Thinking about taking early retirement. Just need to ensure I've covered all of the bases.

Remedial_Massage_Kid

At the moment I claim benefits as I'm living with an autoimmune disease and have limited capability for work due to the damage the disease has caused to my body. I got sacked from my job in 2020 due to my health and have been on long term sick since.

I really don't like being on benefits and can afford to take my civil service pension early. Or at least from the calculations I've done I can manage it. I just need to check I'm not missing anything.

I've been doing some sums and if I reverse commute my lump sum of £5550 (which will increase my pension by £462 per annum.) and take my pension at fifty-eight and a half, I'll have £8600 per annum. My outgoings will be £6300. I live by myself, this isn't going to change.

There is a chance I won't live long enough for the reverse commutation to be worth it, but I need to be mindful of the council tax reduction bands too. For where I live that is £10400. Going over that will take me from the 50% bracket to the 25% bracket of reduction.

I will get another small pension at 60 of £1200 with a lump sum of £3600.

I have enough savings to take me from now until when I'm fifty-eight and a half.

Thanks in advance for any help you're able to offer.

Many thanks.

kimwp

Have you considered capital expenditure? If your fridge or boiler breaks and you need to replace it? Roof repairs or new windows. Wheelchairs, scooters, zimmer frames, stair lifts, rising recliners, electric bed? Cleaner, gardener for when you can't manage those things? If on benefits, is that giving you NI contributions and if those stop will that reduce your state pension? Is your home suitable for when your health declines or will you need to move?

dnpark38

28 years ago I retired early at 60 I got to know the following in my 59 th year.

I asked both my works private pension people what my pensions would pay if I retired on my next birth day.

I also asked the DWP to confirm I would have enough social security contributions by my next birthday to get my full state pension at 65.

hugheskevi

I really don't like being on benefits and can afford to take my civil service pension early…I've been doing some sums and if I reverse commute my lump sum of £5550

That sounds like you have a Classic Civil Service pension. If so, you can apply for ill-health benefits from deferred status if you think you are sufficiently sick to qualify.

What are you basing the inverse commutation figure on? It looks higher than I would expect to see. It looks like you are assuming you can exchange at 12:1. You cannot. The 12:1 rate is used when exchanging pension for a lump sum. If exchanging a lump sum for pension then an actuarial figure is used, which, for someone aged 58.5, would give about £4.50 per £100 of lump sum inversely commuted (so a ratio of about 22:1). Hence, inversely commuting a £5550 lump sum would increase the pension by about £250 p/a.

Remedial_Massage_Kid

https://forums.moneysavingexpert.com/discussion/comment/82149045#Comment_82149045

Most of my appliances are fairly new. Boiler is one worth bearing in mind as it's twenty years old. My house is twenty years old, so I don't envisage it needing a new roof in my lifetime.

On reflection, I'll take the lump sum to give me that buffer.

Thanks for your input.

Remedial_Massage_Kid

https://forums.moneysavingexpert.com/discussion/comment/82149066#Comment_82149066

Thanks for your reply. I'm not going to get ill health retirement, that is something I've already had a look at.

I got the information from a web search. Looking into it further, the information is incorrect. I'm glad I posted here before making a decision. It looks much more sensible, for a number of reasons, to take the lump sum.

Remedial_Massage_Kid

https://forums.moneysavingexpert.com/discussion/comment/82149047#Comment_82149047

I have full credits for my state pension. Thanks for that.

Triumph13

https://forums.moneysavingexpert.com/discussion/comment/82149145#Comment_82149145

That's another good reason to take the lump sum, as money is going to be much tighter before your state pension kicks in than afterwards.

Once you hit 67, you are going to have about £20k pa post tax. Given your lifestyle, that should give you plenty of scope to rebuild savings. Subject to not leaving yourself short in an emergency before then, the best use of those lump sums is probably to let you have a bit more fun, health permitting, in the pre-67 period.

Remedial_Massage_Kid

https://forums.moneysavingexpert.com/discussion/comment/82149175#Comment_82149175

Thinking about it more, the lump sum is a better option. Especially as I now realise the correct figures of the reverse commutation. The only big items which may potentially need replacing are my boiler and washing machine. I'm not into holidays and I don't drive or go out even, so I feel confident that I'm making the right decision. I'd be even happier if there was a way to take the state pension early. I won't know what to do with that when it arrives.

horsewithnoname

civil service reverse commutation is 1:16 I believe, which I gather is considered a bit rubbish by people who know about such things, but I’m not one of those people.