Take pension now? Advice Please.

[Homelykind]

I am no longer able to work due to medical reasons. But I am not sick enough
to retire on medical grounds or claim any benefits.
My DH earns a good salary and we are mortgage free and debt free.
I cannot claim state pension until I am 67. I am 58.
I have a work pension from a job I did over twenty years ago which I can now claim. I can have a lump sum tax free and then A small monthly pension.

I am looking for advice, do I take the lump sum tax free and a smaller monthly pension for the rest of my life (it is small) or just the lump sum, or wait until 67 to get a slightly bigger monthly pension and/or lump sum. This work pension is the only work pension I have. I feel like I should take it now as no guarantees I will get to state pension age, even if it is a smaller amount.

Partly because I also feel guilty I am not contributing financially. And this will make up for that, even though my DH is happy to support us both. At retirement we will both claim full state pension and DH has a good company pension. I cannot decide what to do. Anyone in a similar situation.

I am in a similar position although I anticipate my current job contract will end in two years and I will be 58 then. It is an NHS pension and I will be better off leaving it until I am 60, so am going to try to last out for a couple of years. Could you still try to claim new style ESA if you have paid sufficent NI contributions. If your monthly pension is very low ( under £85 a week ) then it would not affect the ESA.

Take the pension is my advice. I did. Retired at 55 with two pensions from two previous jobs. My home situation is v similar to yours. I figured I’d rather have a bit less per month and have it 12 years earlier rather than wait.
zero regrets.

You really need a good spreadsheet showing your yearly income and expenses from all sources. Then you can model different timings of taking pensions / spending savings.
This has to be a joint spreadsheet though, pointless doing it for one.

If you can manage without it don’t claim it yet but wait until you need it. If you need it now claim it now.

Assuming it is DB then you need to work out what you would gain (or not) by taking it now.

I retired at 57 and took my DB pension straight away.
Based on the information provided by my pension provider it was loosing so little by taking it early but gaining so much by having the income (and tax free lump sum) straight away, many years before I might have otherwise taken it.
My IFA agreed with my decision and confirmed that (in my case at least) it was a no brainer. Your pension may not be as clear cut.

A couple of questions....
Have you had any earnings this tax year?
Is your pension a DB scheme?
Do you or your husband have any savings?

If yes to all: Use some savings up to put into a low cost SIPP as soon as possible. (You can do this up to £2880 even if you haven't had any earnings). You will receive 20% tax relief boost into the SIPP.

In April 2024, new tax year, start to draw down the money out of the SIPP including the extra 20% tax relief, up to your personal tax threshold over the 20224/25 year.
This strategy will boost your savings by 20% to use as income, and delay claiming the DB pension for a year.

The following tax year April 2025, start to claim your DB pension. Use the lump sum to repay into the savings.
If you have more substantial savings, and have had some earnings this tax year you could contribute enough to draw down from the SIPP for two or more years to delay taking the DB pension further.

Consider how much you would have to live on should your DH die before you. You might wish you had your full pension at that point if you can manage without for a while longer.

I did that at55 . Part of me wishes i waited till 60 or 65 .. but as there are no guarentees in life - on balance I did that . My reason was i was burnt out( i still work seasonally)
my pension was either 800 pm plus ( was part time) or 430 ar 55
i took 55 as dh pension is 170O a month . If he dies i get half of it and vica versa .
would this apply to you .
saying that we live v simply - would it suit you also ?

@Homelykind I retired at 57 and did some simple sums on the basis I would live to 80.

57 to 80 = 23 years
60 to 80 = 20 years
65 to 80 = 15 years

I multiplied the pension at each age by the number of years and found that essentially I got the same amount in total. For me 23 years of a lower pension meant I got up to 8 more years in retirement.

It was a no brainer so in your position I took the reduced pension.

My only advice is check your state pension forecast https://www.gov.uk/check-state-pension. Aim to get the full amount by paying voluntary contributions. However, you state “no guarantees I will get to state pension age”. If that really is the case consider saving up and when you get very close to 67 pay any missing years.

Thank you everyone for your advice.

@Propertylover I will do the sums you have suggested, but am of similar thinking I will get 9 extra years of pension even if lower. I have done my state pension forecast I have more than enough contributions to receive full state pension.
@Getoverits I am in similar position as you I will get half of DH pension also. My thinking is also similar to yours with no guarantees of getting to state pension age I may as well take my pension now.
@Cotswoldbee I am in exactly same position and the fact your IFA thought it was a no brainer makes me think more positively. I think it may be worth the small loss on the pension to get the lump sum and a smaller pension, but years earlier. Thank you for posting that.
@seekingasimplelife The SIPP information is very interesting I will look into it.

I took my NHS pension earlier than 60 as I did the sums and I wasn't losing much so it was worthwhile to me. I guess to others they would not have wanted any loss.