Retirement

[TitanTim]

Hi all,

I've decided to bite the bullet and take early voluntary retirement from April next year I'll be 58 by then and will have done 41 years with my same place of work in Local Government. To be honest I just can't wait as the job isn't doing anything for me anymore.

I've had my work pension figs confirmed before tax so deicided to put a bit of a spreadsheet together to work out the tax side of it along with all the yearly outgoings/bills etc so it's easier to keep track of things.

I'll be another 8 years off the state pension when I finish work but have logged onto the State Pension forecaster on the .gov.uk site which has confirmed I will pretty much have maxed out my state pension contributions by the time I finish work and it gives an estimate of my weekly pension I can expect when the time comes.

I'm just a little unsure how the tax pans out with the state pension.

At present my work pension will take me over the personal allowance of £12570 per annum so have worked out what tax I will pay on my pension over that ammount but unsure how it works once you receive the state pension?

Am I correct in thinking you add your total work pension before tax and the state pension together to get a total then apply the income tax to the amount over the £12570 personal allowance and thats the figure in your pocket? or is that a little simplistic

Any pointers gratefully received.

Tim.

[buzyg]

You have it right regards to tax on your pensions. Income tax is paid just as it was on your working wage. The biggest bonus of retiring, I have found, is no longer paying National Insurance and no longer paying into a works pension scheme. That was 20% of my wage gone before income tax, when I was working. Though I still have four years contributions to pay in before I reach 67, due to being ex services, so will register as self employed for four years and pay a small contribution each year until I reach the 30 years of contributions, required for a full state pension. Best thing I ever did retiring early. But need to be sure you have enough income to maintain a decent lifestyle. Sounds like you have that all in hand on your spread sheets.

If your pension scheme allows you may be able to draw down up to 25% of your pension pot as a lump some. I did this on two of my pensions and was able to purchase another property with the money. That adds to our income and also provides a secure investment either for us in the future, or for the kids when we go.

[Pondrew]

I have been looking into pensions too recently, as am about to reach 55 and all of my personal pensions are ready to mature into annuities (which I don't want), or leave as they are for now (which I also don't want).

If you are drawing any money, from anywhere, I am under the impression you pay normal income tax above the 'free pay' threshold; whatever that may be at the time.

I am looking into changing my pension pot into a 'draw down' one, which allows you to draw as much or as little as you like ongoing. This way I can manage the tax element just by changing the draw out. The balance then still gains growth, however, I'm not sure yet how (stock market linked, or just savings rates).

I talked to a financial adviser about this a few months ago. He came up with some very complicated ways of doing it and wanted 6% of my pension pot for the privilege. I will do it myself, thanks.

[TitanTim]

You have it right regards to tax on your pensions. Income tax is paid just as it was on your working wage. The biggest bonus of retiring, I have found, is no longer paying National Insurance and no longer paying into a works pension scheme. That was 20% of my wage gone before income tax, when I was working. Though I still have four years contributions to pay in before I reach 67, due to being ex services, so will register as self employed for four years and pay a small contribution each year until I reach the 30 years of contributions, required for a full state pension. Best thing I ever did retiring early. But need to be sure you have enough income to maintain a decent lifestyle. Sounds like you have that all in hand on your spread sheets.

If your pension scheme allows you may be able to draw down up to 25% of your pension pot as a lump some. I did this on two of my pensions and was able to purchase another property with the money. That adds to our income and also provides a secure investment either for us in the future, or for the kids when we go.

Thanks buzyg that confirms what I was thinking and sounds like I'm basically along the right track.

You're right on the tax and NI contributions and was surprised after working things out I won't be that much worse off by opting for retirement. It just shows how much tax and NI contributions I'm making from my working salary which I won't see so much on the Pension Shocked me a little to be honest when you start looking at the tax and how much I'm paying

I will get a tax free lump sum with the option to take any amount between a minimum and a maximum but obviously the more I opt to take the less my annual pension will be so need to make a decision on this.

Tim.

[Zedebee]

I have been looking into pensions too recently, as am about to reach 55 and all of my personal pensions are ready to mature into annuities (which I don't want), or leave as they are for now (which I also don't want).

If you are drawing any money, from anywhere, I am under the impression you pay normal income tax above the 'free pay' threshold; whatever that may be at the time.

I am looking into changing my pension pot into a 'draw down' one, which allows you to draw as much or as little as you like ongoing. This way I can manage the tax element just by changing the draw out. The balance then still gains growth, however, I'm not sure yet how (stock market linked, or just savings rates).

I talked to a financial adviser about this a few months ago. He came up with some very complicated ways of doing it and wanted 6% of my pension pot for the privilege. I will do it myself, thanks.

Pensions advisory fees are eye watering. All you really want to know is to know what the options are and then make your choice. The worst rule is having to take pensions advice if you want to transfer out of a defined benefit scheme (where the transfer value is > £30,000) and take control of your own money. I know exactly what I want to do, but I don’t want to pay a silly sum for someone to tell me I can.

[Scubaregs]

I did this 4 years ago, transferred a defined benefit scheme and two small private pensions into a drawdown pension. Pondrew, you may well find you have no choice but to take professional advice to do so, I had to. However like most things in life the fees are negotiable, I paid nowhere near the original fee quoted.

For me it was a no brainer, although engaged I'm not married and have no kids so the vast majority of my pension would have died with me, now it is all part of my estate. My personal thoughts are that I would rather access my money when I want it, whilst I still have health and can travel and have less in the much later years. (Assuming I get there) You don't need the same money pa at 90 as you do at 60.

[TitanTim]

I did this 4 years ago, transferred a defined benefit scheme and two small private pensions into a drawdown pension. Pondrew, you may well find you have no choice but to take professional advice to do so, I had to. However like most things in life the fees are negotiable, I paid nowhere near the original fee quoted.

For me it was a no brainer, although engaged I'm not married and have no kids so the vast majority of my pension would have died with me, now it is all part of my estate. My personal thoughts are that I would rather access my money when I want it, whilst I still have health and can travel and have less in the much later years. (Assuming I get there) You don't need the same money pa at 90 as you do at 60.

I think if you reached 90 its a whole different ball game and potentially a different set of costs i.e. care costs probably at the top of the tree, I don't know how people afford it and guessing most loose their property to afford it Dread to think, not something I would want to relish and think about.

Tim.

[Scubaregs]

TitanTim, My point is it's better to use the money when it benefits you most.

[Smartbear]

I retired in 2018 when i just turned 53, I’ve never regretted it for a moment & would recommend you go as soon as it’s possible if the sums work out for you Tim
Rob

[Pondrew]

I did this 4 years ago, transferred a defined benefit scheme and two small private pensions into a drawdown pension. Pondrew, you may well find you have no choice but to take professional advice to do so, I had to. However like most things in life the fees are negotiable, I paid nowhere near the original fee quoted.

For me it was a no brainer, although engaged I'm not married and have no kids so the vast majority of my pension would have died with me, now it is all part of my estate. My personal thoughts are that I would rather access my money when I want it, whilst I still have health and can travel and have less in the much later years. (Assuming I get there) You don't need the same money pa at 90 as you do at 60.

Same reasons as you for me TBH Craig.
I can manage on the state pension, if needed, so I look at anything else in the next 13 years as a bonus.
I have 3 private pensions and want them to be where I want them, when I want them. I will continue to work part time but it would be nice if I have a plan in place to be able to give up working completely as and when I want to.

I have checked the financial advice rules with my pension companies and I can do what I like. I consulted an IFA, just won't pay the greedy cnut.

[TitanTim]

TitanTim, My point is it's better to use the money when it benefits you most.

Completely agree, it seems though the harder you work the less benefits you see

Tim.

[TitanTim]

I retired in 2018 when i just turned 53, I’ve never regretted it for a moment & would recommend you go as soon as it’s possible if the sums work out for you Tim
Rob

Thanks Rob, yes I remember when you retired and thought at the time I wished that was me. Since then for me work enjoyment has completely deteriorated as I lost a member of my team through redundancy the other member of my team then also left and management wouldn't sort out a replacement and dragged their feet to save money. I ended up trying to do the work of 3 people which was a silly mistake and was off with stress for a month last year. Finally got replacement last September and after 10 months of training them up they left last week as decided they didn't like the job so it was the push I needed to decide to go More trouble than it's worth.

Tim.

[Scubaregs]

I'm redundant end of August at 59. Fiancée does not want to retire just yet so we will do another 18 months, plan is then Barbados for 2-3 months over festive season then semi retire, pick up some work when it suits us which my fiancée can do very simply.

I'll look for something else in September, however mortgage being paid off, bike loan being paid off and no more £300pm in petrol means I can take virtually anything and still maintain lifestyle.

[TitanTim]

I'm redundant end of August at 59. Fiancée does not want to retire just yet so we will do another 18 months, plan is then Barbados for 2-3 months over festive season then semi retire, pick up some work when it suits us which my fiancée can do very simply.

I'll look for something else in September, however mortgage being paid off, bike loan being paid off and no more £300pm in petrol means I can take virtually anything and still maintain lifestyle.

I always end up having lengthy conversations with the Tesco delivery drivers when the weekly shopping turns up as a few of them are over 65, one is an ex Policeman, other and ex BT Engineer and they do it as they got fed up of retirement and wanted something to do I haven't really thought about if I would want to work again but the nice thing is hopefully no pressure and that option is always there if fancied some part time work in the future.

Tim.

[Chippie]

I’d love to retire at the beginning of next year when I’m 60, but being realistic I don’t think I can afford the 7 years until my state pension kicks in, so I’m going to become a t**t (working Tuesdays, Wednesdays and Thursdays) and see how things pan out.
I had a telephone consultation with the pensions advisory service which helped to explain the options I had, although they can’t advise you what to do only the options available, if I sold up and moved to somewhere cheaper, didn’t have two holiday’s abroad a year ago sold the Zed (no more meets and road trips) then I could probably retire tomorrow, but I don’t what that, so I’ll have to keep working a little while longer, my mum is in her late 80’s and not in the best of health and moved near to us a few years ago, once anything happens to her I may reconsider things. It really annoys me though the amounts that these financial advisers charge for simply telling you where to put your money (at least Dick Turpin wore a mask) I’ve got a decent amount of savings which I’m hoping will supplement my pensions and keep below the tax threshold, I’ve already told my kids I’m leaving them bugger all .