Semi retirement at 55: is my plan doable? Any potential pitfalls you can see? Please advise.

[CrumbsInBed]

Background: mortgage paid off, outgoings not terribly big as we live in a smallish new build. We didn’t have children.

I have both a private and nhs pension. The final projection age is 55 for the private one.

The idea is for me to semi retire, say, to 2 days a week, and draw some of the private pension and leave the nhs pension as it is. Or do I keep the private pension ticking over, and take some of my nhs pension?

I currently work 3 and a half days a week, 30 hours in total.
I have worked for the nhs since 2005, was full time until 2010, then went down to 30 hrs. I am band 2 admin and clerical.
Dh works full time.

Can anybody see any potential problems with this? Any advice would be appreciated.

Meant to say, I’ve had my private pension since the mid 90’s and the last projection for 55 was £35,000.

I’m 52, planning ahead.

Ooh what a nice position to be in! I've no idea what the best option is. You can get free pension advice from pensionwise: www.pensionwise.gov.uk/

When you say £35k, is that an annual pension? That's huge!

I retired at 55 with an NHS pension of £15k pa, no mortgage. It gives me enough to live on modestly, but not frugally, but I also work on the NHS bank which earns another £15k, a lot of which is saved. I estimate I could live very well on £20k, so once my state pension kicks in, I should be fine.

@Mayhew. I wish!! 😄.

@strongandlong, I’ll have a look at that website.

Not sure whether to draw from my private pension and keep my nhs pension going, as I plan to stay in the nhs when I go to semi retirement. ....Or would I be working just to pay my nhs contributions?
Lots of things to think about.

Is the NHS pension based on your final salary. I have a teaching pension and I due to retire at 66 in four years. If I dropped my hours then my final pension would be reduced as it would be calculated on the lower salary. However, if I drop within 3 years of retirement then they use my highest annual salary within that 3 year period. Check the rules for your pension and time any drop in hours carefully

@Mayhew, sounds like you are sorted 🙂.
We have savings also, but we don’t want to touch them.
They are there for when we retire altogether, plugging any shortfalls.

@granny. My nhs pension was final salary from 2005 until April 2015 when it became no longer final salary.
I need to look further into this, yes.

Are you in a union? I know unison offer free financial advice for their members. It sounds like independent advice would be beneficial.

What sort of pension is your Nhs one? Is it a final salary type arrangement or avc you want to withdraw from?

Not sure what you mean by projection of £35k in your other pot? Is that total value?

There are a few points that spring to mind that you may want to consider:

1. Your tax rate when working part time and supplementing with pension. You may want to consider using savings such as ISA first to reduce your tax payable. Apart from 25% tax free from your pension the rest is taxable depending on your tax rate. General Rule of thumb when taking income from your savings in most tax efficient way is in this order: other shares/funds, ISA, 25% tax free portion of pension pots, then finally the taxable part of pension.
2. Contributions into your pension whilst still working. If you withdraw taxable income from your pension you trigger the reduction in annual allowance to £4K. Not sure how much you plan on contributing into your pension once you reduce your hours but something to bear in mind.
3. If you do decide you want to use your pension savings to supplement your income, do you want to withdraw your pension income as guaranteed income or flexible income?

(Disclaimer: the above is not advice nor am I an adviser! There are a couple of qualified experts that frequent these boards who will hopefully see your post)

@mintbiscuit. Total value (I think
I still have 3 years yet to contribute to that.

1. We have savings/ISAs. I was hoping to keep them to top our pension up in older age, but looking at it like that, it’s just the other way round.

As our bills/outgoings are minimal, we could use our savings as much as possible. I’ll have a look at our savings later, maybe do some overtime and pour some more money into our savings between now and when I reach 55.

1. I’ll have to look at how many hours/days to reduce to.

I was looking at 20 hours a week. I currently do 30 hours a week. How many hours can I reduce to without affecting my pension much?

1. Not sure. Glad you are asking me these questions, as I need as much info as possible before the age of 55, to make the right decision.

Are you sure you are not an advisor? 😄

@leghair, I’m in Unison, so I’ll look into that, thanks.

Have you checked your state pension entitlement on HMRC website when you are able to receive and how much. Do you have 6 month to a year emergency fund ? Will your DH resent you for not working full time. You are still relatively young, so why not work more hours now and less when you have worse health/energy ? What if you split up, will you still be able to fund your retirement with the same level of work/saving ?

@N3w.
Yes, checked HMRC, all ok, yes we have money put aside besides our ISAs. We have money in other accounts which we are going to move into one account, and left until needed.

I used to work full time 37hrs until 2010, then I reduced my hours to a 30 hr week, paying for that reduction out of my personal expenditure account, so no, dh won’t, and doesn’t resent me doing this.
The last part about splitting up. Fingers crossed it won’t happen, but I appreciate what you are saying, and it is something else we need to consider.

Thanks, the more advice I get the better, so we can look at things and make the right decision.

Loads to sit down and think about. I could do overtime as we are always short staffed.

I think it would be good for you to see pensionwise. I don't think you understand that your NHS and private pensions work in quite different ways.

@George, thanks, yes, I’ll be looking at the website later.
You’re right, I don’t know the difference really.

I am drawing a list of questions raised by you all on this thread. I’m glad I’ve asked, as we can make the right decision.

If you didn't work after 55 do you have enough funds to live until 90, 100+ with increased inflation costs. I believe that you can take some of your pension as a tax free lump, have you looked at how much and what you might spend it on

If you didn’t work after 55, do you have enough funds...

@N3w, sorry if I didn’t make myself clear. I’m not retiring altogether after 55 ( I wish...😄) I’m looking to semi retire. To work less hours for as long as I physically can, and use some tax free savings to make up the shortfall, before touching the 25% tax free pension.

After a discussion an hour or so ago with dh, I plan to do some overtime between now and 55 to help boost our tax free ISA account allowances as much as I can, and transfer some money from other accounts to fill it up also.

I dont know how much our tax free lump sum will be yet, another thing on our list to find out, but our outgoings are not very high, so when we find out how much, we’ll adjust accordingly.

Could I add something to consider regarding your future expenditure? Which is that you will probably find upon retiring in your 60s that you can live quite frugally but chances are that as you get into your late 70s / 80s you may need to pay out for somebody to help with shopping / cleaning / possibly even personal care so when you are looking at savings you may want to think of this if you are in a position to do so. My understanding at the moment is that there is a savings threshold whereby over it you pay for everything, under it you will get support but this can be fairly minimal. I don't think either position is a good place to be.

Obviously this is years away at the moment but something we don't really like to think of when planning retirement.

(FI I'm similar age as you - thinking of the future but we have minimal savings etc. However going through the care minefield with my parents ATM)

If your private pension has a total pot of of £35,000 this will give you a very small return. I have a smallish pension pot of just over £100,000 which is projected to pay out around £4,000 pa. or may be I have misunderstood your post?

Do you mean your whole pot is 35k? Or per annum you will get 35k?

NHS pensions have a website. You can ask questions and they will give projections.
NHS employers usually invite you to a retirement planning event around 54 to discuss this stuff.