NRA65

[Lawrencepa2014]

I know very little about pensions. I’m 34 and been working at Royal Mail since April 2019. I have been full time for a little over a year earning about £28k before tax. Recently I’ve been paying £20 AVC a week on top of the normal contributions. According to generic pension calculators I should be on about £10k at the age of 57 which is ideally around the age id like to semi retire. I’ve just read though that because of the NRA65 I would likely get a huge reduction if I took it before 65? How much of a reduction would I get if I took it 5-7 years early? Is there anything else I could do to help prepare for early retirement?

[NorthernBoy]

You are off to a good start by paying in extra into your AVCs. If you take your NRA65 early you lose 5% for each year, so factor this in to your figures if retiring at 57.

Try and work out how much you will need to live on once retired and then aim for a plan to have this amount coming in per year. Will you have a mortgage/house paid off or be renting, important to think about theses things as they will influence how much you need

For example say it’s 25k ayear, RM pension gives you 10k then you need a plan for the extra 15k. Will you receive an inheritance later in life that will help. Personally I would open a SIPP separate to RM and put as much money as you can afford each month, you will get tax relief on this.

The good thing is that you have time on your side at 34. Don’t worry if share prices drop as this will be a good thing if you are buying monthly over the year (pound cost averaging).

If you need any more info just ask.

[Lawrencepa2014]

You are off to a good start by paying in extra into your AVCs. If you take your NRA65 early you lose 5% for each year, so factor this in to your figures if retiring at 57.

Try and work out how much you will need to live on once retired and then aim for a plan to have this amount coming in per year. Will you have a mortgage/house paid off or be renting, important to think about theses things as they will influence how much you need

For example say it’s 25k ayear, RM pension gives you 10k then you need a plan for the extra 15k. Will you receive an inheritance later in life that will help. Personally I would open a SIPP separate to RM and put as much money as you can afford each month, you will get tax relief on this.

The good thing is that you have time on your side at 34. Don’t worry if share prices drop as this will be a good thing if you are buying monthly over the year (pound cost averaging).

If you need any more info just ask.

Thanks for getting back to me.

I currently have a mortgage that has 21 years left. I do expect to get some inheritance at some point though as both of my parents aren’t in good health so I would inherit their home. I thought that was the case with NRA. I don’t know if it’d be possible to retire at 57 by then (2047) because they might raise the age but hopefully I could at the earliest
age. I’d only be looking to semi retire anyway and work 2 days a week for 10k a year if I was on NMw in today’s money which would put me on about £20k before the NRA deductions. Would you recommend a SIPP instead of an AVC? Or both?

[NorthernBoy]

It looks like you have got a workable plan in for retirement/semi retirement at the earliest possible age

My understanding is that they are linking the age of taking a pension at state pension minus 10 years. It’s possible the state pension may rise to 69/70 by the time you get there but this is just a guess.

I would definitely keep your AVC payment going but would also open a SIpp as well if you can afford to. You will be getting more tax relief on your avc so it will be costing you less via salary sacrifice. The sipp will still get tax relief but not as much as your AVC.

Have a look at what fund your AvC is invested in and see if it meets your risk levels. If it was me with your time horizon I would be in an equity based fund which could over the long term deliver good growth.

[Lawrencepa2014]

It looks like you have got a workable plan in for retirement/semi retirement at the earliest possible age

My understanding is that they are linking the age of taking a pension at state pension minus 10 years. It’s possible the state pension may rise to 69/70 by the time you get there but this is just a guess.

I would definitely keep your AVC payment going but would also open a SIpp as well if you can afford to. You will be getting more tax relief on your avc so it will be costing you less via salary sacrifice. The sipp will still get tax relief but not as much as your AVC.

Have a look at what fund your AvC is invested in and see if it meets your risk levels. If it was me with your time horizon I would be in an equity based fund which could over the long term deliver good growth.

Yeah I’m not sure because obviously atm it’s 55 for private pension but I read someone mention that in 2028 it will be 57. I’m not sure how often they change that. Yeah I’ve noticed the deduction from my take home pay is a lot less than what I actually use towards my avc so I think it’s worth it. I haven’t heard of a sipp but will look into it. Why would that be better than putting more into my avc though? Any way I could find out about the equity based fund? Im with Scottish widows I believe that’s all I know

[Hyrrokkin]

I know very little about pensions. I’m 34 and been working at Royal Mail since April 2019. I have been full time for a little over a year earning about £28k before tax. Recently I’ve been paying £20 AVC a week on top of the normal contributions. According to generic pension calculators I should be on about £10k at the age of 57 which is ideally around the age id like to semi retire. I’ve just read though that because of the NRA65 I would likely get a huge reduction if I took it before 65? How much of a reduction would I get if I took it 5-7 years early? Is there anything else I could do to help prepare for early retirement?

Already good advice above
Paying into AVC's is a good start (most in RM do not even know they exist) - remember not just the amount you pay it is also how long you pay in that counts towards a decent pension.
I would add a bit more to AVC's if you can afford it and open a SIPP/ISA as well (small amount and increase over time - plenty of years to build up)

[ARMIT65]

I thought if you took your NRA65 before 60 you lost 50%, once you get to 60 then it's 5% for each year before you reach 65.

[NorthernBoy]

Yeah I’m not sure because obviously atm it’s 55 for private pension but I read someone mention that in 2028 it will be 57. I’m not sure how often they change that. Yeah I’ve noticed the deduction from my take home pay is a lot less than what I actually use towards my avc so I think it’s worth it. I haven’t heard of a sipp but will look into it. Why would that be better than putting more into my avc though? Any way I could find out about the equity based fund? Im with Scottish widows I believe that’s all I know



A SIpp is not necessarily better than AVcs, it’s just gives you another tax efficient saving plan. It’s also very flexible as you can choose exactly what to invest in, from funds to individual stocks. Say you came into some money it would be very easy to put into your sipp directly.

[heapsy]

Yeah I’m not sure because obviously atm it’s 55 for private pension but I read someone mention that in 2028 it will be 57. I’m not sure how often they change that. Yeah I’ve noticed the deduction from my take home pay is a lot less than what I actually use towards my avc so I think it’s worth it. I haven’t heard of a sipp but will look into it. Why would that be better than putting more into my avc though? Any way I could find out about the equity based fund? Im with Scottish widows I believe that’s all I know



A SIpp is not necessarily better than AVcs, it’s just gives you another tax efficient saving plan. It’s also very flexible as you can choose exactly what to invest in, from funds to individual stocks. Say you came into some money it would be very easy to put into your sipp directly.

It might be worth looking in to investing into a Stocks and Shares ISA. Although treated differently from a tax perspective, they have one very big advantage over pensions. That is that they are not subject to minimum age restrictions, so they can be taken as a lump sum, income and can be taken at any age. Unlike a pension, which is minimum 55, soon to be increasing to 57. It would also be worth paying extra off your mortgage, as this would save you money and enable you to have more control of your finances at an earlier age. Ideal if you want early or semi retirement.

[Dnairn8417]

If you joined the business in 2019, you’ll be in the DC scheme with Scottish widows, there’s no reduction for taking your pension a few years early.