Pension for before retirement

kara_p_uk

Hi all,

I am in the NHS Pension which is linked to state pension age so will receive both at the same time if I retire at 68.

I would like to retire at 60 or go part time which is in 15 years. To be able to do this I need to have savings/a plan to cover this gap.

Due to historical part time working when my children were small my NHS pension isn’t huge, currently around 8K. However I am lucky enough to now be in a full time role at a decent salary so will start to see that pension amount go up so it will be around 30k when I reach 60.

I’m currently putting three children through uni and still paying off a mortgage which ends in 9 years so I will have additional disposable income over the next few years as they become less financially dependent.

What should I be looking at to invest in to help fund the bit between 60-68?

thanks!

Ms_Chocaholic

Can you start paying extra towards your mortgage now, it doesn't need to be a huge amount every month or indeed every month but it will save you a huge amount in interest and reduce your term. Double check with your mortgage provider that you are able to though (and the amount you can overpay each year).

kara_p_uk

https://forums.moneysavingexpert.com/discussion/comment/82034907#Comment_82034907

we have started using Sprive to make small overpayments, our fix is 2.29% until 2030 so I’m trying to put what I have left each month into savings at a higher % to pay off at the end of the fix.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82034931#Comment_82034931

Why would the OP bother with a S&S ISA and not just start contributing to a DC pension straight away ? For retirement savings pension beats ISA due to the tax benefit.

They can get 20% tax relief on the way in, and if they have no other income between 60 and 68 they can withdraw over £16K a year completely tax free.

What should I be looking at to invest in to help fund the bit between 60-68?

There are two facets to this:

1. What to invest in - shares, funds , bonds etc
2. Where to buy and keep the investments

I would say the answer to 2 is - in a pension, due to the tax benefits. This would be a separate personal Defined Contribution ( DC) pension, as opposed to the Defined Benefit NHS pension.

Regarding Point 1 - The choice here is mainly down to what is known as your risk tolerance. Higher risk investments will normally bring higher growth over a 15/20 year period, but can be a bit of a scary rollercoaster. Although when we talk about high risk, we do not mean investments like crypto, or currency trading or individual share tradingetc which are more Super high risk.

In the context of more mainstream investments - high risk equates more to volatility than the risk of total loss.

jimi_man

Definitely a pension is going to the best option. You can pay off extra on your mortgage but personally I wouldn't bother and just start putting into a DC pension.

You can also take your NHS pension earlier which is generally cost neutral.

In terms of what investments, it's probably against the forum rules to name specific investments and there are the usual caveats about taking financial advice from random people on internet forums. But if you have a read through some of the threads you'll see the same investments and names come up time after time. I hadn't a clue when I started and a couple of hours reading on here and the link below (and further reading on that site) gave me a lot of information and ideas.

Worth reading this.

https://monevator.com/index-investing/

Oppenheimer

Not questioning your arithmetical skills but to build up extra defined benefit pension of £22,000 over 15 years is quite good going and would suggest a current salary of £80,000? If you are on £80,000 then nice one.

Re your issue about bridging 60-68 - I am building up a DC AVC pot with the civil service.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82035689#Comment_82035689

Good point, the NHS pension also offers an AVC option.

In reality contributing to a DC AVC pension, or contributing to a stand alone DC pension, is a similar strategy.

There can be some differences depending on the DB/AVC scheme involved, but essentially in both cases you are building up a separate pot, to use to bridge a gap later.

kara_p_uk

Thanks all. Really helpful advice - my maths skills weren’t wrong, I do now have an incredible salary having gone up through the bands in nursing into senior management and full time. I want to make sensible decisions being in a position that I know is a rarity in these times.

Triumph13

If your kids are still under 18, then contributing enough to a pension to get your income down to £60k would also get you your child benefit back (unless you have a partner earning over this) Ignore me, just re-read and seen your kids are already at Uni

With 40% tax relief it is an absolute no brainer to use a pension to bridge the gap, getting it back out at a mix of tax free and 20% tax.

QrizB

https://forums.moneysavingexpert.com/discussion/comment/82139368#Comment_82139368

That might be your belief, but there are more things wrong with it than I have time to correct right now!

Triumph13

Quick, back-of-a-fag-packet calculation, all using current tax rates and allowances:

• £30k NHS pension, plus full SP of £13k is £43k gross, £37k net
• Eight year gap at £37k pa is £296k of income to replace between 60 and 68
• You'd need £325k in your pension to do that. 25% comes out tax free as TFLS. Another £100k tax free using eight years of Personal Allowance. £29k basic rate tax on the rest.