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Take actuarial reduction or use savings to cover the gap?

Discussion in 'Retirement' started by heldon, Nov 2, 2015.

  1. heldon

    heldon Occasional commenter

    Taking the pension with actuarial reduction or using savings(life) to cover the gap. I am in the position of wanting - no needing to retire. I want to go Xmas 2017 when I will be 55 and 6 months. I will have about 32/80 ths by then. I have managed to save enough to live on for 2 - 3 years. So my question is should I keep hold of my savings and take the actuarial reduction or use the savings and take the pension aged 58 ish. In good health generally. Just my mental health being affected by this job. Has anyone worked out the number of years until you are better off taking the pension later? Thanks for any suggestions/viewpoints?
     
  2. Yoda-

    Yoda- Lead commenter

    If you were going at 55 it would be around 72 before you would be worse off.
    This by using typical values for service and salary. Then putting them into the TPS actuarial calculator. You get the reduced value and normal pension age values. From these you calculate the number of years for a balance of paid out cash between the two choices.
    Remember that the actuarial factors used may not stay the same if peoples life spans increase. They are not guaranteed and could be adjusted at any time.

    Which age you pick depends on your financial situation. You hopefully will get your state pension around 67 (check this).
     
  3. jacob

    jacob Lead commenter

    As far as I am aware the "actuarial reduction" is based on expected longevity and the number of years or months that you retire early. Say you were expected to peg out at 80, should retire at 60 and would get 10K a year at 60 (all arbitrary figures). That would be 10K per year for 20 years, so a total of 200K. Thus by retiring at 55 the 200K has to stretch over 25 years so they would give you only 8K a year. If you went at 55 and lived beyond 80 you would be the "winner". The problem is how they calculate all this, and there is inflation rises in there too, or possibly pay rises if you stay in work. You should be able to get a rough estimate of what you are due from number of years service and information on the TPS website.

    And the Jedi master what he said.
     
  4. lindenlea

    lindenlea Star commenter

    Would you consider looking for paid employment - however little - to keep you going and to extend your savings if you're reluctant to start taking your pension.
     
  5. Piranha

    Piranha Star commenter

    I went for the using savings route, but I was a bit older than you, and still expect to have some savings left. It may be a bad idea to exhaust your savings completely, as you won't have anything for emergencies. You need to look at your budget and plans. If you can live without problems on the reduced pensiom, perhaps you should go for it, perhaps spending some of the savings on some kind of luxury.
     
  6. heldon

    heldon Occasional commenter

    Thanks all for the thinking
     
  7. carioco

    carioco New commenter

    I think a key consideration is whether you can live comfortably on the 32/80ths. If you can there is an argument for retaining your capital as it might give other options
     
  8. pennyh.

    pennyh. Occasional commenter

    I was hunting for info -since I am thinking of something similar and how it works. I find the Pension site helpful but also not clear. I do not want to declare my possible plans to the school until I am clear on the financial situation. Next July I will be 58 and a few months. Is the reduction based on that or when the start date is for taking a pension. Can I wait (would I be better waiting) until 59 and live off savings and partner for a few months? I really cannot face the new GCSE and the A2 level replacement in one year plus all the silly CPD and meaningless statistics etc. Can I resign and be out of work but not claiming anything until I choose to take my pension. Sorry if this sounds rather ignorant but when I try the TPS modellers I am not sure what figure to try to work my actuarial pension out with. My salary has gone down due to new contract and will go down again so my pension is the best 3 years in the last 10.
    Advice or recommendation to where to seek help appreciated. I did write to TPS last summer but I think I asked too much because I never received a reply-or perhaps there are too many of us!
     
  9. lindenlea

    lindenlea Star commenter

    Speak to them on the phone, most people find them helpful. If you resign voluntarily I don't think you will be eligible for JSA.
     
  10. pennyh.

    pennyh. Occasional commenter

    What is JSA? My partner (teacher) is 60 this academic year and will retire next summer. That is another factor in thinking of ending early. I am in my 36th year of teaching. I know the state pension will be at 66
     
  11. lindenlea

    lindenlea Star commenter

    This made me think you might want to claim Job Seekers Allowance, although clearly it doesn't say that.
     
  12. lizziescat

    lizziescat Star commenter

    You could also (not instead) contact you union to see if they have someone with specialist knowledge. Mine did. They may also highlight questions you need to ask/ be aware of which hadn't occurred to you.
     
  13. jacob

    jacob Lead commenter

    Pension payments are based on the date you officially retire from, not when you quit work. Thus the actuarial reduction for going early diminishes the closer you get to 60. If you can survive for a few months, that would be up to you. Remember you may be taxed on your pension also, but if you earn nothing for a financial year, your tax "allowance" is lost also, as it cannot be carried over to a new year. In terms of this tax allowance it might be best to maximize tax free income by quitting halfway through a financial year and picking up income again halfway through the next, thus you would get the tax allowance in full for both years. You also pay no National Insurance on your pension because it is "unearned income".
     
    emerald52 likes this.
  14. pennyh.

    pennyh. Occasional commenter

    Thank you this has helped me work out some of my confusion. I had looked at union pension sessions but they were either too far away or too close to next summer. Silly I never thought to just ring the union up and then be clear in my mind to talk to the TPS.
     

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