Got something to say or just want fewer pesky ads? Join us... 😊

[Finance] Early Retirement help



happypig

Staring at the rude boys
May 23, 2009
7,934
Eastbourne
I've been given the choice of moving to Ipswich, redeployment or taking a paid leaver package. I've plumped for the leaver package and am looking at taking my pension early.
I have the choice of a bigger monthly payment and lower lump sum, or lower monthly and bigger lump sum.
Anyone else made this choice and can offer plus/minus for each ?
 


seagullwedgee

Well-known member
Aug 9, 2005
2,981
Take as big a lump sum as you can, tax free, and take good advice to invest it wisely in a tax free environment like ISAs. If your partner is still working, make a lump sum contribution to their pension with part of your lump sum.
 


Blackadder

Brighton Bhuna Boy
Jul 6, 2003
16,077
Haywards Heath
Depends if you need the cash or not?

If the pension gets an annual inflation increase, I would plump for that (reduced with a lump sum)

Sounds like a silly question but how much longer do you think you will live? ISAs don't have much of a return at the moment (or the last 8 years or so come to think of it).
 




dazzer6666

Well-known member
NSC Patreon
Mar 27, 2013
52,006
Burgess Hill
Depends if you need the cash or not?

If the pension gets an annual inflation increase, I would plump for that (reduced with a lump sum)

Sounds like a silly question but how much longer do you think you will live? ISAs don't have much of a return at the moment (or the last 8 years or some come to think of it).

Can't really make a blanket statement like that - depends on what your ISA is invested in.......................
 




Blackadder

Brighton Bhuna Boy
Jul 6, 2003
16,077
Haywards Heath
Two other things. Do you intend to stop working completely or take on a part-time or full time job?

Are you mortgage free? (assuming you are buying).
 


studio150

Well-known member
Jul 30, 2011
29,553
On the Border
No right or wrong answer, it all depends on your personal circumstances and what the decrease in pension payments is for different lump sum amounts.

If you are looking to reinvest the lump sum, it would be worth talking to a financial advisor.
 


Beach Hut

Brighton Bhuna Boy
Jul 5, 2003
71,903
Living In a Box
I had the option of a tax-free lump sum and a higher pension to 67 when the national pension kicks in then it reduces by that amount, think it was called level pension option.
 
Last edited:




NooBHA

Well-known member
Jan 13, 2015
8,584
Take as big a lump sum as you can, tax free, and take good advice to invest it wisely in a tax free environment like ISAs. If your partner is still working, make a lump sum contribution to their pension with part of your lump sum.

Not always the best option.


If you expect a long and healthy life, long into retirement then the larger lump sum isn't always the best option - If you intend to get 20 years or so out of the monthly Annuity then it could be beneficial to take the larger Annuity


I know you can't anticipate your demise but really that is what you need to try and do when making such a decision.


Also if you want to maximise the lump sum withdrawal and it exceeds the tax free amount, then you would want to push it back into the new tax year when any tax free amount is not being added to the current years salary. Especially if it is going to push you into Higher Rates or Marginal Rates.
 


Blackadder

Brighton Bhuna Boy
Jul 6, 2003
16,077
Haywards Heath
Can't really make a blanket statement like that - depends on what your ISA is invested in.......................

True but it depends on your attitude to risk? A lot of pensioners are risk averse to investments that may go down. Cash pays diddly squat.
 


Stat Brother

Well-known member
NSC Patreon
Jul 11, 2003
73,367
West west west Sussex
I've been given the choice of moving to Ipswich, redeployment or taking a paid leaver package. I've plumped for the leaver package and am looking at taking my pension early.
I have the choice of a bigger monthly payment and lower lump sum, or lower monthly and bigger lump sum.
Anyone else made this choice and can offer plus/minus for each ?
So you weren't given a choice then?
 




dazzer6666

Well-known member
NSC Patreon
Mar 27, 2013
52,006
Burgess Hill
True but it depends on your attitude to risk? A lot of pensioners are risk averse to investments that may go down. Cash pays diddly squat.

Correct...but that's not what you posted..............'ISAs don't have much of a return at the moment (or the last 8 years or so come to think of it'

If you'd added 'cash' at the start it'd have been ok...............
 


East Staffs Gull

Well-known member
Jan 16, 2004
1,421
Birmingham and Austria
Everyone’s situation is different and there are numerous factors to consider. The rate of exchange between cash and pension is set to be fair, based on average life expectancy. People generally tend to underestimate their life expectancy. The average life expectancy in the UK for males currently aged 65 is 85.
 


Weststander

Well-known member
NSC Patreon
Aug 25, 2011
63,388
Withdean area
Depends if you need the cash or not?

If the pension gets an annual inflation increase, I would plump for that (reduced with a lump sum)

Sounds like a silly question but how much longer do you think you will live? ISAs don't have much of a return at the moment (or the last 8 years or so come to think of it).

Good points. Weigh up the two scenarios on a spreadsheet, based on a personal assessment of expected life to come.

ISA’s - depends on whether a cash ISA or invested in equity shares. If invested in equities, there are options where this can be at a lower risk to the capital e.g. through Hargreaves Lansdown Vanguard funds where their costs are low, in blue chip dividend income companies with real cash inflow. Better to drip feed monthly contributions in, to smooth the effect of stock market movements.
 




Weststander

Well-known member
NSC Patreon
Aug 25, 2011
63,388
Withdean area
Not always the best option.


If you expect a long and healthy life, long into retirement then the larger lump sum isn't always the best option - If you intend to get 20 years or so out of the monthly Annuity then it could be beneficial to take the larger Annuity


I know you can't anticipate your demise but really that is what you need to try and do when making such a decision.


Also if you want to maximise the lump sum withdrawal and it exceeds the tax free amount, then you would want to push it back into the new tax year when any tax free amount is not being added to the current years salary. Especially if it is going to push you into Higher Rates or Marginal Rates.

I’s say don’t touch Annuities as such, with a barge pole. Rates are the worst in history

In the scenario you mention, invest the lump in a wealth management fund or similarly a SIPP, and use income drawdown as and when you need the cash.

It’s getting technical, so best to see a recommended IFA.
 


Blackadder

Brighton Bhuna Boy
Jul 6, 2003
16,077
Haywards Heath
Good points. Weigh up the two scenarios on a spreadsheet, based on a personal assessment of expected life to come.

ISA’s - depends on whether a cash ISA or invested in equity shares. If invested in equities, there are options where this can be at a lower risk to the capital e.g. through Hargreaves Lansdown Vanguard funds where their costs are low, in blue chip dividend income companies with real cash inflow. Better to drip feed monthly contributions in, to smooth the effect of stock market movements.

I am taking a monthly draw down on an AVC pension through Hargreaves Lansdown Vanguard funds. It's only a small monthly amount but it covers my season ticket.
 


bluenitsuj

Listen to me!!!
Feb 26, 2011
4,301
Willingdon
Depends if you need the cash or not?


If the pension gets an annual inflation increase, I would plump for that (reduced with a lump sum)

Sounds like a silly question but how much longer do you think you will live? ISAs don't have much of a return at the moment (or the last 8 years or so come to think of it).

Depends on the ISA. My S&S Isa is doing extremely well.
 


NooBHA

Well-known member
Jan 13, 2015
8,584
I’s say don’t touch Annuities as such, with a barge pole. Rates are the worst in history

In the scenario you mention, invest the lump in a wealth management fund or similarly a SIPP, and use income drawdown as and when you need the cash.

It’s getting technical, so best to see a recommended IFA.

The OP makes reference to a monthly pension - That's what made me think that an Annuity was what he was currently in consideration of - Perhaps it isn't but that was my first port of call as I am not all that up on where to invest funds. Not really my expertise
 




Weststander

Well-known member
NSC Patreon
Aug 25, 2011
63,388
Withdean area
I am taking a monthly draw down on an AVC pension through Hargreaves Lansdown Vanguard funds. It's only a small monthly amount but it covers my season ticket.

We’re not well off, but a few years back I set up a Vanguard ISA in an equities fund, in effect saving for our kids, with small monthly contributions. It’s done brilliantly, way above the crumby low rates paid by building societies for childrens savings accounts. Wish I’d been more organised and done it earlier.
 


Weststander

Well-known member
NSC Patreon
Aug 25, 2011
63,388
Withdean area
The OP makes reference to a monthly pension - That's what made me think that an Annuity was what he was currently in consideration of - Perhaps it isn't but that was my first port of call as I am not all that up on where to invest funds. Not really my expertise

I’m only a layman on this like you, but I knew about the dreaded annuities word, from my Dad and from some clients of mine (I’m not an IFA).
 



Paying the bills

Latest Discussions

Paying the bills

Paying the bills

Paying the bills

Albion and Premier League latest from Sky Sports


Top
Link Here