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Opting out of pension - what happens when I actually retire

Discussion in 'Retirement' started by TonyM19, May 9, 2019.

  1. TonyM19

    TonyM19 Occasional commenter


    One of a series of questions I've posted before I take the final plunge. Going to call TP but just wanted to check I'm not about to ask a stupid question.

    I'm in the final salary scheme. I'm 58 and have already taken 25% phased retirement (literally the best thing I ever did). My Final Salary calculation will drop off considerably at the end of August (and is actually reducing gradually now). I'm about to opt out of the TP to protect the Final Salary. I will still have 20 years in at the end of August after having 25% taken out for the phased retirement. If I opt out now and take the pensiion after I turn 60 are their any penalties? I'm assuming that it would be 20/80 x my final salary which would be frozen at whatever it is in August. Is that right? Once I retire I will not be seeking further employment. I understand that opting out means that I would take a hit on my tax and I wouldn't be getting all my monthly pension contiributions in my take home pay.

    Anything I've missed before I call them?

  2. phatsals

    phatsals Senior commenter

    But you could pay the same amount into a SIPP and get the tax reduction that way.
    TonyM19 likes this.
  3. diddydave

    diddydave Established commenter

    Taking it at 60 you get no AAB penalty.
    Check your inflation increases as although your salary is frozen at whatever it is in August the final calculation of 20/80ths of it should be to August 2019 and as you'll be taking it in 2021 it should be increased by inflation.
    TonyM19 likes this.
  4. TonyM19

    TonyM19 Occasional commenter

    Never really looked into SIPPs. More research needed here. If I was to pay the same amount into a SIPP as I currently pay into my TP would that leave my take home about the same?

    Any recommended begiiners guides to SIPPs before I call the financial advisor?

  5. phatsals

    phatsals Senior commenter

    When you pay into a SIPP it is from taxed income but the tax is then reclaimed, ie you pay in £100, tax is reclaimed of a further £25. You can invest as you choose or not at all, the money would just sit there.

    It wouldn't be a huge sum of money but it has it's advantage. Take a look at Hargreaves Lansdown, they're very reasonable for fees and have a wealth of research available to you.
  6. flyingdaisy

    flyingdaisy New commenter

    I am in a similar position, deferring from September 19. Is the inflation increase applied to the final salary or to the estimated pension/lump sum? What % increase might we expect?
  7. diddydave

    diddydave Established commenter

    I've had several exchanges of messages with TPS as I was worried that when I deferred it meant freezing the revalued final salary as it didn't appear to be increasing. I had expected it to rise each year in line with inflation but instead they freeze it at that point, work out the pension to the point it was frozen and then add the inflation increase from the time it was frozen to the time it is paid. Mathematically it makes no difference to the final figure to do it this way or the way I was expecting so I'll try to answer you question (but you may want to check this with TPS yourself to be sure)

    They work out your annual pension, it is increased to 'todays money' by adding on the inflation figure and then the lump sum is 3 times that figure...so you get the inflation increase to both your annual amount and the lump sum.

    Currently inflation is around 2%. The figures on the statement provided by TPS on their website have the inflation figure included.
  8. TonyM19

    TonyM19 Occasional commenter

    I'm exploring whether its worth taking a further 50% phased pension, taking on a different role (20% less - the school is ok with this) and then deferring the remaining 25%. Lot of spreadsheet work ahead this weekend to see which is best for me. There are some pros and cons to both options. Of course if theye were to offer me full AAB and then a new contract that would be very nice.
  9. TonyM19

    TonyM19 Occasional commenter

    Anybody got any experience of time frames for applying for phased retirement or early AAB retirement. Is it cutting it too fine to get it in place for August 31 or is 31 December more realistic?

    What if you apply now, but they don't get it done until mid Septemeber when I have experienced a drop in my Final Salary? Are the calculations made on the lesser figure?

    Can I defer my pension in September and then take phased from 31 December or does that option disappear once you defer?
  10. Braindead101

    Braindead101 New commenter

    TP received my completed form from my employers on 15th Feb - I think I'd filled it in around the 4th Feb. This for an AAB retirement date of 1st May. No problems getting all sorted by retirement date.
    1st September is the busiest date so (I expect) TP would need as much time as you can give them.

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