

My question is about the precise timing of taking the pensions. My birthday is in July, and I’d assumed this would be the trigger point - but on chatting with a friend found myself wondering why not April onwards, making the most of the spring. Clearly the amount I would get per month would go down marginally (both because I’m taking the pension earlier and because - in relation to my current scheme - I’m paying in for a few months less). 

I suppose what I’m wondering is whether your date of birth has some special significance when pension amounts are being calculated - and that waiting until I reach a nice round 60 is significantly better than being three months shy of it. Or perhaps this is just something that will vary by scheme, in which case I’ll just need to check. 

I hope this makes sense - any reflections welcome. 

I’d check the rules for each scheme.

As you know you will be topping up from savings, you could live off those for a few months before you commence your DBs at 60. Then replenish your savings from your pension income.

If your DBs have PCLS (Pension Commencement Lump Sums) it’s worth considering what you will do with those, in the context of tax on savings interest.

There were some interesting views, and links to relevant discussions, when I was considering timings.

https://forums.moneysavingexpert.com/discussion/6440579/best-time-of-year-to-retire

cfw1994

Whilst it is clearly wise to minimise your tax paid and maximise your use of personal allowances……
…don’t let the tax-tail wag the retirement dog, to butcher a phrase 🤪

I planned to cycle LEJoG to free my mind from the world of work.  Had some pals who were doing it over several years, with their last leg being from Edinburgh at the start of June.
I gave up a work bonus so I could start in May and join them.  Best decision I made: we had a blast pedalling the Highlands, & the memories will last longer than the brief time I spent considering the cash I gave up 🤷‍♂️

Triumph13

Financially the key things are probably any bonuses and getting your NICs if you need them for state pension, but they are probably small beer in the scheme of things.  When you have enough, you have enough and it's time to be having fun rather than working.