|"Independent Redundancy Help" - Established since 2000|
The basic question is "if you take early retirement will you
have enough to live on at the standard of living you desire"?
Retiring before you are 65 is now typical. Last year some 80% of company pension scheme members retired early. Employers are often keen to offer early retirement as an alternative to redundancy. For many it is a lifestyle choice to be carefully considered with their partner. Do your research and seek professional advice.
For many employees today, early retirement is more difficult than in the recent past. Pension funds have lost tax benefits and are growing more slowly - partly as a result of all the early retirement pensions they have had to pay! Annuities (which provide the retirement income for most pensioners) are paying lower rates. Interest rates are low so investments do not provide much extra income. You will receive less income for a longer retirement period - perhaps 30 years or more!
You need to see how your money is currently spent and then adjust
the figures for when you have retired. This will produce a minimum income
requirement - cash flow plan.
Try the following methods:
Whatever the method there are four main types of expenditure to consider:
How much income can be provided by your assets and investments? Do
include all your assets including your property. Divide them into those
you can draw upon on early retirement and those to be used for other
Discrimination on the basis of age is regrettably very much a reality of modern life. Changing jobs late in life can be very difficult. The majority of jobs open are going to be part time and low income. Be realistic.
These are under pressure, and given an ageing population, are likely to decrease if anything, making past benefits seem generous! A State pension will not be available until you are 65 (or 60 if you are woman born before 6 April 1950). You currently need between 40 and 44 years of National Insurance contributions, or credits, to qualify for a full pension. Early retirement could affect your State pension unless you pay some class 3 voluntary National Insurance contributions. To see how much State pension you qualify for, and how much you would get if you retired early, contact your local DSS office or the Retirement Pensions Forecast Unit, contacts below.
Inland Revenue rules for company pensions allow for early retirement from age 50.
Incapacity Benefit will not automatically be paid to people retiring early with company or personal pensions. The Pensioner's Income Guarantee of £75 a week only applies to people over 65 whose pensions pay them less than this.
Subtracting the estimated income from your estimated outgoings gives
you the amount you will need from your pension(s).
The earlier you retire the more difficult it will be. If you work for
40 years you may qualify for a maximum company pension of two-thirds
your salary at age 65. If you retire ten years early at age 55 then
you have got 25% less time to accumulate a pension fund and could end
up with only 45% of your salary at time of retirement. You therefore
also miss out on a potential 10 years salary growth. Depending on the
pension scheme your pension value could fall further due to other penalties
and reductions. Each pension scheme is different.
Final-salary company pensions (increasingly
What's an annuity? An annuity is a special policy which you must buy with your pension funds. Sorry - you can not blow your life's pension funds on an orgy of spending. The government will not let you! An annuity provides you with your day to day income for life in return for the lump sum from your pension fund.
Early retirement gives you fewer years of contributions and fewer years for them to grow. Retiring ten years early means ten years' contributions lost and in that ten years the fund could have doubled, producing perhaps double the pension. If you need your pension income immediately you will also have to buy an annuity at a younger age - when annuities pay far less (ten years early perhaps 40% less).
This is likely especially if you had not planned for early retirement. You need to compare the benefits of any special early retirement deal with all the alternatives.
Boosting your pension?
Any special early retirement deal may be open to some negotiation especially
if you can show how disadvantaged you might be.
Retirement Pensions Forecast Unit:
Form BR19 Application for a Retirement Pension forecast