Advice on setting up for an early retirement

[Reluctantadult]

Has anyone got sage advice on how to set yourself up to retire before 68? More like 60 or 64?

According to 'which?' a couple can live comfortably on £28k. Does that sound about right? No advice I can see for a single.

I believe retiring early means taking a lump sum to tide over to state pension age.

Which? assumes that the mortgage is paid off. Ours runs until 64 at the mo, so should reducing the term by overpaying be a priority?

Thanks @Testina ,it doesn't add up though as the cost of after school clubs means I earn £2... I have just added a couple more hours to my week.

Everything I've looked into so far is pointing me towards leaving the pension and mortgage as they are right now, ticking along but not doing extra. And saving harder for the kids educations in case they choose to go to uni or need a house deposit. I would like to give them £25k each which means getting on with it significantly.

The juggle is real.

I didn’t save anything for uni, we paid as we went along, never over paid the mortgage, everything went into the pension to get the tax relief. If you go full time you’ll get more money put into the pension.
It’s an amazing feeling being mid 50’s and my DH will never have to work again.

We're early 40s and would like to retire at around 64/65 if possible
Our loose plan is to get the mortgage repaid by 55. The term ends at 64 if we don't overpay
Then spend 5 years between 55 and 60 working as much as possible increasing pension contributions and saving as much as we can. Then at 60 we'd both like to drop to 3 days a week for 4 maybe 5 years
We should both get full state pension assuming it still exists
My husband has 2 DB pensions that are worth £12k a year currently and will have around £200k in a DC pot also
I should have around £300k in a DC pot which we will probably draw down instead of purchasing annuities
We then are planning on having another £200k in various savings/investments
We already have funds in place for house deposits but nothing to pay for higher education, we have 4 children so they will have to take out loans for this
It would actually make more sense for husband to put more into pension as he's a high rate tax payer but thus worries me in case anything happens with pensions and I do like the thought of being mortgage free

Do you mind me asking whether that is £18k a year pension based on the entitlement you have built up so far, or is it the amount you are predicted to have built up if you work in the same job till 65?

Also, are you certain that you can take that at 65 without reduction? Civil service pensions are so complicated because it depends which scheme you are in, when you joined and how McCloud applies to you. But I thought the general Alpha scheme could now only be accessed at state pension age without reduction (your past contributions might be treated differently). If you are 40 I would assume that willl be at least 68 and could go higher. Princessglittery's post is really helpful on how the reduction might work.

As a PP said it's very likely that public sector pensions will be downgraded further. I'd never assume that the prediction for benefits accrued in the future will be accurate. I'd also be very cautious about relying on the state pension as that's also likely to become less generous in the future.

Watching with interest. I'd like to retire at 62, which is about 5 years away. I've got three different pensions, two of which (including my current one) are defined benefit. I'm ploughing in as much as I can now and suspect I will stay in this job until I retire simply because of the advantageous pension. The pensions don't pay out until I'm 65 so I'm saving to cover the gap between 62 and 65, helped by a small inheritance a few years ago.

My two current worries are:

1. My DS will go to uni in a few years and he will only get the minimum maintenance loan (because of my salary). So we need to top this up. I'm saving towards this too, and plan to retire when he finishes. He will earn too to supplement his loans and what we provide, but probably more of a holiday thing than term time.

1. Most of my saving are in funds like the Vanguard life strategy one and they of course have been doing terribly. I'm happy to ride that out but I have to decide where to put any new savings from now on - ploughing more into the stock market given how relatively soon I'll need to draw on them feels risky. I have premium bonds too but the return in those is small.

Helpful to write this down - thank you!

@Mia85 that's my projection if I carry on like I am now. I intend on increasing my hours to full time in 5yrs time. I think I'll try to find a more knowledgeable colleague to a chat to.

Does it tell you what you have already built up? I am not in the civil service but I can log into my pension and it makes it really clear what I've already built up and then my annual statement has that plus what I might get in the future.

I'd really recommend taking the time to find out more about exactly how the scheme works and your position. I did this a few years ago and its helped me so much in setting up a financial plan.

@Mia85
This is the 2020 statement, I don't have anything more recent printed. Might be £6-7k now hazarding a guess. Can check on Monday. Got £4690 in an older scheme. = £10k?

@Reluctantadult Ah we are in the same scheme! You can pay additional sums that allow you to take your pension earlier at the same level (ie without reducing it) - that is what I am doing. It might be worth seeing what extra you'd need to pay to do this.

As the poster above says on the CS pension scheme you can boost your pension. Firstly you can buy an EPA (Early Pension Age) - i.e pay extra now to take an unreduced pension at 65 and secondly you can buy “added pension”. Both are fairly cheap if you start early and are taken from your gross pay, before tax and NI are taken out. I’d sign up for one of the online pension power webinars that myCSP run. There is loads of info on the website. You can also plug your figures into the retirement modeller and look at what you would get at different ages.

Thanks folks, I will see what I can access. We don't see much of the civil service training and 'things', despite having the Cs pension. Non-departmental public body.

Do you have a login for the mycsp? That should let you get an updated amount and you can play around with their retirement modeller to see how different options look.

At the moment you are getting 2.32% of your salary plus inflation (explained in more detail
here In 2020 that meant you added another £478 + inflation to each year's pension after state pension age.

From the numbers you've given that means that in 2020 you had: 2348+ 4690 = £7038 pension a year

As a very rough calculation, if your salary has stayed around the same you will be adding about £500 a year to that (plus inflation). So by April 2023 it should be about £8500 a year in total (including the older pension). Another 20 years under the same terms and salary would take it to about £18500 in today's money. Everything apart from the £4690 would be at state pension age (whatever that is at the time) unless you paid the extra contributions pp have explained or take a reduction.

Obviously mycsp will give you a much more precise number but I hope that is helpful.

@Reluctantadult The Civil Service Pensions website www.civilservicepensionscheme.org.uk is a public site and contains full details of the schemes, Pension Power webinars, modelling tools etc. There is also a link to the pension portal your personal pension entitlement.

As I said in my post you need to take your t8me and use this website to learn about your pension and option.

@LoveAHolidayOrTwo @Boonata that's our plan too. Both maxing out salary sacrifice pensions and then will use the tax free lump sum to pay off the mortgage.

Only anything left after pension payments goes into ISAs. I'm also paying into JSIPPs for the DCs.

@Mia85 I wish I had too! I just didn't really think about saving into a pension at that age although I did have a workplace scheme which I put a little into.

I've been trying to get through to my children the importance of paying into a pension. But they're 15 and 18 and it's not on their radar.

I'd also mention an advantage of salary sacrifice is that it reduces your declarable taxable income for submitting applications for student finance, if your children go to university and are ok with a bigger maintenance loan - this helped us a lot.

Tbh, we have been planning for early retirement since the age of 30, as it's harder to do as you get older. But AVCs are a good idea, plus paying off your mortgage (if you have one).