Early Voluntary Retirement

[fairytale132]

I have worked for a local authority for 21 years and they are offering Voluntary Early Retirement. I am unsure until I get the quote if they are paying my pension up to my retirement age of 67, I am currently 60 and would also get 12K redundancy on top of this. Trouble is my pension is pretty poor having worked part time for child-care and so only really have 10 years service so I am unsure what to do as I can’t manage on this. I am so annoyed and kicking myself this morning as I hardly slept last night as I was dwelling on how I could have afforded to retire as I got divorced a couple of years ago and he begged me not to touch his pension which I didn’t, had I done the proper thing and had a pension sharing order I would have been able to do this but that is in the past and I know I have to move on but today it’s really upsetting me because I know at the time I was bullied and manipulated and it’s having a knock on effect on the rest of my life now.
I don’t like my job and all my friends are leaving I can’t bear the thought of being managed by some of the people left behind. The plus side is I can work at home some days and this helps with my health so wondering in if I did take it where would I be able to get a job working from home and at my age as well. I am feeling pretty despondent as I know I won’t get another opportunity like this but feel reluctant to take it if I can’t afford to live.
Also I have no idea whether I would be better taking a bigger lump sum and a smaller pension or a larger one and smaller lump sum, I have no idea on this and the best thing to do.

You need to know how much the pension will be each year. I can see you’re waiting for the quote. How much have you built up so far according to your latest pension statement? Do you have any other savings, ISA’s etc.

If the amount is enough for you to live off with a bit extra for treats, holidays I’d take it. However, it it’s a very small amount it could be a miserable retirement.

is there anything stopping you from getting another part time job elsewhere?

Its hard when you look back at what if and buts - but maybe its best to keep looking forward and thinking at least you don't have to live with him anymore

Sadly it's between 4-6k per year with a small lump sum
I have virtually nothing else due to my divorce, hence the bitterness!
I couldn't live off 500 per month but fact is it would only be 9k if I worked for 7 more years. I would have to take another job but at my age?

How old are you? And how much a month would you need to be comfortable on? Also do you own your own home. All things to think about. I think you can claim jsa for 6 months as well which will help if you have a period out of work.

You need to work out how much you need to achieve the lifestyle you'd like for this part of your life.

Those sums don't sound like anywhere near enough to retire now tbh, and £12k redundancy is peanuts. But it depends on your actual and forecast outgoings - eg do you run a car, is your mortgage paid off? Could you do some other sort of work to make up the shortfall?

It's always easier to find another job when you're still in one, but be careful with that because it might invalidate redundancy if you accept a job before signing the redundancy.

If you stayed, would you have spare money to invest in an extra pension or ISAs?

Also, check if your employer supplies free or subsidised advice from an independent financial planner? They would be able to help you work out what your options are. Failing that, do they offer counselling as an employee benefit and could you access a life counsellor if so?

An IFA will really only give financial advice and one of the tricky things is working out how you want to spend this latter part of life - this is something I have struggled with.

Work is more than just money - it's also status, social contact etc.

There's an American podcast called Retirement Answers Man which has helped me with this.

Forget about the divorce decisions - I bet you're better off without him and that's priceless.

Take your time to consider carefully - this is a big life decision - good luck.

This website is useful too:
restless.co.uk/

If you do take redundancy, could you become self employed? Think about the skills you have for that and any retraining you might need - eg seamstress, cleaning, book keeping?

Or if you stay, can you start a side hustle to help invest money for retirement?

EVA doesn't usually mean that LGPS is made up to your usual retirement age, but your LA may offer it anyway if there is a business base for your job no longer being needed..

Are you a Union member ? If so , it would be good to talk to them as they will be able to help you negotiate a business case if your job is being phased out .

if you decide to stay do look into pension AVCs .. I did that and it made a huge difference to my pension ..

It’s incredibly unlikely that your pension will be enhanced to 67. Usually, you just get the pension that you have accrued with no reductions for taking it early. LGPS employers used to enhance benefits on early retirement but it’s very expensive so very few do now. You may be lucky and have one that does! They do have to have a policy on it though so see if you can find the early retirement policy and see what it says.

Regarding whether to take a larger lump sum and smaller pension or the other way around - in the LGPS the commutation rate (the rate at which pension is converted to lump sum) is 12:1 which is not that great particularly if you’re retiring early. This means that for every pound of pension given up you get £12 lump sum. The pension is taxable and the lump sum isn’t, but taking that into account if you live for more than about 15 years after retirement you will be better off getting the bigger pension. However it’s not quite that simple - if you have debts to pay off you could use the lump sum for that and then you would be saving interest. Generally though, if you don’t need the lump sum for anything immediate and you’re in good health, you will probably be better off taking the bigger pension. If in good health you could easily live 25 years after retiring at 60 and you may be grateful for the extra annual income as you get older whereas the lump sum could be spent more quickly. It really does depend on your own personal circumstances though, what’s right for one person won’t be right for the next.

Littlelightchink - some great advice there

It's essential to get whole of all of the facts

If you can use Excel, put all the figures into a spreadsheet year by year. I did this recently, and found it to be a real eye opener. You can then see what happens prior to the State Pension kicking in

Just one observation - doubling your pension by working another 7 years sounds like a really good deal to me. Taking redundancy to have £12K and no job - not such a good deal

@fairytale132

Sadly it's between 4-6k per year with a small lump sum I have virtually nothing else due to my divorce, hence the bitterness! I couldn't live off 500 per month but fact is it would only be 9k if I worked for 7 more years. I would have to take another job but at my age?

If it would only be another 9k (I presume pot not per annum) if you worked for another 7 years then 12k sounds good but it's only £3k and it they'll not also pay pension early in meantime that's crap but also your salary is presumably loads less than your pension even if they did pay it? If so would it not be better to keep working but scrimp and save to add more to your pension in that time in hope of investment increasing pension per annum?

*loads more than your pension. Doh!

I think OP means she has between 4-6k a year at the moment and this will increase to 9k a year if she works another 7 years.

9k work pension plus 9k state pension is a reasonable amount if no mortgage/rent to pay.

Hi all, no mortgage.
I have no idea what the quote will say, only I get the basic 12K plus early retirement which I am assuming stands at 4k to what I have paid in so far but they'd be no % reduction. So I can take 4k per annum with a 27K lump sum or a 6K pension per annum and 4K lump sum.
However if I stay full time on the same salary it would be 9K plus 4K lump or 6K plus 43K lump sum this is very doubtful given we are having major cuts next year anyway and if I don't take voluntary it would be a severance anyway...
Hope this is a bit clearer and thank you for all your responses so far

It sounds as though you may have no choice.

I'd start listing all your skills and ways to make money (the kind of things I suggested upthread) as it sounds as though you will need to earn extra income to bridge the gap to state pension age. There are lots of ways to bring in extra income, obviously a new job is one so polish up your CV too.

You can ask your local careers office for help with that.

If you do stay until 67, £18,000 a year at today's money would be close to a comfortable retirement according to this research:
www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

Have you checked your state pension forecast?

Was the divorce finalised legally i.e. was there any kind of court order (this would probably have been a consent order where you come to an agreement and then the court approves it)?

Yes I have checked my state pension, having worked 44 years I can contribute no more (except they still take plenty of NI from me!)

Divorce in finalised, I have challenged, lost money, bad after bad and I can do it no more, very sore point.

Ah that's a shame re the divorce. Sometimes couples divorce with only a loose agreement on the finances (not a good idea!) and if so there may have been some scope to negotiate.

Anyway, with a full SP and some in the LGPS that puts you in a better position than many, especially as the LGPS is index linked. If you can work for a little longer and build up more in the scheme you should be reasonably comfortable. Are there any other pensions that you have from jobs earlier in your working life?

Have you worked out what you will need/want to live on in retirement? The Which guide that a PP linked to is helpful for looking at what people spend in different categories but you will have a better understanding of your own situation. IF you don't mind sharing that it'd help in thinking about the best options.

Thanks for the Which link, really good x

As your state pension won’t pay out until 67, you are going to need to boost your income between now and then if you take the early retirement option. The £4-6k clearly isn’t enough to live on, unless you have significant other saving sources to draw from..and you do t sound like you have those.

Therefore, you are looking at needing to work. As others say, it might be easier to get another job from a position of being employed than not.

Is it the LGPS you’re in? The lump sums you mention seem low to me….assuming you have some service before 2007, you’d have some years in the final salary section and this gives a lump sum of 3x yearly pension. But perhaps you were out of work and doing childcare in this period?

Inwoukd say the pension is certainly more valuable to you than lump sums. Focus on getting a good enough pension to sustain you in retirement. As others say, £18k (£9k from state and £9k from occupational if you keep working) will give a decent payout.

Come back and tell us when you get some figures. We can help you consider the options more usefully then.

In your position I'd stay working. Not only will you be earning but your pension will be doubling. While you're earning you can pay AVCs with Prudential which when I retired 3 years ago I took as a tax free lump sum (best double check now though) and you're saving the tax while paying.
You say you can WFH so I'd suck it up. There aren't many jobs with the same kind of perks as the public sector. Good luck with your decision

I would be careful with suddenly putting a load of money into AVCS. It will effect your annual allowance. If you are thinking of doing this please speak to a financial adviser.

That's seems really unfair
I'd be tempted to take the offer and think about how to manage.
Could you downsize?
Get a lodger?
Air b and b?
Work part-time? lots of places are hiring

Yes it's a LGPS however I only worked part time to cover childcare for most of those years so although I have been there 21 years my service is actually 10. The final salary scheme is the bit when I was part time sadly. I wished I had paid AVC'c whilst still married at least I would have got a half decent pension that way, instead of saving money which he now has.
I do actually have a smaller private pension, this is worth around 33K so I could draw about 8K however I was planning to use this as a draw down for holidays each year. I couldn't live off this of course it was from SERPS years ago.
I think I may have to reject the early retirement much as that galls me because most of my colleagues same age as me are going, I'll be the old bird left in the corner...
To get the 9K I would also have to remain full time for the next 7 years too, I wished I could work PT to make it more palatable.