Feeling anxious about taking NHS retirement - maximum lump sum and reduced income or standard lump sum and higher income?

[wonkytonkwoman]

I just don't know what to do. I'm 60 and on the 1995 scheme so I can retire this year. But I still have a (small, admittedly) mortgage and I feel anxious about the big drop in earnings that leaving a full time job will bring. I have (had) plans to take on some P/T private work but with the economy looking bleak for the forseeable I'm rethinking that.

But I'm tired, stressed, and I've worked pretty much since I early teenage years.

On the figures for this year I could just about manage on a lower income but it wouldn't be much fun and anything unexpected would mean using the lump sum (needing a new boiler, stuff like that).
On the higher income I'd be a bit better off each month (more wiggle room) but I'd still need the lump sum for anything more expensive (when my car gives up completely).

I've been a crap saver as well but I had a very expensive divorce and had to start again at 50.

Just looking for thoughts really. I have a friend who has said that taking the maximum lump sum is better as it's the only tax free lump sum of this size I'd ever be able to get.

TIA.

What’s the difference between 15 years income and small lump sum and the larger lump sum?

How much mortgage interest will you pay until it’s cleared versus save if you pay it off?

I think it depends on how much tax you will pay on the pension income.
Also, what you could do with a bigger lump sum. Paying off a mortgage could be very worthwhile, giving you more disposable income each month.
You need to sit down and do the sums.
Think about whether you will be nominating a dependant to receive a proportion of your pension if you die.

Does your union/ professional organisation offer any advice?

@OverMy I'm not sure if I've understood you right but the answer to the first one is just short of £22,000 and the second is £50,000.

I also have a pension credit which i haven't factored in. there is the option to do the same on that one as well.

@endofthelinefinally after tax I'd have £1175.00 per month .
I'm not sure about the mortgage question without rooting around in my filing cabinet. I'm on fixed rate interest for another 4 years, I think it's 2.75%.
And I'll check with my union to see if they offer pensions advice. I hadn't thought of that. Thank you (both).

Sorry, to your other ideas - yes I could easily pay off my mortgage which would free up about a third of my (currently hypothetical) smaller income.
And I've nominated my DD for my death in service benefit; I'm assuming that means she is my nominated dependent.

I'd pay off your mortgage with the lump sum (smaller lump sum if it would be enough, and take the bigger lump sum if not) as that will give you more security and mean you are wasting less money on interest, and means your monthly income will be easier to manage.
I'm not sure what role you currently have in the NHS, but could you do some bank work if needed to top up your income?

@KitKat, yes I could apply to the bank but probably not as my current role although, to be honest, I'd do a couple of shifts a week as an HCA quite happily - I have a huge amount of clinical responsibility in my current job and I've pretty much had enough.

Work out your monthly income for 15 years for both lump sums.

Then add the small lump sum to 15 years income you’d get by taking the small lump sum.

then do the same for the large lump sum and the 15 years income.youd get with that choice.

Is there much difference?

Mortgage depends on what the redemption fees would be if paying off early. You can ask for a redemption calculation.

There's about £6000 difference between the two - however I still didn't factor in the pension benefit from my exP. I should do that.

over the 15 years I mean. so not much difference

Not much at all that’s why I asked. Presumably you’ll get state pension at some point?

Yes, when I'm 66. I think I can do it, that was so helpful @OverMy thank you very much.

You are very welcome. Don’t do anything about paying the mortgage off until you work out:

Total cost of all remaining payments.
Versus the redemption statement.

Personally I have always thought that income is the only thing you need in life. Capital is nice and everyone should have a rainy day and planned expenditure fund but it is income that gets you through each month.

Just found this thread, so you may have already come to a conclusion about the best plan. I work for the NHS and I am in the same pension scheme. Most trusts put on pensions and retirement training sessions. If this is available it would be worth going. I attended one last year. They weren't allowed to give specific personal advice but general information. From what I remember, they implied taking the larger lump sum was a big risk, unless you know you have sufficient funds to live on for thr next 30 years from another source. Another colleague said to me this wou,d only be a good idea if you had a terminal illness and wanted to leave the sum to your children, as they don't inherit your pension! I would seek financial advice if i were in your position.

OP if you have not already made your decision I would check your figures. A pension of £22,000 a year is about £1,675 net a month after tax. Remember your salary will have had National Insurance and Pension contributions deducted but your pension won't. Also, in 7 years time you will get your state pension which will boost your monthly income.
I would also suggest doing a state pension check as you may be shocked to find you do not qualify for a full state pension because you were contracted out for most of your working life. www.gov.uk/new-state-pension/your-national-insurance-record-and-your-state-pension

@missminimum and @Margaritatime

So yes I went to the Trust retirement workshop but didn't find it very helpful perhaps because it was generic. But I have now spoken to NHS Pensions (twice!) and I have an up to date a picture of my benefits and credit situation both if I choose the standard or maximum lump sum. Obviously I need to allow for the finer calculations once I've officially applied to retire, but I pretty much know what my income would be in both scenario's and how much I'd have/need to live on.

I also applied for my State Pension entitlement forecast and it states I'd be receiving £168.60 a week based on the current law and it won't increase even if I work for another 4 years.

My plan is to find some kind of part time work after a complete break and recharge of my batteries; that might be private work or something else completly unrelated to my training.

The only thing I haven't done yet, as suggested by @OverMy, is get a mortgage redemption statement but I plan to do that this week; I'm very focussed on paying my mortgage off as it's my only debt and I don't want it to tie me to a job I no longer enjoy (in fact I cry quite alot more these days about it) for all the reasons that are reported and commented upon everywhere right now.

In fact, as I reflect now - I have very similar dilemma's and fears about staying in the NHS (I will have some kind of breakdown) or retiring (I will lose everything) as I did in the years before I finally got divorced. Fear made me stay married but in the end I've done more than survive on my own.

Sorry, probably TMI but it's alot, alot to think about.

How about working part time in a private care setting? Have a break from the NHS and reassess if you want to come back.

Some retired nurses have come to work as nurses, HCAs, teaching assistants, teacher in further education.

OP thank you for the update, glad you will be getting the full state pension.

It is difficult making the decision when to retire. I made the decision at Christmas as my job was making me ill and will retire in the next month. i cannot tell you what a relief it was once I made the decision and I could start planning my future.
Unfortunately my plans didn't include covid 19 😂, but at least it has given me time to think about my options.

Good luck for the future.

Hey there- 60 is still young! You've got a lot of years to go so I would take the annuity.

Depends if you need more than your planned lump sum, for something specific? Generally not recommended though.

I retired early (55) after donkeys years as a nurse. Husband has cancer so it seemed like a good time. Your total rewards statement will give you a idea of annuity and lump sum but you can also get one free detailed estimate a year from Nhs pensions.

However as my pension is quite small (about £1300 a month) I also 'returned' to work in 2 days a week and am taking home what o used to have to work 4 days a week to get!

It makes life much more enjoyable
AND WE DESERVE IT!