Advice on when to retire

[Wallingtonhall]

I am 60. I have a public sector pension which is currently frozen as I moved to a new sector a few years ago. I can draw that now if I want. Decent lump sum and about £12 thousand a year. Good but nowhere near my current salary. However the lump sum would get rid of debts and pay off a lot of the outstanding mortgage and reduce monthly outgoings.

My current job has a smaller pension which kicks in when I am 65.

I am thinking about going part time and drawing the first pension. What I lose in salary will be made up by my pension. The lump sum is just sitting there and I feel I might as well use it now. It’s index linked but I’m not paying into it so won’t increase much. Reducing my mortgage seems to make sense as it’s our biggest outgoing.

ideally I would retire now but I don’t think I can afford it. Part time for a couple of years until second pension kicks in. Or even voluntary severance which happens occasionally in my profession.

Does this sound like a good idea? I realise you don’t know my full circumstances but seems daft to sit on that pension when I could be putting it to better use now. Plus I hate my current job and going part time would significantly help my stress levels!

Sounds like a brilliant plan.
I think it is called Retire and Return, and is exactly what you describe.
Take your pension, use the lump sum to pay off mortgage , and the Return part time to pay the bills.

can you tell I shall be doing this as soon as I am eligible and my numbers stack up.

Thanks! I had the public sector details and suddenly realised it was barely going to change so thought it was mad not to use it now. Lightbulb moment.

My current pension though smaller won’t be much but I can pay AVCs to boost it. Especially as it will be less due to change to part time.

I stopped work at 58, i was made redundant and took the opportunity to do so.

Yes less money but life's short, for most people, there are not many years of a healthy and active life after 60 & those years will go quickly, plus at 67, you ll get the state pension.

I also got made redundant at 58, 5 years ago now. Had thought I would work till 60. I only have 2 small pensions and have 2 when I reach retirement age, but have inherited money which we live on. DH always thought he would work until he was 70, but stopped working at 63, 3 years ago due to health reasons. In your shoes I would take the pension and pay off mortgage and debts, life’s too short to be working where you aren’t happy.

It sounds great plan OP. Live whilst you can. Don’t work yourself into the group. I’m late 30s but my parents have done what you’re describing & it is nice to see them able to do things and have some space. Enjoy!

Just check your state pension is on track to get the full amount, you need the look for ‘check my state pension’ on the gov.gateway website.

And I have a complicated and beautifully coloured in spread sheet to ensure I have enough for all the things I spend money on. The annual bills add up to way more than you think. But this isn’t compulsory🙄

Thankyou all.

That state pension calculator is good. It seems to suggest that even if I stopped contributing now, the difference between that and the max I can receive is £7 per week! And actually I would still be contributing as am planning to work part time for a couple of years.

It is definitely worth planning to earn at least the approx £13k a year to get your NI contributions.
£7 a week is £364 a year, which is a decent weekend away or several trips to the theatre.
I need a few more years to get max state pension, but can afford to drop my hours right down to just earn enough to meet the threshold.
Its great to be at this point in life, I can’t wait

How confident are you with spreadsheets? Only you know your personal circumstances (finance, lifestyle etc) so only you will know if you are ready to retire or need to continue working.

In my own preparations (I’m 56 and hoping to retire at 60) I started with a budget, working out what my regular expenses are now and what would be the amount I needed to cover these. What are the fixed items (e.g. Council Tax, Utilities, Rent?, Telephone, TV (Licence, Cable/Satellite service), Car etc)? What are variable necessary expenses (Groceries, Maintenance, Public Transport expenses etc)? Once these are covered then think about discretionary spend such as hobbies, holidays, leisure etc.

Once you know what your expenses are (this is where the spreadsheet comes in) note them down and work out your totals. Think about what savings you have (if any) and any other investments (e.g Stocks and Shares ISA). This may be alien to some people.

My biggest resource has been YouTube. There are some excellent videos by Pete Matthew under MeaningfulMoney, and Chris Bourne. They are both Independent Financial planners in the UK so all details are relevant. They suggest starting with a budget and calculating your expenses & also making sure you have paid your debts off before (or at retirement).

There is a lot to cover, but if you are confident in your own calculations you do not need to use an Independent Financial Adviser (their fees can be quite high, I’ve found).

I am assuming your public sector pension is a defined benefit (final salary) scheme which are the gold standard in pensions. Unless there are restrictions with your other pension, I would have thought you can claim this at any time (e.g. now). Many pensions schemes indicate an “intended” retirement date (e.g. 65) but that is usually just the expectation with the pension provider who, if you are on a default scheme, will usually start changing the way your pension is invested as you approach the intended retirement age

Whatever you do I wish you all the best

Claim your public sector pension ASAP - just check your claim date. If you were a member of the scheme before 2007 (I think - but do check in case there were some differences) you can claim at 60. The public sector pension will not be impacted by your non-public job because of the abatement rules.

Hi why do you say claim it asap?

also, second pension is teacher’s pension if that’s relevant.

Thanks

In case you are losing ‘free money’. The old schemes had a retirement date of 60 - anything in old schemes you can claim as soon as you hit 60. They will not increase in value.

if your second pension is in the TPS then we were all transferred into the CARE scheme in March 22. Suggest to look at Diddy Dave’s YouTube videos (Dave Fountain is a TPS god and has helped loads of teachers)

some of my colleagues have taken their old scheme pension, taken a one day break and are now building up their CARE scheme which they will not access until much later

Thank you.

@isthewashingdryyet I think the qualifying amount is less than £13k as there is the LEL lower earnings limit. I don’t fully understand it so can’t explain but might be worth looking into.

If you're thinking of still paying into your second pension whilst being PT, please check if this is possible / I thought once you take some out of a pension you can no longer pay in.

I'm thinking of (actually, have decided to) doing something very similar but with a private pension scheme. I agree that having a lump sum now would make a significant difference to your debts and to your peace of mind.

I've looked into whether I can continue to make pension contributions if I take money out, and the answer was as long as it's only the tax free lump sum I can. I think even if you are drawing down from a pension you can still contribute to another, but the amount per year is limited. Not sure if the amount went up in the recent budget - as pp said, look at Pete Matthew on YouTube. I've also found James Shack helpful. Good luck - enjoy your new way of life!

Ah so if I take one pension now and work part time, I can’t contribute to my second pension?

I think you can but the amount you can contribute is limited. Have a look into it - there's a govt website that gives info on pensions, can't remember what it's called at the mo

I don't think that's true. I got one pension at 50, and threw as much as I could into my next work pension. Do check in case rules have changed though.

Have a look at this website - they offer appointments so you could talk through your situation:
www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Great idea. When I’m 60 I will be doing the same until I’m due my state pension.

You need to know about abatement. I’ve been told it crucial to know. It’s something to do with reducing your hours enough that you qualify for something. Not sure. Sorry I sound vague. I know if I drop a day a week and take my pension it will screw it up. I need to drop more days. Like only work two a week or something.

Hopefully someone here can explain or send a link.

Work out how much worse off you’d be on the reduced salary (taking into account the drop in loan repayments) and then try and live on that money for a month and see how you get on. It’s the only way you’ll know if it’s ok or just not do-able at all.

good luck.

Look at David fountains video on abatement.

You can still pay into your second pension. I know colleagues who are ready taking their first pension, working part time and paying into tps. Some took the one day break option.

their part time earnings plus pension do not exceed the highest amount they earnt whilst full time.

Super plan. Your first pension will top up part time wages. You'd be able to work a few days a week and enjoy your time off.

Life is too short not to do it!

Thanks for the advice all