The MSE Forum will be undergoing some maintenance this evening. As a result, some users may experience temporary performance issues. Please use the Site Feedback board to report anything major. Thank you for your patience.

Pension Planning advice

Just considered reality of retiring early....

Aged 48 and would ideally want to retire at 55.
Have a company pension (non contributory - all payments covered by employer), which would give reasonable pension of c £35kpa (or lump sum and lower pension) at age 60.

Have been contributing to AVCs (around £16k so far) and am now contributing £150pm.

Also have some savings (ISA) and just wondered what the best plan to achieve early retirement would be - more AVCs or savings? My concern with AVCs is if you can't take until 55 does ISA savings provide more flexibility in case our circumstances changed (i.e. lost jobs etc?).

Husband (just a couple of years older) also has a private pension (NHS) although not as good - part can be taken from age 55 and rest, I believe, at usual state retirement age.

Don't really know too much about pensions - always known my scheme was a decent one and assumed would work to 60 but if we can retire earlier then that would be good.

Thanks.

Comments

  • SonOf
    SonOf Posts: 2,631
    First Anniversary First Post
    Forumite
    Also have some savings (ISA) and just wondered what the best plan to achieve early retirement would be - more AVCs or savings?

    Not possible to answer on the limited information you have given.

    Is the occupational pension a DB scheme or a DC scheme?
    What penalties are there for commencing at 55?
    What level of income do you want at the various stages of your life?
    Can the AVC link directly to the main scheme for payment of benefits?
    What savings do you have?
    Is your financial planning handled jointly or individually (i.e. sole or joint finances) - no point looking just at one side if you operate joint finances.
    My concern with AVCs is if you can't take until 55 does ISA savings provide more flexibility in case our circumstances changed (i.e. lost jobs etc?).

    AVCs are largely obsolete as a product since 2006. Indeed, most companies have either pulled out of offering them or left them on the terms they were in 2006. This means many have fallen behind the retail pensions offerings (personal pension, stakeholder pension or SIPP). Some AVCs can still have benefits that retail pensions cant. Not many but they do exist. So, AVC is one of the options on the table but may not be the best one.

    At this moment, you are asking too much of the forum posters here as we don't have enough to go on. More information is needed.
  • Linton
    Linton Posts: 17,060
    Name Dropper First Post First Anniversary Hung up my suit!
    Forumite
    Money from ISAs can be taken any time, assuming that you havent gone for a fixed term account.

    You have the choice of a cash, savings ISA where the interest may well not match inflation or an S&S ISA where the return should be higher over the long term but the value could fluctuate significantly in the short time. 7 years is close to the minimum time for an S&S ISA to be reasonably sure to have increased in value, 12 years until you are 60 should be OK. But you could be drawing from the AVC anyway in that time frame, assuming you can take your AVC indepedently of your main pension - you would need to check that.

    So I suggest you split your contributions say 50:50 between a cash ISA (or a non ISA savings account where the interest may be higher than from a cash ISA even after tax) and an AVC/ S&S ISA.

    Have you worked out how much you need to save to cover your living expenses until the DB pensions and State Pensions can be taken? £150/month = £12600 over 7 years is a lot less than you will need for 5 years.
  • Special_T
    Special_T Posts: 192
    First Post First Anniversary Combo Breaker
    Forumite
    Thanks Sonof...looks like we need to find out a bit more, but can answer some questions

    Is the occupational pension a DB scheme or a DC scheme? DB
    What penalties are there for commencing at 55? Not sure
    What level of income do you want at the various stages of your life? Need to consider this further
    Can the AVC link directly to the main scheme for payment of benefits? Yes
    What savings do you have?
    Is your financial planning handled jointly or individually (i.e. sole or joint finances) - no point looking just at one side if you operate joint finances. Jointly

    Sorry the details are too vague - but thanks for your response.
  • Special_T
    Special_T Posts: 192
    First Post First Anniversary Combo Breaker
    Forumite
    Thanks Linton

    The AVC is linked to the main pension so probably can't take independently of the main pension.

    Need to work more on the living expenses - a big difference on what you actually need to spend and what you do / can spend! Household bills, food, subscriptions, travel / car insurance etc probably £15kpa between us, then holidays / meals out etc allowing another £10k would be generous, so £25kpa which I would consider overstated.

    Have really looked at the state pension as a bonus in a few years - i.e. would use lump sum / savings for any big expenses now and by the time we get the state pension would have expected to slow down on holidays etc
  • Albermarle
    Albermarle Posts: 21,617
    First Anniversary First Post Name Dropper
    Forumite
    Have a company pension (non contributory - all payments covered by employer), which would give reasonable pension of c £35kpa (or lump sum and lower pension) at age 60.Don't really know too much about pensions - always known my scheme was a decent one

    I think calling it 'decent' is probably understatement of the year, even for a British person.
    A £35Kpa guaranteed income for life, that starts at 60 and you do not have to contribute to. In general these types of pensions have almost disappeared because they are very expensive for your obviously very nice employer .
    You might be interested to know that the actual value of a pension like is probably in excess of one Million Pounds !
  • crv1963
    crv1963 Posts: 1,372
    First Anniversary Name Dropper First Post
    Forumite
    Hi OP-

    Your pension as Albermarle states sounds a great deal. Have a read of the what's your number thread and others then plan how you can structure taking your pensions between you. The beauty of them is that unlike work and a wage it is not all or nothing, different pensions or pots can be taken at different times. Retirement can then be staged or eased into if you want to do it that way.

    Work out as has been said how much income you need between the various ages, so without knowing your actual figures you could look at-

    1) Age 55-60 a) How much husbands NHS pension is taking the 1995 scheme pension, deferring the other NHS pension part until NRA, plus how much your pension will be and will it be reduced for taking it early? Or b) How much income will you get if you take all three pensions that are reduced for early retirement.
    c) Can you take one pension and savings to live until the other deferred pensions start?

    2) Age 60-67 All pensions in payment plus savings that can be run down to zero prior to SP starting.

    3) Age 67 (or SPA) onwards, how much income from reduced occupational pensions (because taken early) and SP will be, do you need this or can one or both SP be deferred for a while to increase income from say age 70?

    The advantage of different pots of money is the advantage to take them flexibly and when you want. I would list your pots and loosely designate them for different stages or spending- so far I for you can see-

    Pot 1) NHS pension available at 55
    Pot 2) NHS pension available at SPA or reduced from age ?60.
    Pot 3) Wife DB pension at 55 reduced to x amount or unreduced at 60 at y amount.
    Pot 4) AVC pot- 16k now but x amount at 55 or y amount at 60.
    Pot 5) ISA savings
    Pot 6) Cash savings

    Identify the pots and roughly what they are worth and when. Have in mind an income figure and play around creating a flexible plan.

    Good luck.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
  • Special_T
    Special_T Posts: 192
    First Post First Anniversary Combo Breaker
    Forumite
    edited 10 July 2019 at 1:22PM
    Thanks Albermarle and crv1963 - especially for the positive comments about my existing pension :)

    Having another look at my pension looks like it would reduce to £25k if I retired at 55 (£28k at 57), so quite a big drop. Also need to consider taking a lump sum would see a smaller pension.

    Albermarle - you mention the possible value. I've heard others at work talk about the value and they are transferring out....but looking at other threads this seems one for lots of debate!

    Lots to think about.... we need to look into husbands pension more but staggering the pensions seems a good option as well as continuing to grow the savings so we have comfort there and may allow us to retire a little earlier than 60.

    Thanks for all the advice...I may be back with more questions!:T:D
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.4K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards