Getting ready for retirement
The moment you’ve been waiting for
Reaching retirement can be a time of mixed emotions. And let’s face it, for the most part, these tend to include joy, happiness and unreserved excitement… along with a dash of good old-fashioned relief.
The truth is, after a lifetime of hard work, we all deserve some well-earned ‘me-time’. And whether this involves travelling the world to explore new lands or putting your feet-up in the garden with a good book, your pension can help to make the experience all the more enjoyable.
The good news is, if you’re at an age where you’re starting to think about retirement, we’re here to help. Within these pages, you’ll find everything you need to know about planning your pension, making the most of your money and putting the wheels in motion.
Where can I view my latest pension information?
Keeping track of your nest egg
If you’re counting down the days to when you can claim your pension, there are two ways you can access the latest information.
1. Your work pension
This is the money that’s taken directly from your wage each month and topped up by your employer. To view your contributions and calculate your latest benefits, you need to set up an account and register your details at My Pension Online.
2. Your state pension
As long as you have paid the necessary national insurance contributions, you will also be entitled to a state pension (when you reach State Pension Age). Full details of your state pension benefits are available at the gov.uk website.
When can I retire?
The big question
As long as you’ve been paying into your pension scheme for at least 2 years (or a minimum of three months for Fire Service schemes), you can claim your work pension from the earliest date applicable to the scheme of which you are a member of – or earlier if you are retiring due to ill health. But before you start planning any round-the-world trips, there are a few things to consider.
How much money do you have in your pension pot?
Obviously, the longer you’ve been paying into your pension, the more money you’ll get when you retire. Plus, it also depends on your salary. So, the first thing to do is check your latest figures via your online account. Using our pension calculator, you can work out where you’re up to in terms of pension contributions and retirement income and what this means for the future.
As long as you’ve paid at least 10 years’ national insurance contributions, you’ll also be eligible for a state pension. This is currently available from the age of 66 – although this will be increasing to 67 in the future.
If you are relying on this income, you can view your up-to-date allowance on the government’s website.
How much money do you need?
This is a tough one, because once you’ve made your decision, there’s no going back. You need to think carefully about the lifestyle you want to achieve and how much it’s realistically going to cost. Alongside everyday expenses, this might involve things like travel, home improvements and hobbies.
As well as working out your monthly pension, be sure to consider any additional sources of income, such as savings, investments and rental properties. But remember, your state pension won’t kick in until you’re at State Pension Age, so if you’re hoping to retire early you’re going to need a contingency plan.
What year did you start paying into your pension?
This is where the fun begins. Due to a number of rule-changes over the years, the date you started paying into your pension can affect your pension pot and your planned retirement date.
For more details, please click here.
Early retirement due to ill health
If you suffer from ill health, you may be able to access your pension as long as you meet certain criteria. The first step is to speak to your employer (or former employer) as they ultimately make the decision. You may then be asked to get your condition verified by a doctor.
Understanding the tax implications
One of the benefits of making pension contributions, is that they’re tax-free… up to a certain limit. So, if you want to avoid paying extra, it’s good to know the limits.
- Annual allowance (AA) for tax-free pension contributions – currently £40,000 (2020-2021)
- Lifetime allowance (LTA) for tax-free pension contributions – currently £1,073,100 (2020-2021)
The rules surrounding tax and pensions are really quite complex. If you think you may be close to either of these limits, you’ll find guidance notes on our website.
How much will I get?
Let’s cut to the chase!
There’s a lot of information to digest when you’re planning your retirement. And you probably have lots of questions. But the one that’s likely to interest you the most is, ‘how much will I get?’
The simple answer is, the more you put in, the more you get out. Obviously, this depends on your salary and the number of years you’ve been paying into the scheme. But there are also a number of factors you can control yourself.
For more details, please click here.
Are you aware of your payment increases?
If, as we hope, you’re planning on receiving your pension for many years to come, there’s no need to worry about the effect of inflation. All schemes are reviewed on an ongoing basis, in line with Consumer Price Index (CPI).
This means that (as a general rule) your pension is likely to increase on an annual basis. And more importantly, it will never go down once the payments have started.
How do I get started?
Show me the money!
Once you’ve worked out the numbers and decided on a retirement date, you’ve done the hard work. Now, it’s just a case of putting the wheels in motion… which by comparison, is relatively straightforward.
You notify your employer
Try to give as much notice as possible. This will ensure your pension starts on your preferred date. If you’re no longer an active member of the scheme, just call our helpdesk and let us know when you want to start taking your pension. We’ll do the rest.
Your employer notifies us
If you are still paying into your pension scheme, your employer will provide us with your Leaver form and pay figures up to the last date of your employment. If you’re no longer an active member, we’ll already have this information on our records.
We take care of the paperwork
Once we’ve been notified, we’ll check all the details and speak to your employer if we require further information. For LGPS schemes, this process takes around 10 days, at which point, we’ll upload your Retirement Options to your online account… or send you a retirement pack through the post.
4. (If you’re part of the LGPS scheme, you’ll need to sign on the dotted line!)
In your retirement pack, you’ll receive two quotes, which include any Additional Voluntary Contributions (AVCs) or Additional Pension Contributions (APCs) you might have paid:
- The maximum monthly payment you could receive
- The maximum lump sum you can take
If you’re happy, all you need to do is complete the ‘Retirement form’ and send it back to us along with any additional documents we may have requested (such as a copy of your birth certificate).
You receive your lump sum and monthly payments
Your pension payments will start on the agreed date and you’ll receive your tax-free lump sum shortly after. Any documents will also be returned to you by post.
Other things you should know
Crossing the ‘t’s and dotting the ‘i’s
Once you’re up and running, you may have some questions around payment methods, tax implications and general housekeeping. The following FAQs may help.
- When do I receive my monthly payments?
Your pension payment will depend on the which scheme you’re a member of, and will be paid on the last or first working day each month.
- Do I pay tax on my pension income?
Yes, your pension is treated as income and is therefore taxable (although any lump sum you receive up-front is tax free).
- If I retire abroad, can I still receive my pension?
Yes, we would make payments in the usual way and your bank would convert the payments into local currency. There is no charge for this service, but it can take up to three additional banking days to receive your money.