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Early Retirement Advice

Discussion in 'Retirement' started by angiebrc, Sep 14, 2020.

  1. angiebrc

    angiebrc New commenter

    My aim is to take early retirement Summer 2021. I will be 56, with 23 years service, mostly at SLT level, so my pension pot isn't huge, but to be honest I will just be glad to leave! Sadly I've just had enough. As a DHT over two schools and a qualified SENCo I'm burnt out and need to go!! We have no debts and are mortgage free and have no dependent children (well I say that, but bank of mom and dad is used regularly!!). So I know I am extremely fortunate. My husband is still working but has reduced his working week and intends to reduce it further when I retire.

    Firstly, I want to know how accurate is the teachers pensions calculator? I have used this to make a spreadsheet, plotting since I reached 55 half termly, my pension and lump sum predictions at these different times. I'm hoping the figures shown are accurate and wondered if anyone could share their experiences? I know teachers do not give you the actual figures until all the paperwork has been submitted. I am just worried and don't want to plan ahead with incorrect figures!

    Also I'm not sure whether to convert my pension and take a smaller monthly pension and have the maximum lump sum?My initial thoughts were I'm definitely going to take the maximum lump sum, but without sounding daft here, these days what do you do with it as there are no returns on savings at the moment? I don't know what would be the best long term financial decision? I suppose I could buy a second property to rent out for some return? But this I find daunting. Would it make more sense to just take my reduced pension and normal lump sum as the pension is index linked I believe?

    Any advice would be extremely welcome. Thanks in anticipation.
     
  2. diddydave

    diddydave Lead commenter

    It is pretty good BUT is likely to be completely useless for your purpose because of the proposed remedy for the age discrimination that is going to allow you to choose how your service from 2015-2022 will be treated.
    That's a good move but you should look to project ahead over the coming year month-by-month to see what effect staying in the scheme has. The hardest part of this is working out what the "final salary" will be - for many teachers it is going down because of the wage freezes and how index-linking is applied to the older salaries. You also may want to look at how the different schemes compare over that time frame.

    Opinion is divided over the lump sum question but unless you have definite plans for it I'd suggest that it is safer to take the full pension rather than convert it to a larger lump sum - inflation is the enemy of investment - here is one discussion thread about it:
    https://community.tes.com/threads/any-thoughts-about-lump-sums.807065/#post-13249708
    In order to achieve the same security you would need to find an investment that pays >10% per year from my calculations.
     
    frodo_magic, Sundaytrekker and Prim like this.
  3. lindenlea

    lindenlea Star commenter

    Have a look back through this forum and there are lots of threads dealing with these matters. It can be complicated - more so than 11years ago when I went. Here are some things you could consider.
    * You could continue to earn for a few years at least - there are part time jobs out there - low paid may be but it provides a boost to your income.
    * You wont be paying National Insurance or Superannuation or a high rate of Income tax so you get more in your pocket.
    * The lump sum is tax free, becomes part of your estate and can be bequeathed in your will.
    * The longer your life expectancy, the better the pension looks - are you from a long lived family?
    * After your death your surviving partner receives a percentage of the pension but your pension can't be passed on in your will eg to your offspring.
    * Investments can still make a reasonable return; savings accounts are not the only place to put money. Talk to your bank or get a free initial consultation with an Independent Financial Advisor, or do both. You don't have to commit yourself to anything but you do need to gather as much info as you can.

    There are no right or wrong answers, but you do eventually have to make decisions.
     
    eljefeb90 and diddydave like this.
  4. diddydave

    diddydave Lead commenter

  5. frodo_magic

    frodo_magic Occasional commenter

    Agree about the lump sum. If you don't need it to pay off debts, just take the normal lump sum and your pension.

    If you have savings, I would use them up before taking your pension. As you know, savings rates are rubbish and the amount you gain in a smaller ARB reduction, with index linking, in comparison is considerable. The longer you can delay taking it the better. I went at 52, did a bit of supply each year for a few years, used savings and still won't need to take the pension for two more years, at 60. Hanging on taking the pension until 60 means it's worth 20% more than taking it at 55.

    If you are definitely going next August, consider putting a huge chunk (all?) of your salary in a SIPP. It will save you a small fortune in the short term. It takes ten minutes of work.

    You need a lot less than you think in retirement. Be clear where your outgoings are. Many people reduce these easily, getting rid of a second car, time to switch to cheaper deals, shopping in Aldi, cooking all food from scratch etc.
     
    wayside34 and diddydave like this.
  6. diddydave

    diddydave Lead commenter

    I am still swinging between the advantages/disadvantages of taking it early. My wife has but as my pension is smaller I'll probably wait until it gets to be the same annual amount as hers - for the not very scientific reason that it 'feels' right.

    I don't think there is any point waiting until you are 60 exactly given that if you take it 1 or 2 months before your 60th you will be financially better off until you reach your 90s.

    As ever it's worth getting the exact figures on what it means so I made this sheet to compare the reduction factors:
    https://docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing
     
    frodo_magic likes this.
  7. lookingtogo

    lookingtogo New commenter

    Frodo - you make a really interesting point there , and one that had not even crossed my mind. I am retiring this Christmas and will need to live off my savings for a couple of years as I am in my early 50s. I had planned to take my reduced pension at 55, but you are right, interest rates are so low now I might be better to continue to live off the savings and leave the pension alone for as long as possible.

    I calculate that I will need to take £1000 out of my savings each month - I think that my lump sum would replace what I removed between now and age 55. However, I may need to adjust my mind set re the amount of money I have in savings and be prepared to let it dip lower in order to take my pension at say age 57. All food for thought. I have found the rainy day thread very interesting - I think I am more risk averse than most and feel less stressed to have a lot more in there than many of the posters in that thread.

    It is going to be so difficult to move my mind set from save save save!!! Diddydave - I am waiting to take you up on your kind offer to help look at my pension forecast - I want to send the details via a PM, but at the moment TES does not allow me to start a conversation as I am a newby. As my letter of resignation has already gone in it is too late to change my mind, but it would be good to know that I have go my sums fairly accurate!!!!

    Sorry to hijack the thread OP|!
     
    frodo_magic likes this.
  8. diddydave

    diddydave Lead commenter

    I can start one though...:)
     
    lookingtogo likes this.
  9. diddydave

    diddydave Lead commenter

    Frodo's point about putting all of this year's salary into a SIPP is very valid, particularly given that you can get tax at 20% added to ALL of it, even the tax-free allowance. However, it does lock it up until you are 55. For my wife we did take out of the AVC pot to extend the time to 56 before she took her pension as that was the point at which her salary matched our 'comfortable' level of income. The temptation of taking money out 'tax-free' was also quite exciting.
     
  10. frodo_magic

    frodo_magic Occasional commenter

    @lookingtogo It's an interesting time! Most people do find that even with planning, they need less than they thought they did in retirement. If you do even a bit of work part time, a bit of marking, some supply etc, you might find your savings will last far longer than you ever imagined, without any effort and far more enjoyable if it's on your terms. I also do / did voluntary work abroad in poor places, which was a joy and by far the most rewarding thing in the teaching career. When I went at 51 / 52, I did a contract a year lasting around a term, and only in nice schools :) and a bit of other stuff, which I did because I enjoyed doing it. That was enough to finance each of the first three years. It's not that I was scrimping. It's that living and travel during term time is cheap and all my hobbies are too. Good luck with the planning. It's an exciting time and part of the fun!
     
    eljefeb90, lookingtogo and diddydave like this.
  11. angiebrc

    angiebrc New commenter

    Wow I didn't expect such informative replies, so many thanks to you all. I'm going to really study the replies at the weekend as week days I'm just too exhausted to internalise any new information and nothing sinks in!!
    Such a hard decision and the way I'm feeling at the moment once I've gone I never want to step inside a school again. Sad as I used to absolutely love my job with a passion. I'm interested in the family support side of my job so i might volunteer in that area. A big thank you for the offer of help Diddydave, I'll be in touch. Thanks again to everyone that took the time to read and reply!!
     
    eljefeb90, diddydave and lindenlea like this.
  12. lookingtogo

    lookingtogo New commenter

    Sorry for hijacking again, but I just want to say a huge thank you to diddydave who has so very kindly compiled a spreadsheet for me and been most patient with my multitude of questions.
     
  13. Jazzz

    Jazzz New commenter

    This area of the forum is absolutely brilliant for retirement advice! I’ve learned so much from just reading posts and reading advice from diddydave (I just wish you were based in Scotland although I’m sure much is similar). Thanks diddydave for taking the time to post and look at individual circumstances.

    I’m 52 and hope to keep going until the McCloud judgement takes shape in 2022. After that I hope to leave, survive on savings and take my pension at 60.

    I am wondering about Additional Pension contributions and whether that’s wise. Have about 16 years service so might be a consideration but I need to find out more info.
     
    Prim and diddydave like this.
  14. diddydave

    diddydave Lead commenter

    I have done some work on the AP

    Faster Accrual Versus Additional Pension
    https://docs.google.com/presentation/d/1iJDZgDwy6s2PoOaQ-0zNHS7jSvCuKHt3nMA8-t_aXOs/edit?usp=sharing

    Mortgage versus Additional Pension
    https://docs.google.com/presentation/d/1W1fWswa1iiATBLBr9abPfeBd8kAU8DY5EDkFF_JzKpQ/edit?usp=sharing

    Additional Pension versus ISA
    https://docs.google.com/spreadsheets/d/1hbQc1RbI2B5ri27mKMBlIFuMhKwKp0yGfSG7knjxB2o/edit?usp=sharing
     
    Jazzz likes this.
  15. eljefeb90

    eljefeb90 Senior commenter

    @angiebrc As usual, lots of excellent advice given already , especially from @diddydave , @frodo_magic and @lindenlea .

    I would only echo wwhat @frodo_magic said. Retirement living is not as expensive as in-work living. Look at all these people working from home who are stashing away thousands because of not having to commute/run a second car/splash out on expensive coffees and meals on the go.
    In addition, there is that huge psychological need, when working in a stressful job, to reward yourself. The expensive holiday, the meal out and the takeaways and booze, it all mounts up and is only being used as a prop to offset the ludicrous pressures of the job. I can now take holidays in term time for a fraction of the cost and enjoy cooking from scratch.
    Life really is too short and precious by the time you reach your mid fifties to keep flogging yourself at the chalk face.
     
  16. Jazzz

    Jazzz New commenter

    Many thanks for linking these.
    I’m trying to read and let it all sink in but it is quite complicated and figures seem dependent on inflation or interest rates (isa).

    I think I may have left it a bit late in the day for AP, especially if I want to leave in the next 3/4 years.

    Apologies for thread hijack! I should really make one of my own. Maybe soon!
     
  17. diddydave

    diddydave Lead commenter

    AP is certainly cheaper if bought when you are younger but as it can be purchased with a lump sum payment it still has the same tax advantages...so long as you don't pay more than 90% of your salary to buy it!
     
  18. eljefeb90

    eljefeb90 Senior commenter

    Memento mori..Plan all you like, you never know how much time you have left.
    My brother-in-law worked in pensions all his life and had all his ducks in a row from a financial point of view. Last month, soon after his 65th birthday, he was diagnosed with stage four cancer.
    Luckily, if such a word is appropriate here, he has had four years of retirement to do some travelling and sort out his house out.
    The TP is a massive deferred benefit and you owe it to yourself to make the most of it for all those unpaid hours you put in over your career.
     
    emerald52, Prim and frodo_magic like this.
  19. frodo_magic

    frodo_magic Occasional commenter

    Yep. I sat next to a lovely bloke in the staffroom for 10 years. Funny, easy going, a rock when things got stressful. He retired early, then a few months after retirement, he had a massive heart attack in the street and was gone. All those plans, dreams and schemes disappeared in an instant, like a teardrop in the rain.
     
    eljefeb90 likes this.
  20. sueclarke65

    sueclarke65 New commenter

    Omg this is all very depressing. I am 55 and think I can only retire when I can choose to take fs pension after Mcloud is sorted. If I wanted to go in 2021 would I be able to take benefits from fs scheme or would I have to wait until 2022?
     

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