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60th Birthday next year - exploring options

Discussion in 'Retirement' started by shipscat, Nov 21, 2018.

  1. shipscat

    shipscat New commenter

    I will be 60 in October 2019.

    Since September 2016 I have been working part time (3 days) and claiming 70% of my Teachers Pension with actuarial reduction.

    I am now examining my options for next year. I don't want to stop work as I want to bridge the gap until my state pension age at 66.

    However, due to caring responsibilities for an elderly relative I would like to reduce to 2 days per week from next academic year.

    I note from TPS that I am entitled to one more draw down out of my pot at 75% of accrued benefits which in reality will not generate that much as I have already claimed 70%. However, I have a Pru AVC payable on my birthday in October.

    Options need to be considered now before I approach the school which I intend to do around Christmas time.

    The options I have considered are:

    1 . Reduce to 2 days per week from September and claim my full TP pension from August 31 plus AVC from October. Obviously there would be a small actuarial reduction on the remaining balance.

    2. Reduce to 2 days per week from September not claim my TP Pension / AVC until October. (Can one claim TP Pensions mid term? - if not defer claim until December )

    3. Reduce to 2 days and take the second phased retirement from September plus claim my AVC in October.

    Is there anyone out there who has made a similar decision?

    Any suggestions as to what is the best option?

  2. Brianthedog

    Brianthedog Occasional commenter

    I will be 60 next November. I dropped one day this September, but didn't notice a great reduction in my take home pay. I've done lots of calculations and have now decided to take my pension a few months early at Easter, and return on 3 days. Partly because I will be looking after my new grandson for one day a week from April.
    I will have a very slight reduction in my pension through taking it 7 months early. I intend to take minimum pension and maximum lump sum as it is tax free, and my pension is above the tax threshold. I also intend to work until I'm 63. I will be able to pay off my mortgage, saving £1000 a month, and because I won't be paying into my pension will actually be better off by around a further £400 a month once I go to 3 days plus pension.
    I will be able to save £1500 a month for the years I continue to work, which I will use to subsidise my income until I can draw my state pension. In actual spending terms, by the time I draw my OA pension, I will have the same spending income that I currently have.
    richest1 likes this.
  3. Dorsetdreams

    Dorsetdreams Occasional commenter

    @Brianthedog , it sounds like you have planned your finances superbly. I'm wondering about "I intend to take minimum pension and maximum lump sum as it is tax free". Taking the maximum lump sum to pay off the mortgage might make sense (although I'm not sure) but doing so to avoid tax? Are you sure this is a good part of your plan?
    eljefeb90 and Startedin82 like this.
  4. lindenlea

    lindenlea Star commenter

    I took maximum lump sum and so did husband ( with USS pension) which gave us a large amount of capital. Gave a substantial wodge to son to buy flat and invested the rest and its done very well. It also helped us move house to a more expensive area. The minimum pension still gives us a good income. Financial advisers are always impressed with what we get.( I think we must look a bit ordinary and dull and they never imagine that we could have done so well.) If you want capital to spend or to add to your estate this is the way to go ( imho of course).
    Startedin82 likes this.
  5. Sundaytrekker

    Sundaytrekker Star commenter

    I appreciate the logic in the posts above and the benefits the lump sum brought them but I wanted the maximum income for the rest of my life. I’m happy to pay some tax on it.
    Startedin82 and lindenlea like this.
  6. lindenlea

    lindenlea Star commenter

    It is a really personal choice and not one that is just to do with getting the maximum amount altogether. it depends on all sorts of very personal circumstances, attitudes and feelings.
  7. heldon

    heldon Occasional commenter

    I agree, personal circumstances are important. If you still have a mortgage or need to pay off other debts or help kids then maybe, if not I would be tempted to take the higher income for life. That's what I am going to do. Each to their own.
    eljefeb90 likes this.
  8. Brianthedog

    Brianthedog Occasional commenter

    I know that the max lump sum will be mainly invested, I will save my excess income whilst working part time, and as I already manage very nicely on what we will be receiving once we both retire, then the minimum pension will suffice. If I invest most of my lump sum and don't touch it whilst still working, it'll pay me a decent bit of interest. The difference between my minimum and maximum pension in net terms is actually very little, approx £200 a month. And yes, I might live til I'm 100 so over time that's a lot of money, but I'm sure I won't be spending half as much as I do now at that age
  9. eljefeb90

    eljefeb90 Senior commenter

    It all depends on your attitude to risk. I chose maximum pension because I do not want to take onerous investment decisions and risk my capital. I want that security of an inflation proof regular amount paid in every month. That means paying tax obviously, but only on a portion of my pension income. It's all psychological really. I chose to be a teacher partly because of the job security. That job security disappeared in the last ten years of my career. I am really relishing the security of that monthly pay cheque for life, combined with a lump sum for extra added security. I never had much in savings during my working life, so it's a nice, novel feeling to have that extra back-up.
  10. PeterQuint

    PeterQuint Lead commenter

    I agree with the posts above which say you need to look at the individual circumstance, and what’s best for one person won’t be right for another.

    However, there’s something I think needs noting. Even if you take maximum lump sum, you still get the vast majority (75%) of your pension.

    When you read some comments you’d almost think people were suggesting signing away their entire pension and gambling on the markets.

    If I had no debts when I retired I think I’d go for maximum pension, but as I’ll have some mortgage left I’ll be going for largest lump sum.

    My pension will only be reduced by a relatively small amount, and continuing with the mortgage would cost more per month than the reduction.

    Best wishes and good luck to everyone.
    eljefeb90 likes this.
  11. lindenlea

    lindenlea Star commenter

    Three things wrong with this post.
    * Investments don't pay interest. They may grow or drop in value and may pay a dividend. Savings pay interest, but in recent years, not much.
    *£200 is not "very little" money.
    * "at that age" you might be needing care which at current prices can easily be £800 / week.

    Martin Lewis bangs on about school pupils needing teaching about money, I wonder about their teachers.
  12. Dorsetdreams

    Dorsetdreams Occasional commenter

    I'm really interested in reading people's different views and I wouldn't want to be perceived as giving any form of criticism, but here goes...

    That is interesting. Can the interest possibly be anywhere near as valuable as the loss in pension? Valid reasons to take a lump sum might be to clear debt or help offspring, or to spend quickly or pass into one's estate if life expectancy is short: but surely not to invest long term?

    I've spent too much of my life worrying about my future yet I have no intention of worrying about my end of life care. I hope that I'll either be beyond caring, or able to find an easy escape....
    eljefeb90 likes this.
  13. eljefeb90

    eljefeb90 Senior commenter

    The possibility of forking out huge amounts to a care home looms as we get older. The costs are so enormous, however, that I could never hope to pay them for longer than a few months. . I just hope there will be some long overdue government initiative...a 40 plus 'dementia tax to get the care sector solvent again.
    PeterQuint likes this.
  14. eljefeb90

    eljefeb90 Senior commenter

    @Dorsetdreams . I feel the same. It's like so many things we could fret about. Carpe diem.
    PeterQuint likes this.
  15. Brianthedog

    Brianthedog Occasional commenter

    How does it feel to be sat on your high horse? There's absolutely no need to be insulting. I thought this post was all about financial decisions when retiring, not an opportunity to be nasty?
    Savings / investments - you get the point.
    £200 is a relative amount of money. Luckily I will have a good pension because I got paid lots of money as a teacher, plus I have very low outgoings, which will be even smaller once my mortgage is paid off with my lump sum.
    If I do need to go into a care home, so be it. Paying more money will only mean softer loo paper and posher wallpaper! Im not a great believer in children having the right to inherit my money so am more than happy for my house to be sold t pay for my care if needed, plus my daughters are both very well off as neither decided to follow me into teaching.
    But once again, thanks for the sniping comments!

    I know I will be able to live off my minimum pension, combined with my state pension, because I already do, so that's why I'm prepared to have a bigger lump sum to put in a SAVINGS account and get some interest which is tax free, as opposed to a monthly pension which will be taxed. Hopefully, I'll be living in blissful ignorance in my dotage, or maybe drop dead once my lump sum runs out,
    Lucy2711 likes this.
  16. FrankWolley

    FrankWolley Star commenter

    Or you can spend most of your capital and enjoy it, and then join the vast majority of those in care in not paying for it (but having it paid for you). You may get less expensive (possibly not less good) care, but will you (sorry) care by then? o_O

    Just sayin';)
    catmother and eljefeb90 like this.
  17. catmother

    catmother Star commenter

    Indeed. To be able to pay for real top notch care is probably well out of reach of anyone on a teaching pension,even a very good one. So may as well spend your money.
  18. shipscat

    shipscat New commenter

    Interesting comments but didn't quite help with my decision making! o_O
  19. the hippo

    the hippo Lead commenter Community helper

    I decided to retire at 59 and now I have a new job, starting in January.
  20. eljefeb90

    eljefeb90 Senior commenter

    On another thread, @Gainingcontrol said that the term ' retirement ' should be replaced by 'becoming financially independent '. You receive a financial safety net but the lump sum can provide you with the capital to rethink your life.You can get another job, start a new career, fund a new enterprise, or just do what you fancy. If you are happy to teach part time, fine; if like me and so many others, you have had enough of a toxic , exploitative and stressful work environment, then taking ARB is a no brainer.

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