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.

Have you looked at APCs. You can contribute via monthly payroll deductions or by a lump sum either from a payroll deduction or direct payment from your savings. lgpsmember.org/more/apc/index.php
It is expensive and only provides pension for yourself.

Have you considered other employment you may be able to undertake on a part time basis if you were to take the redundancy now?

What is the jobs situation like in your area? I understand that in many areas there are vacancies in hospitality industry and always in care industry . Are either of these things you might be able to do on a part time basis to add to the pension you would be able to take ?

On the other hand, if it is likely you can spend some days WFH and it is likely that you may be facing compulsory redundancy in the near future maybe it's not worth making the decision to leave at the moment .

Have you done a budget to see what you actually need to live on? Being mortgage free is a big help .

At least try looking for jobs and see what's out there.

Lodger or Airbnb great idea too.
There's also the drastic option of downsizing.

I think the key is to do a really detailed review of your likely spending so you can work out what you think will be a reasonable amount for you in retirement. The Which report is good for that as is www.retirementlivingstandards.org.uk but ultimately it depends on your own circumstances.

Once you've got that clear, work you can out how far you are from your target income for the time before and after state pension age. Then you can see how much more you need to save before you can retire. With that in mind you can then plan and model different approaches to see what gets you there.

I'd really recommend trying to live on your planned retirement income now. That gives you a feel for whether it is realistic. It also means that you should have extra savings (assuming your current pay is greater than your target retirement income) that you can use to get you to your end goal quicker. If I were you I'd explore putting that money in your pension either as AVCs or opening a SIPP. This should give you an extra boost from the tax benefit.

Having a really clear picture of the situation and a plan for how to get to where you want to be will really help.

I think realistically my view is 15K would be alright I would 'get by' OK. Which earning 22K right now is fine as I am saving each month for this goal.
Downsizing isn't really an option as I live in a small house and the thought of air bnb etc when we have one tiny bathroom isn't effective sadly, if I were to sell approx value 250 K I don't think I could (after fees) get anywhere other than a small apartment which I am loathe to do as my home is the only thing I have left, it was my family home and like most during lockdown my garden was and is my solace so selling is a very last option.
This may also sound really morbid....both my parents had dementia and I also lost my brother due to early dementia so I kind of think how long should I budget for, given they all died before 80. My brother was 50, I am 60 and think maybe at retirement at 67 I should maybe only have 10 what I would call 'quality' years left to take holidays etc if that...which is why I would dearly love to retire early and it's such an issue with what went on in my divorce as he has robbed me of that. Having said that I have to move on and make the best of what I have now.

Is partial retirement an option? It stops work feeling so 'big' in your life and frees up time for short holidays with longer weekends.

I completely understand why you want to make the most of the 'quality years' but also have to balance that with avoiding poverty in old age. I'm really sorry the divorce has left you in this position, on the face of it (but not knowing the rest of your circumstances or your ex's position) it's surprising that the judge signed off on the agreement.

Anyway, if 15K is the aim it sounds as if you are not too far away from it from 67 onwards. Is the 15K post tax or pre-tax? The tax won't be high at that level but if you are aiming for £15k spending you need to take it into account in working out the amount you need to generate. Does it also include money put aside for occasional expenditure like holidays and house repairs or will that come from your private pension and lump sum? I'd really recommend looking at a budget planner like www.moneysavingexpert.com/banking/budget-planning/ to think through anything you might need to plan for so you can be as sure as possible it will be right for you.

Assuming 15-16K is right for you then the state pension and your existing LGPS already put you very close to the post-67 aim and they have some protection against inflation. Presumably you are adding about £500 to your annual pension each year whilst you are in the LGPS so if you stay for a year or so you should be at your target.

That means your main focus is probably going to be on generating an income or saving for the next 7 years. I would talk to your pension office about whether you can take any of your pension early without penalty. I am not a pension expert and am not in the LGPS but I understand that if you were a member under the old scheme you might be able to do that. There is some info here www.lgpsmember.org/more/pre2014.php and the pension board on MSE would be a good place to ask as there are lots of knowledgeable people there forums.moneysavingexpert.com/categories/pensions-annuities-retirement-planning but if I were you I would definitely be in contact with the LGPS to find out the exact sitatuation for you. If you could get some of your pension early it would really cut down the amount you need to earn/save to retire early.

Slightly off track from your work situation but if you have time of an evening, there are lots of ways to make extra cash even now. You could bank some of this and if you chose to retire early, continue with these things. If you follow the £10 a day thread on here, lots of people (myself included) are doing surveys, online projects and transcription work from home. I have a full-time job and young children so don’t do lots but easily make £200-£300 a month.

If you register with Profit Accumulator, you could try matched betting which is completely risk free as long as you follow everything to the letter. Even if you only did the initial offers of free bets, you could easily make another £700-£1000, but if you get your head around it, it’s very easy to make another couple of hundred a month long-term.

This may not be your thing and I would totally understand that, but just thought I’d suggest. Lots of people don’t realise this is even an option or they think you earn peanuts for hours of work, which isn’t true. Good luck x

So I have had my quote through:
Option 1:
Annual Pension = £6575.53
Lump Sum Retiring Allowance = £4054.48
Option 2: Increased Lump Sum
Annual Pension = £4444.34
Maximum Lump Sum Retiring Allowance = £29628.76
On top of this I would receive 12.5K redundancy.
If I take the bigger lump sum I would have to face living off 4.4K for the rest of which isn't great neither is the 6.5K . I was hoping they would top it up to what I would get if I were to stay until 67 as it hasn't been clear sadly not so I think it's another 7 years slog for me.

Sorry OP it does look too tight. I think in your situation I would stay in my current job but actively look to see what I could do to retire a bit early. If you have the full state pension then it looks as if you've already got the income you're aiming for from 67 and you're still improving that whilst you're working.

Have you asked about whether you can claim your pension early without (much) reduction? If you look at the links I posted above you can see that might be a possibility as a longstanding member of the scheme. If that does look possible for you then you can look further at what you need to earn/save to make up the difference and you might be able to retire sooner than you fear.

The cost of topping it up to normal retirement age would probably be a lot, add that onto the financial strain your employer is already going to have to pay to the scheme to release your pension unreduced and you can see why they wouldn’t do it.

Ultimately there are redundancies to save costs. It often comes down to ‘it costs £x to make this person redundant or £y to keep them employed. Which one is lower’.

I think I would consider taking the £6.5k pension now and getting a PT job to see you through to when your state pension comes in.