Defined Benefit Pension advice

Deenport

daveyjp said:

I would check your local government pension figures first.  The figures given may be the amount if you retire at normal retirement age of 65 and not 56.  Depending on years of service snd rule of 85 protection you may end up with a large reduction for taking the pension early.

So the figures are based on the pension site calculator where I can adjust retirement date, amount of lump sum increases if I take lower pension and vice versa. Looked at rule 85 and don’t think it applies to me. But do you mean that my state pension when I reach 75 ( or whatever it is) may be reduced? 

Dazed_and_C0nfused

Deenport said:

daveyjp said:

I would check your local government pension figures first.  The figures given may be the amount if you retire at normal retirement age of 65 and not 56.  Depending on years of service snd rule of 85 protection you may end up with a large reduction for taking the pension early.

So the figures are based on the pension site calculator where I can adjust retirement date, amount of lump sum increases if I take lower pension and vice versa. Looked at rule 85 and don’t think it applies to me. But do you mean that my state pension when I reach 75 ( or whatever it is) may be reduced? 

No, your LGPS pension will have a normal retirement age and each year you take it before then can result in a reduction in the pension that is payable.

It's not a penalty, it just reflects the fact that you are asking for the pension to be paid for a longer period.

And unless the law changes your State Pension age will be 67 or 68, nowhere near 75 😉

Deenport

Dazed_and_C0nfused said:

Deenport said:

daveyjp said:

I would check your local government pension figures first.  The figures given may be the amount if you retire at normal retirement age of 65 and not 56.  Depending on years of service snd rule of 85 protection you may end up with a large reduction for taking the pension early.

So the figures are based on the pension site calculator where I can adjust retirement date, amount of lump sum increases if I take lower pension and vice versa. Looked at rule 85 and don’t think it applies to me. But do you mean that my state pension when I reach 75 ( or whatever it is) may be reduced? 

No, your LGPS pension will have a normal retirement age and each year you take it before then can result in a reduction in the pension that is payable.

It's not a penalty, it just reflects the fact that you are asking for the pension to be paid for a longer period.

And unless the law changes your State Pension age will be 67 or 68, nowhere near 75 😉

Ah yes, I understand about the change in total because I take it early. And yes, you’re quite right about the pension age. Sometimes feels like the government are heading towards 75 though. But that’s a whole other topic :-)

[Deleted User]

If you get a part time job that pays £15000 a year the amount of tax you pay will depend on how much your total income will be including your LGPS monthly pension payment. The tax feee lump sum is just that, tax free.

How much will your annual LGPS pension be? With a tax free lump sum of £40000 I estimate it could be in the region of £13000 a year. Am I in the correct area? So total income if you were earning £15000 a year would be £28000.  Your tax allowance is £12570 so you would pay 20% tax on anything in excess of that. 

Have you checked your state pension forecast?

You would still be paying NI at your age too.

Your part-time job may also have its own pension scheme as well.

Best wishes with your plans.

daveyjp

As above you only pay tax on income above personal allowance, not the lump sum.

However adjusting the pension to take a maximum lump sum to avoid tax now may not be the best approach, especially when only in your mid 50s. 30-40 years of reduced annual pension could work out far more expensive than the tax saved by maximising the lump sum now.

Deenport

[Deleted User] said:

If you get a part time job that pays £15000 a year the amount of tax you pay will depend on how much your total income will be including your LGPS monthly pension payment. The tax feee lump sum is just that, tax free.

How much will your annual LGPS pension be? With a tax free lump sum of £40000 I estimate it could be in the region of £13000 a year. Am I in the correct area? So total income if you were earning £15000 a year would be £28000.  Your tax allowance is £12570 so you would pay 20% tax on anything in excess of that. 

Have you checked your state pension forecast?

You would still be paying NI at your age too.

Your part-time job may also have its own pension scheme as well.

Best wishes with your plans.

Hi

yes, you are very close to the mark with the figures. Thank you for sharing the details. I have a full state pension forecast and also have another private pension in progress. 

Deenport

Thank you everyone for all the information. Much to think about for my next steps. 

LXdaddy

daveyjp said:

I would check your local government pension figures first.  The figures given may be the amount if you retire at normal retirement age of 65 and not 56.  Depending on years of service snd rule of 85 protection you may end up with a large reduction for taking the pension early.

Seconded - I came to say just this.  Early retirement usually comes with a reduction in pension because the pension will be in payment for longer.