Early Retirement

A question about : Early Retirement

Hello, I am hoping to take early retirement next April (2015) at age 62, I have a pension forecast of Ј32.500 lump sum, plus Ј465 a month pension,my wife gets Ј300 a month pension, so would be on nearly Ј800 a month, would we pay any tax on this ?.....plus would I still have to pay N I contributions ?....I have worked for over 40 years.....any help on this appreciated.......Jack.

Best answers:

• Assuming you have no other income then Ј5,580 pa and Ј3,600 pa are both below the personal allowance so no tax to pay.
  There are no NI contributions due on pension income.
• The Ј300 a month the wife receives is her old age pension, she doesn't quite get the full amount, I think it is something to do with when she had our son in the seventies......she didn't work for a while........Jack
• The plan is to use Ј12000 of the lump sum to pay household bills for the 3 years until I get my old age pension....currently they come to nearly Ј300 a month.....gas, electric, water, council tax, t.v. licence, so Ј3600 a year, I have rounded it off to Ј4000 a year. so Ј12000 should cover any rises in costs......that would give us Ј190 a week for food, clothes etc .for two of us,....no mortgage, no rent, no kids at home, no car,...any opinions welcome.......Jack.
• the 32.5K, is that lump sum set in stone or could you take less and get a higher income?
• I could take less than the Ј32.500 and get a slightly larger monthly amount......but this option seems to be favourite,.....it's those damn monthly bills.........Jack
• Goldiegirl, Now that's a good idea , the general opinion is that we should be able to manage, of course every case is different, but Ј200 a week, with no bills......a lot of pensioners live on a lot less......Jack
• So far our experiment is working really well.
  I've made a few changes to things like supermarket spending, and we now cook most things from scratch, which we find saves money
  I've got more clothes than I could ever wear, so things like recreational clothes buying will be a thing of the past. I'll only be buying clothes I need in future.
  But I think small compromises like that will be outweighed by never having to work again!
  Good luck with your plans
• It would be worth knowing what the lump sum would buy in increased pension, or what pension you are effectively giving up for this lump sum.
  This commutation rate is often very poor and it's frequently better to take the higher pension offered, assuming you're in reasonable health.
• Goldiegirl, Have just put your suggestion to my Mrs. she likes the idea, and is going to start straight away.....she is very ''frugal'' anyway, being a good old Scottish girl, I am not bothered about myself, as long as she is o.k then it should work.......thanks, Jack
• Another question for you experts out there, if I waited for say another year, and went at 63, or even stayed until 65, by how much would my pension rise ?......it is a final salary scheme.....but I don't see my wages rising by any great deal between now and then ......Jack.
• Hi,
  if you want to go now, just go and enjoy your free time, I sure you will survive on what's coming in, your wife'll make sure.
  Enjoy.
  Be happy.
• Hi,
  as a new joinee maybe you havn't seen this forum, click, but sure your wee frugal wummin will know a few money saving hints herself.
• Frugal, Thanks for that, still finding my way around.....but I have to say what a great site this is.......only been here a couple of hours and lots of questions answered............Jack.
• Hi,
  you'll find it very friendly and helpful, have a look at the other forums, DIY, Techie, Gardening, good craic, you get the odd wee stramash, but, ach, unless you want to bash their heids the gither, just ignore them.
  Welcome,
• If you are going to try the experiment of frugal living, consider the possibility of your wife suspending her State Pension for a year. (It's officially "Pension deferral".)
  https://www.gov.uk/government/upload...024-apr-14.pdf
  The reward she'd get for a year's deferral is 10.4% extra on her pension - that's like buying an index-linked annuity that pays 10.4% p.a.; a remarkably good deal. (It's so good that the reward is going to be halved for the new-style State Pensions.)
  Another thing you could consider once you have some spare cash, i.e. after April '15, is for your wife to make a pension contribution (up to Ј2880 per annum). The taxman makes the Ј2880 up to Ј3600 and then, shazzam, the intention is that she can draw it all out and, in her case, it'll be tax-free. (Strictly 25% will be tax-free, and the rest will be taxed but she can claim back that tax.) So if the new laws reflect the Chancellor of the Exchequer's intentions, this may be a very good stunt. It's worth keeping an eye on to see whether some regulations are introduced to obstruct it.