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Retiring early on an Actuarilly Reduced Pension

Discussion in 'Retirement' started by Footyfan1, Aug 24, 2011.

  1. I would like to hear from anyone who has taken or who is thinking of taking an actuarilly reduced pension at 55-57. What are the positives and negatives? Have you managed to cope financially? Have you continued to work in schools on a supply basis or moved onto something totally different? As someone who is considering taking early retirement in the next 12-24 months I would appreciate any relevant feedback
  2. Dunteachin

    Dunteachin Star commenter

    I was made redundant from an independent school at 55 and, having no other job lined up, decided to take ARB. You do lose a percentage but I did the sums and decided it was still worth it; my redundancy pay made up for the short fall in the lump sum.
    If you take ARB, you can still go back to work and your pension will not be affected. I have been lucky enough to have had regular supply work (2-3 days some weeks) at a local school and have been offered a part time job there.
    However, I'm sure you are aware that supply work is very thin on the ground. If you can manage on just your pension, all well and good.
    Another thing to consider, is whether or not the age at which teachers can take ARB might be raised from 55 to 60, now that we are all supposed to work longer before getting our pensions.
    Everything depends on your circumstances and everybody is in a different situation; I certainly have no regrets but you need to give it some thought.
  3. hi dunteachin, when you say 'redundancy pay' do you mean the lump sum? thanks
  4. I'm just about to get ARB. The key to any big financial decision is planning. I've planned to get ARB for about 5 years and although my income will be drastically reduced I think I can cope.
    I've done supply in the past and don't want to do it again. I suspect the golden days of supply are well past. I am reasonably confident of getting private tuition as I teach maths and already have a couple of students.
    I would not worry about ARB being removed. It is cost neutral and a good way of replacing expensive older teachers by a newer cheaper model.
    In the final analysis, it is up to the individual. I have always traded money for time on the grounds that you can always earn more money but earning more time is a bit of a problem. Family, friends and doing my own thing interest me much more than a teachers job. Perhaps selfishly, I regard this last third of my life as mine. I've been a dutiful son, a decent dad, now I want to explore a few more things before I "turn my toes up"

    tenpast7 and MrSaturday like this.
  5. Dunteachin

    Dunteachin Star commenter

    Sophie, my statutory redundancy pay was completely separate from the lump sum I received from TP and was paid by the school.
    Peter, I don't think ARB will be removed; I just suspect the government will move the goal posts. If we can only get our full pension at, say, 65 in the not too distant future, then you are unlikely to be allowed ARB 10 years earlier. Strike while the iron is hot!
  6. I have been doing supply for a year and decided to take an ARB at the beginning of August at the age of 56. For me it released me from ever having to teach full time again and that was a huge relief. I've been in some horrible situations in the last couple of years. Yes, I took a 20% reduction (you lose 5% for each year you take it early) but I'm getting 80% for 4 years more than I otherwise would have so it will be 16 years before I'm any worse off. By then I'll have adjusted to less money, have no dependants and will be able to cope. I'm going to continue to do supply work and hope to average 3 days a week to keep me financially stable. For me it is definitely the right decision.
    I, too, was worried that the government would remove the ability for us to take our pensions from 55. I know I couldn't have continued with full time until I was 60. I still have to wait until I'm 65 for my state pension.
  7. Dunteachin

    Dunteachin Star commenter

    You are quite right not to worry too much about the reduction. Although it sounds a lot, by my calculations, I will be into my seventies before I start to lose out. Quite frankly, given my gene pool, I'll be delighted to reach that age! Roseangel, you and I seem to be on the same wavelength.

  8. Peter99 I totally agree with the sentiments expressed in the final papragraph of your post. After 32 years of teaching I feel it is my last chance to move onto other things. As stated in other posts people who take advantage of an ARB will be well into their 70's before they lose out. The downside of course, is that by retiring at 55/56 I will be foregoing 4/5 years of salary. You stated that you are just about to get ARB. May I ask what percentage of your pension will you lose and how have you prerpared for retirement.
    I will look to take the maximum lump sum ( through conversion ) and use this to enhance my annual pension until I get the OAP pension in 10 years time. This along with any other work I can find, preferably not supply, should keep my head above water financially.
  9. I will lose just over 20% but there is an ARB calculator on the TPS website. All you have to do is input your average salary, your length of service and the age you wish to take ARB. The information can readily be found on the website.
    Incidentally, do those people applying for ARB have access to the estimation of benefits screen? I appear unable to access this info. Also I'm still on 60%, anyone got over this hurdle?
  10. Here's the link. Hopefully it will work.

    parkerCS likes this.
  11. I will be 2 weeks short of 57 when I think I might retire next year. This will be after 35 yrs service. I have an AVC which will make up for a fair chunk of the shortfall through ARB. Look at it in relative terms. No more paying into AVC or teacher's pension (unless you want to continue) and you get your pension for the extra few years. The mortgage gets paid up next year also. Along with using the lump sum, and some other savings for a few years, I feel I can manage until my state pension kicks in. I have heard that supply work should be a last resort. So even without any further work I could manage with just a little tightening of the belt. Fortunately I am a music teacher so I know there is work out there for me if I want it.
    You cannot put a price on your mental and physical health and with good planning there is a whole new life waiting. Get out while the going is good!
    It would be good for us ARBers to keep in touch and compare notes.
  12. You don't pay national insurance on your pension as well.
  13. Dunteachin

    Dunteachin Star commenter

    Don't forget that it is taxed, however.
  14. When calculating the actuarial reduction, is it simply by the year, eg 57 years, or is more precise eg 57 years and 6 months?
  15. lindenlea

    lindenlea Star commenter

    Every day counts!!
  16. The reduction is based on the number of whole months. Each extra month of early retirement will reduce your pension and lump sum by around 0.4%.
  17. Thanks for the quick replies! - I'm seriously considering the 'quiet' life!
  18. Noswad. If I take retirement next year ( presumably this will be on the 31st August at the end of the next summer break) I will be two months short of my 56th birthday. Some may think this is too early but my mortgage will be paid off ( hopefully ) and I will no longer have to maintain my daugther at university. One thing for sure is that I will not be continuing until the age of 60. At a push I could go on till 58 but would gain very little by way of ARB,
    I agree with you that potential ARBers should keep in touch to check on their progress.
  19. If you can plan things right, you might be able to leave when you want to but delay taking your pension for a year or two using savings. I'll be retiring in two years, when I'm 53. No mortgage, kids all have their own lives, enough to keep me going til I'm 60 - why carry on working? People drop dead in their 50s.
  20. Over the hurdle, 2 days ago got notified that it is complete. Also got a letter stating pension and lump sum.
    All is honky dory and I am looking forward to the start of the new school year, why, because I will not be there.
    To the OP if they put the age at which you can claim your pension to 65 then if you go at 55 you will lose 50%, i.e 5% per year.


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