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Phased retirement: Earning more by going part time

Discussion in 'Retirement' started by mustntgrumble, Feb 5, 2019.

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  1. mustntgrumble

    mustntgrumble New commenter

    Hi,

    I'm approaching retirement and forward planning. I'm a year+ from NPA of 60. Final salary scheme.

    I've been through my projected income calculations as follows:

    If I go 0.6 - phased at a few months before NPA

    I would get 0.6 of my salary which is then taxed as normal, it pays NI as normal, and I would continue to pay pension contributions on this component of my income (8.6%). I used this: https://www.thesalarycalculator.co.uk/salary.php

    Additionally I would/could get 75% of my pension. This is taxed at 20% ish but there are no pension or NI contributions on this part of the income.


    Given the above and assuming a phased retirement start four months before my NPA it seems that I'd be bringing home (after all taxes) £300 a month MORE than I am actually earning full time at the moment.

    Question - is this possible or will someone step in and say you can't do this and you'll have to take a smaller percentage of my pension (as an example)?
     
    emerald52 likes this.
  2. Sundaytrekker

    Sundaytrekker Star commenter

    You can do exactly that. That’s why phased retirement is a good idea. You can take less than 75% pension if you want. I think they’ll apply your tax code first to your pension then, assuming your pension is more than the personal allowance, your earnings will all be taxed after pension contributions. It makes no difference to your total tax whichever way round they do it.
     
    mustntgrumble and emerald52 like this.
  3. Braindead101

    Braindead101 New commenter

    The phased part of the pension is actuarially reduced as you are taking it early. The earlier you take it, the more it is reduced. If it's only a few months it won't make too much difference though.
    You would also be taking (up to) 75% of your lump sum, actuarially reduced too.
     
    border_walker likes this.
  4. Braindead101

    Braindead101 New commenter

    A couple of other things to consider:
    After you take phased retirement, is it worth staying in the pension scheme, or should you stop contributing?
    It is likely that the rate of your pension contributions will go down as your salary goes down, as will the total amount deducted from your salary each month.
    If you go from full time to 0.6 for say, one year you will not, by the end of that year have accrued a full year of pensionable service, only 0.6 of a full year. You need to work out whether the amount you pay each month in pension contributions would buy you enough pension to make it worth contributing.
    Have you talked to your school about what your part time hours would be? Do you have any preferred days off e.g. Thursday and Friday? What if the school says you can have Tuesday and Thursday? Or even, you can go to 0.6 but still work Monday to Friday and go home after lunch. When I was considering this, my school was accommodating and helpful but I have worked in schools where the management would be as awkward as possible on principle!
     
  5. mustntgrumble

    mustntgrumble New commenter

    Thank you for the responses. I'd done a lot calculations- however looking at it closely I guess the figure is a bit higher than the original £300 as I assume the remaining 25% of the pension which I take after NPA is not subject to AR.

    As to "discussions" about what 0.6 means in real terms.. that's for another day...
     

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