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Phased retirement: Earning more by going part time

Discussion in 'Retirement' started by kings_rune, May 25, 2019.

  1. 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://incomeaftertax.com/uk

    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)?
  2. mustntgrumble

    mustntgrumble New commenter

  3. diddydave

    diddydave Established commenter

    Not an expert so I offer these as considerations for you to ask one when you find one...

    Why take phased retirement of 75%? You could just take the whole lot with the small reduction, you would be taking the reduction on the 75% anyway.
    You could then join the new scheme and build up a small amount through that...probably looking at faster accrual, useful if you are in the higher tax bracket.

    You may need to find out what happens if you leave some until your NPA as there are rules on who much you can earn if you take your pension at NPA (or after). (Salary + Pension cannot be more than your 'salary of reference')
    Lara mfl 05 likes this.
  4. mustntgrumble

    mustntgrumble New commenter

    One other thing which Im planning for
    1) Take 60% of pension three months before 60 (npa) This the full pension and lump sum with a couple of percent down for actuarial reduction. Result is I earn more by dropping dowm to three days a week.
    2) Take 75 % of pension following year (you're allowed two in final salary}. No actuarial reduction applied. Then drop to two days a week. At this point you are taking 90% of your pension and lump sum. At which point you are still only down a few quid every month on your full time salary. It's not worth working past npa full time If you have sufficient years in scheme.
    Lara mfl 05 likes this.
  5. vicki7

    vicki7 New commenter

    When you take the second 75% you can only take it from that accrued since the first phase was taken. As you always have to have 25% of your pension remaining. To put it another way you can draw a maximum of 75% at any one time but can do this over two phases. So for you 75% at the first point and later adjust to the new 75% after adding more service.

    The part I have difficulty understanding is why would anyone not take the first 75% phased retirement if what is taken doesn't increase if you don't take it. As I understand it you take up to 75% of your accrued years. As I see it those years cannot increase even if you continue to work and don't claim your pension. So surely there is no point not taking the 75% and reduce your salary by a minimum of 20%. The only thing I can see as a downside is if you didn't want to reduce either your role or number of days worked, or you needed to work full time to add more years of service.
  6. mustntgrumble

    mustntgrumble New commenter

    Actually - you;'re right! I got it wrong. 75% is the maximum you can draw and give or take the phased bit this is an upper limit.

    I must admit - despite having more qualifications and experience in this area AND having spent three years planning for retirement (talking to HMRC and TPS) I am still capable of this kind of mistake. Preparing for pensions is really, really complex - everyone take note!
  7. Brianthedog

    Brianthedog Occasional commenter

    I looked into this and also got confused! In the end, with 6 months to 60, I was able to have a days break in service, return on 3 days a week, take my pension minus about 2%. I paid off my mortgage and had a few jobs done on my house with some of my lump sum. I'm currently practicing living off my pension and saving my salary. In total, my income is approx £400 a month more than it was when working full time. I've opted out of the pension scheme now as I don't intend to work in teaching for much longer.
    I know I can live comfortably off my pension, have a big amount of savings to pay for holidays etc, have a home that won't need any big money spending on it, and most importantly don't have sleepless nights over my job because I don't actually need the income any more! That in itself is priceless.
    binaryhex and Sundaytrekker like this.

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