Retire early but poor or work longer for bigger pension?

[KindnessMyFriends]

Which would you prioritise, more time to enjoy yourself or less time but more money? Work another year and retire very frugally, or work another 6 years and retire comfortably. Life is so short!

Honestly you don't want to be poor and older. I'd stick it the next six years if I could. The Pandemic has changed everything and this will all need to be paid for, I think cuts will come. Old age and poverty is awful. Im in same position and previously Id have got state pension at 60, I will now have to wait till 66 and my husband 67. Fortunately, we can manage on our works pension, but retiring is a massive drop in income. Id advise you to try and live on less money before you retire, so it doesn't come as such a shock when you actually do. Thats what we did but it's just a suggestion to you.

I would retire then just do odd/seasonal jobs as and when you like for extra spending.

The thing is, people say you need x% of your pre retirement income. But even right now I only spend around 40% of my income and save/invest the rest.

Assuming you have no more debts or mortgage or obligations to kids, I think as long as you can get an income of £12k per year youll be fine.

yeh, eking out a living would be so miserable. I agree, everything will be cut in the next 18 months.

I agree with stay working and reducd hours. Or retire, take your pension and top up with a part-time job.

Sounds like you’ll have enough pension once the state pension kicks in, so the bit to think about is the period between you retiring and you getting the state pension.

Rather than pouring more money into your LGPS pension you could open a separate private pension, a SIPP, and save specifically to bridge that gap. You’ll get the same tax relief as for a workplace pension but no employer contribution (but it could be there’s already no employer contribution on the extra you’re paying in).

That could be your 60’s fund for you to drawdown and spend just as you need. You decide how much you want to take out and when.

However you can’t draw down a SIPP while at the same time paying into your workplace pension - or rather it limits how much you can pay in.

There's a book called 'Your Money or Your Life' that really explores this question in depth. I think it would be a good read for you ☺️

Wow, thank you all. So much valuable information here. I need to go back to my spreadsheets, my employer and my pension provider armed with all this info. Thank you all so much!

@Plexie my gov.uk pension forecast is saying full state pension despite the lgps years. I did have a different career before the single parent thing and I have worked a few years on full NI since the rule changes so I'm hoping it's right!

My DDad died shortly (months) before retirement age. It was very unexpected, following a short illness. He was previously very fit and healthy and his parents and extended family members all lived well into their old age (late 80s at least).
He never got to spend a penny of his pension pot, which he spent his whole working life working hard to fill. His great plans to travel and enjoy his retirement were for nothing. It really changed my outlook and I hope to at least semi retire in my 50s so I can make the most of any time I am privileged to have. Carpe Diem!

Really interesting thread, thanks OP for starting it. Watching with interest. I've just turned 55 with an NHS 1995 pension but sadly most of that is part time. I've gone full time in the last 3 years to try and boost it but wish I'd done it sooner. Wondering how the McCloud judgement may effect me.

Personally, I’d reduce my hours so that I had a better work/life balance while still saving for retirement. My Mum worked an extra year before starting retirement, having slightly adjusted her hours and she said that just knowing she could retire if she wanted to made so much difference to her mindset. She says that the last year of her working life was one of the most enjoyable simply because she felt the pressure was off and she was working on her own terms.

She now lives in a retirement community and there is a very big difference between the people who have a decent amount of disposable income and those who have to live very frugally. Although I would be very tempted to retire as soon as I can, I think DH and I will work a little longer if it means a more comfortable retirement. We’ll probably consider downsizing to free up some of the equity on our house or even move to a cheaper area.

@flatcoatfan yes, I read about the McCloud judgement but I can't understand how it impacts me at all. I know it could change things as I joined in 1997!

What an interesting and informative thread!
Thank you to all contributers

My MIL took advantage of a scheme whereby you delayed taking state pension for five years, then receive am enhanced amount. As she remained working (FT initially, then PT) on reaching pensionable age, she managed perfectly well before taking her state pension. Not sure if this is still offered, but if you've paid off the mortgage and receive a pension from working, it could well be something to consider.

Can you pick up some work that fits your interests? E.g. gardening if that's your thing or dog walking or babysitting or after school nannying or something like that

My mum died recently at 70 having been ill with cancer for a number of years. I felt so sad for her that having worked hard all her life she never really got to enjoy her retirement and she did not get much use out of all those pension payments. At one point it even looked as though she would die before ever receiving her state pension but in the end she got a couple of years worth.

I do love my job but it's very hard and there is more to life. What with her death and the pandemic I have started to seriously plan to retire early. I am not planning to work past 60 if I can help it and will maybe even cut down hrs/ responsibilities a few years before that. I want to move to the country and downsize after the kids leave home and spend more time on hobbies. I'll have done my bit by then I figure.

Retire early. Tomorrow's promised to no one!

The McCloud judgement relates to those in public sector final salary defined benefit pensions in 2012. These mostly had a retirement age if 60 and some of 65, with payouts being based on years of service and the final salary. At that point, it was ruled that workers younger than a certain age would be moved to the new Career Average schemes (with a retirement age if state retirement age...so 66/67/68 and payouts being based on salary of each year worked and not all based on final salary) starting in 2015, but older workers would remain in the Final Salary scheme.

This was all implemented in 2015 as planned. However the government were challenged that it was age discrimination and the Supreme Court ruled against them. The consequence is that workers who were in the public sector pensions back in 2012 can CHOOSE whether to have the period 2015-22 in the old final salary or new career average scheme and choose as they reach retirement.

Essentially, for most (but not all) older workers, getting the extra 7 years in the old final salary scheme is better and means they will be able to retire sooner. Why? Because firstly the final salary pensions pay out for most at 60 instead of 66/67/68 like the career average. Additionally, the payouts are usually larger as based in final salary which for most tends to give a higher calculation as workers earn more later in their career (final salary can be last year or best 3 averaged in final 10 years) . All this means those workers can retire sooner with more than if they had the new system for 2015-22.

From 2022 everyone will move to the new Career Average system. 2022 is the date because at that point all workers would have moved to the scheme anyway so there is no longer any age discrimination.

Millions of public sector workers, especially those in their 40s and 50s will find they can afford to retire sooner than if the McCloud judgement hadn’t happened. In reality many workers in 40s and 50s have never really tracked their pensions anyway and so will be nine the wiser about this significant gain to themselves, but nonetheless it is one.

This all only applies to those in the public sector defined benefit schemes and not to those in the more typical defined contribution schemes where you pay into a pot which is invested in the stock market and outcomes uncertain.

Re when you can retire, in the public sector defined benefit schemes, there is a pension age at which you can take the full benefits, but it is possible to take them on an actuarial key reduced basis from 55.

With defined contribution schemes you can take part or all of your pension from 55 (rising to 57 in about 6 years time) but of course, your pot has to last you longer.

Sounds a bit like the change that was made in Ireland to CS and public service pensions. They were excellent and based on final salary up until 2013 and then anybody who joined after 2013 just gets a social welfare state pension topped up by a pension based on their referable amounts. Heart breaking for me! I started in 2014!
I think the IMF told Ireland its pensions were too good. And Id love to retire on half my salary plus a lump sum 1.5 x my final salary. A lot of lucky people with far less fortunate people behind them.

@WombatChocolate - I've spent ages trying to find out what the implications of the McCloud judgement are for someone like me. Your explanation was the first one that explains it in terms I can understand. Hopefully LGPS will be able to give me an alternative forecast once they've had time to get new systems and software sorted in the light of McCloud. I can't believe how informative and useful some of these replies have been. Thank you!

I've never heard anyone say that they wished that they had worked more !

However, I have heard a few people say that they didn't enjoy retirement. But these were people who had enjoyed the routine of work & had few hobbies. You have stated that you have a few hobbies that you already enjoy & you could start some more, if you retire.

Have a look at some of the Government pension & retirement websites eg pensionwise

I hope that you find the right answer for you

I also agree that life is too short !

My DH and I went for early retirement as three of our parents died quite early and my DM has advanced Alzheimer’s and is only 70. I know none of us know when we’re going to die.

He never got to spend a penny of his pension pot, which he spent his whole working life working hard to fill.

There's a few comments like this. Many annuity pensions continue to be paid to a dependent in full for a few years if someone dies very early in retirement, and traditionally a spouse would get half the yearly pension whenever they were widowed so pension security for your dependents is important even if you were to die young. And more modern pensions have greater flexibility around being inherited to address this idea that there's no point saving into a pension because you might die young. The majority of us don't die young, we live well into old age and I'd rather be comfortable and able to pay for private care to keep me in my own home than end up in a care home chosen by the local authority.

Another thing to consider is the financial vulnerability of being a single person. If you became to ill to work during the next few years ho would you manage? These are things I think about and yes I know even as a couple it could happen to a partner. But when there is only one income coming in I do wonder how I would manage if I suffered a long term illness. Suddenly living off savings and never being able to bild them up again.

Excuse the spelling errors...long day in work .