Retirement Advice Please

Sally_Henny_Penny

Any advice of the following would be gratefully received. I am 60 in September, and as such, come into the catorgory of being able to retire. However, I still have a £48000 mortgage which my partner and I have been reducing at a fair rate of knots over the last few months.

As I intend staying on at work, I am faced with the following dilema. Do I take my state pension which I believe is going to be around £95-100 per week, pay the tax on it and use this as an overpayment, along with the other over payments on the mortgage, or do I defer it and let it build up. I understand the government would pay 2% above the base rate, and draw it in two or three years, pay the tax and then use lump sum to make one big overpayment, or do I draw it, put it in an ISA and wait for that to build up. At present the mortgage deal is at 5.79%, but this ends in June 09 and may not be negotiable at this rate for the future.

It has been suggested to draw it now and put it to good use, as I may snuff it (nice eh) and not see any benefit.

Thanks

eira

There are calculators included in the pension handbook that helps you work out what you will get-it's then a question of deciding the best for you. I have two dependent daughters who would have see nothing of the pension if I snuffed it. I used the calculator to work out what hanging on would get me-as I rememeber I hung on for eighteen months which gave me about £10 + extra a week.Future pension rises are then a percentage of the pension you get when you take it, not the original pension.They do seem very keen on you taking the lump sum which didn't appear to be that good a deal when you looked into the ramifications.

I am still working-can't afford not to, and want to work anyway.I've got a mortgage that expires when I'm 72 so I've got to be extra vigilant with the pennies.

Hope this helps

EdInvestor

Sally_Henny_Penny wrote: »

I am 60 in September, and as such, come into the catorgory of being able to retire.

Actualy you can retire from the age of 50 onwards ( 55 from 2010) But perhaps you really mean 'draw my state pension'.

Do I take my state pension which I believe is going to be around £95-100 per week, pay the tax on it and use this as an overpayment, along with the other over payments on the mortgage

As long as it doesn't put you into a higher rate tax band, this is likely to be the best bet as long as overpayments are high enough, as you will save loads of interest if you quickly reduce the capital owed.

It has been suggested to draw it now and put it to good use, as I may snuff it (nice eh) and not see any benefit.

That's also a consideration.

chesky369

I deferred for a little over two years which gave me an extra £29 per week - I had to choose between the extra per week or the taxable lump sum - would have been approx. £11k after tax, so, as I was feeling healthy that day, I opted for the increased weekly sum.

EdInvestor

chesky369 wrote: »

I deferred for a little over two years which gave me an extra £29 per week - I had to choose between the extra per week or the taxable lump sum - would have been approx. £11k after tax, so, as I was feeling healthy that day, I opted for the increased weekly sum.

You should break even in a bit over 7 years then ( calc doesn't include interest/divis on lump sum or index linking on pension).

Do pop back and let us know if it was the right decision.

chesky369

well, I certainly do still hope to be around in seven years - don't plan to cash my chips in just yet.