Taking Early Retirement

[suedonim]

Dh is considering early retirement (not that early, he's over 60!) and has a question about his final salary pension which I hope a knowledgable Mumsnetter could answer.

Would commuting £50,000 from his pension be worth it, if it resulted in a drop in annual pension of £3,000 before tax ? (Spouse's pension entitlement would not be affected.)

bump

It depends on how long he lives!

In very basic terms, he'd need to live for 17 years or more in order for the commuting to not be financially the best bet, but then you also need to factor in the fact that a lump sum of £50k now might enable you to do much more than an extra £3k a year would.

If you spent the £50k now, would the annual income that he would then receive be enough for you to live ok on? If so, then I'd be inclined to commute.

It depends on what he would do with the £50k - if it reduces debt, or is partly invested, then you're not just comparing £50k with nearly 17 years of £3k, but you need to consider the income generated/saved by the £50k as well. Also, typically I believe that the lump sum is given tax-free whilst the £3k will be taxed. So usually commuting would be advantageous.

Thank you! I told a sceptical dh that MN would have views on this.

Yes, I'd thought about how long dh might be drawing his pension for! Dh has to give his decision tomorrow and he suspects his company is about to pull the plug on their final salary scheme so wants to do the best thing. Any lump sum would be invested 100%, we're not interested in posh cars/fancy holidays or stuff like that.

So, if he does, does that mean we get you back over here again??

Well if you're investing it then I would expect it to be a no-brainer. You'd only need a gross return of 6% per annum to be better off with the lump sum. If you get 6% then you have the same £3k per annum, plus your £50k capital to add to the inheritance.

Tbh, I was a bit taken aback when he mentioned early retirement, Freckle, as it's news to me, lol!!

Actually, I think he's just trying to think ahead. This job ends in Dec so he's thinking of what to do next. There's a possibility of transferring to another company out here, otherwise we'll go back to Scotland. But dh hates working in the office there so he might take ER and then do consultancy work. He doesn't really want to retire yet, he's doing top-notch work and would like to continue it.

Thanks very much, LadyMuck! Maybe dh will stop angsting over it now.

IIRC your husband is in the oil services business. I'm fairly sure that he'll have no problem in getting some interesting consultancy contracts tbh - there is such a dearth of certain skill atm. Of course it means that you'll probably still end up travelling to some interesting places (has he done any stints in Sakhalin or Azerbaijin yet?)

Nooooo - he's avoiding those places like the plague! I hope there'd be work for him; certainly people out here flit from one job to another like the rest of us change our knickers.

Ah well, the deed is done! Thanks for your help.

Ooer! So when does he officially finish working?

He isn't. He can take his pension and continue working. At least, I think that's the deal - I haven't paid too much attention!