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Should everyone on Final Salary scheme claim before 60?

Discussion in 'Retirement' started by diddydave, Nov 9, 2019.

  1. diddydave

    diddydave Established commenter

    I've just been looking through some figures and messing about with spreadsheets and wondered if anyone can confirm or not that my calculations are correct please?

    I've used the tables from https://www.teacherspensions.co.uk/...ement/early-retirement-factors-july-2019.ashx for the actuarial reductions.

    I'll put a link to the spreadsheet later but for example if someone takes their pension at 59 years and 11 months, i.e. one month early, then they get 99.8% of their full pension. They get one month more, so I'm looking to see how long it takes for that 0.2% extra they'd get by waiting a month to amount to the one month's extra.

    The one month extra is 1/12th of the 99.8% yearly amount, so that equates to 8.3%. Dividing that by 0.2% means it would take 41.5 years to catch up, because there is also the 3 times involved in the lump sum it comes down to about 38.5 years...which means that they'd have to live to about 100 in order to be better off waiting that month.

    This is probably more of interest to deferred members than those who are still in the scheme building up benefits but I have seen nothing that prevents them taking the early retirement benefits and then going back to work - other than the requirement to actually be 'out-of-service' for the day on which they take the benefits.

    Spreadsheet here: https://docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing

    Note that although I have put a pension of £25k in it is irrelevant as it cancels out in the calculations so the timings apply to any value pension
  2. Dorsetdreams

    Dorsetdreams Occasional commenter

    I can't confirm that your spreadsheet is accurate but I can certainly confirm that it is interesting.

    I convinced myself long ago that if I get the push before 60 I should take AAB without delay, whether or not there is another job on the horizon and even if I can pay my bills without doing so. (It is certainly incorrect to wait a year in the belief that you gain 4%: you have to live forever to manage that!)

    The startling growth shown in your spreadsheet in the 'years to catch up' as one gets towards 60 is probably a little deceptive. The actual amount better off you would be, between the ages of 90 and 98 by going a month earlier is probably trivial.

    As I say, interesting work. Thanks for sharing!
    diddydave likes this.
  3. diddydave

    diddydave Established commenter

    I'm currently awaiting my 55th to claim so I've been looking at various angles for a while...the going 1 month earlier is very interesting as on a £25k pension you immediately get a £2k headstart and then the pension is only £50 a year different - so even when you get to 99 you are only going 'ahead' by £50 a year.

    Everyone has to do their own sums and lower down the scale, say at 55, the difference in a £25k pension is nearly £5k, so once you go beyond 78 it adds up...so if I lived to 88 then I'm a total of £50k down..which sounds more impressive...to 98 then its £100k down...
    Dorsetdreams and PeterQuint like this.
  4. Sundaytrekker

    Sundaytrekker Star commenter

    I went two months before 60 and worked out the pension was about £180 a year less. At the time I applied for it I didn’t know I would take another job but a new part time role came up which was started a couple of days late to have the break. If I’d have left applying for my pension then I wouldn’t have been able to take the job as I don’t think I could then have taken my pension while I was working in that job. I have a friend who finished early but wouldn’t take her pension until she got to 60. I couldn’t convince her that it would take forever to be worse off if she did.
    Dorsetdreams and diddydave like this.
  5. diddydave

    diddydave Established commenter

    Yes the removal of the barrier to re-employment is quite a significant one... re-entry into the career average with its higher NPA is also a consideration
    Sundaytrekker likes this.
  6. Zoot

    Zoot New commenter

    I want to take my pension just before I am 60 in 2021 and your post confirms this is the best way forward. Claiming before I am 60, will allow me to to take a break in contract and go part-time if I want to. Thanks for doing the calculations - they are really useful.
    diddydave likes this.
  7. diddydave

    diddydave Established commenter

    I've added a table to show the difference total value for 5 year increments from 60 to 105
    jonnymarr and letap like this.
  8. letap

    letap Occasional commenter

    Thank you for this spreadsheet - it is certainly very useful for retirement planning. In a hypothetical situation somebody who left teaching at 55 might look to have an alternative provision/additional pension to tide them by before claiming their teachers pension.
    diddydave likes this.
  9. jonnymarr

    jonnymarr Occasional commenter

    I love your attention to detail, DD!

    It will be interesting to see how the McCloud judgement affects things and whether or not the post 2015 years ( 2015 to 2022 perhaps? ) are returned from CARE to the FS scheme.
    diddydave likes this.
  10. diddydave

    diddydave Established commenter

    Yes, I left before 55 having put in place some alternative funds sufficient to carry me through to 60 if necessary and I'm still not absolutely certain whether to take it at 55 - it was only this week that I started looking at the 'total' amounts and noticed that once you get to 59 the incentive to take it early does jump quite a bit.
    Very, I do have the luxury of having a few years to go before I can make any decision so, hopefully, I'll be able to factor this into my decision with a little more certainty than anyone having to make that choice in the next few months.
  11. diddydave

    diddydave Established commenter

    Yes, my feeling is that putting everyone back on the FS scheme until 2022 (when the transition protection was to end anyway) is the most likely resolution. I can foresee a number of those who are 55+ and who have a declining 3-in-10 salary deciding to take it and come back into the CARE scheme...and who knows they may want to, with their lump sum, buy quite a hefty chunk of 'additional pension'.
  12. letap

    letap Occasional commenter

    Assuming if you did leave at 55, if you had contributed to a SIPP - you could drawdown from this till you were happy to take your teachers pension.
  13. diddydave

    diddydave Established commenter

    Yes, that is one of my options as I set it up with the aim of it paying out the same as the prospective teacher's pension from 55-60 but the growth the private pension is getting is beating the miserable rates of interest I'm getting on my savings so we may leave it as our 'rainy day' reserve instead.
  14. jonnymarr

    jonnymarr Occasional commenter

    No idea if this will affect you, but people currently 47/48ish and younger need to keep a weather-eye on the rules regarding earliest access to SIPPs, as this is due to rise to 57 in 2028 ( and then potentially might keep pace with 10yrs below state pension age? ). No clarity yet if this will be a cliff-edge change or phased in. In my own case, I turn 55 in 2027, so I hope, if my SIPP is already in drawdown, they won't stop me accessing it.
  15. avenka

    avenka New commenter

    Thanks so much for doing this. I am contemplating taking my pension at 55, and this makes the issues much clearer.
  16. coolhands

    coolhands New commenter

    hmm that is interesting. I haven't checked the figures/calcs but assuming you're right it can help make a judgement about when you personally think the crossover into losing a total amount is worthwhile.

    Eg to me it looks like aged 59 and 7 months is a good balance as you only start losing a few hundred from that year onwards at 83. By 85 it's a grand but still only £3k by age 90 (using £25,000 as the pension figure, although it seems a good age for this with a £10k pension too).

    I figure by aged 85+ (if I live that long) that gradual curve into the negative total will be pretty much irrelevant to me :) So having that nearly half a year off extra would be worth it to me.
    diddydave likes this.
  17. Dorsetdreams

    Dorsetdreams Occasional commenter

    These spreadsheets are interesting and worthwhile. But they can't tell you:
    (a) when you will die
    (b) if you will enjoy retirement
    (c) how much that enjoyment might be tempered by money or lack thereof.

    [I'm hoping DD is working on an update to address these deficiencies.]

    I'm pretty sure that I can enjoy retirement even more than I enjoy by weekends and holidays, even living cheaply. As I'm just getting to that magic age of 55, I'm feeling much less stressed over c**p at work! The only fly in the ointment is dependent offspring. Maybe DD can sort them out for me too.
    Sundaytrekker and diddydave like this.
  18. diddydave

    diddydave Established commenter

    You should be able to make a copy of this sheet that will then let you put your own pension amount in. I have swung between taking it at 55 and then 60 and all the way back and forth several times...this 'total' figure is a bit bewitching but I think the key will be working out how much I can live comfortably on.
    (a) - the only certainty is that it will happen, and as I have no offspring I'm not expecting to find any arsenic mixed in with my cocoa...but if I've gone before I break even I'll be most upset :p
    (b) - I am certainly enjoying this pre-retirement phase now that I've stopped working, so I live in hope that when I do finally retire and draw my pension it will be even better.
    (c) - It would be a shame to have to send Mrs DD back to work but if needs must....
    Dorsetdreams and Sundaytrekker like this.
  19. HannahD16

    HannahD16 New commenter

    I’m loving this thread. DD’s posts always useful. I too am thinking more often about my retirement and how to best use the full time working years I have left (who knows!!) to put as much away as I can. Am relying on the Mc Cloud judgement doing at least a restoration of NPA 60 at least up to 2022 but my absolute dream scenario would be that all pre-2007 teachers retain entirety of their pension on the old scheme. As some have said in other threads, the old scheme was part of our terms and conditions that we signed up to as younger teachers only for the rug to be pulled. If only.
    diddydave likes this.
  20. harpplayer

    harpplayer Occasional commenter

    A mate I used to work with went when he was 50, using (some) savings to take him to 60, when a £15k teacher's pension kicks in. He reckons he is debt free, mortgage free, and has lived off about £13000 a year. Got to hand it to him! So far this year, he's had a month in Poland skiing and culture, two weeks in Israel, six weeks in Spain, three in Egypt, two weeks in Vietnam and the same in Thailand, twice. He's also just walked the Pennine Way! He reckons cheap hobbies, travelling when schools are working, having a small car, taking advantage of cheap long distance flights with long layovers and adopting a 'less is more' philosophy is the way to go. I think I agree with him.
    diddydave likes this.

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