State Pension + Change of FIRE Meet Up Venue

A lot of people aiming for FIRE, in particular the younger folk, don’t include the State Pension in the plans

I understand why that is – they won’t be able to touch their pension when they FIRE by 40, the pension-age goal posts keep getting moved by various governments, it might be means tested, there might well be nothing left in the government pot, etc. So quite a few unknowns there.

However, for me, the State Pension has always been part of my plans right from the start. Perhaps I’m just being over-optmistic that the government ‘will come good’ for me, but it’s probably because I’ve gotten into FIRE later in life so I can consider pensions as part of my plan.

What State Pension Might I Get?

When I first started thinking about FIRE, doing my ‘back of the fag packet’ calculations, I used a nominal £5k as my state pension number – I reckoned that I was going to get at least this amount from the age of 67.

Recently however, I’ve been able to obtain a more accurate estimate (can an estimate be ‘accurate’?) via HMRC’s website:

At the last count, I had paid 30 years of full National Insurance. The requirement to receive full state pension pay out is 35 years.

The five years remaining ties in nicely with my stretch target of becoming FIRE by the end of year 2024…

However, as my work pension was contracted out for most of my career (meaning that I paid less NI during that period), it looks like I have to pay an extra two years to receive the max, so 7 more years in total of NI to pay, with my current forecast based on NI paid to date being £139.18 per week:

How Does It All Fit In?

So how does the state pension feature in my FIRE plans when I won’t be able to get my mitts on it until I’m 67?

Well, it’s income which I do not have to accumulate as part of my Future Fund (my FIRE pot).

If (and I actually hope not) I live to 100, that’s 33 x £8,797 = £290,301 (based on current forecast) which I don’t have to save up for (or generate) as part of my Future Fund.

I think this was one of the reasons I never really got into the whole 25 x expenses calculation for FIRE – I couldn’t see where the state pension fit into the calculation. Nor in my case, my DB pension. My DB pension and state pension combined will should provide me with a guaranteed minimum income floor, enough to cover all my basics expenses. It’s down to me to make up the extra for a more comfortable retirement.

As I’ve mentioned on previous occasions, my Future Fund is just a bridge from when I FIRE until when I am able to draw on my DB pension (at 65) and then the state pension.

Sometimes my plan seems too simplistic and I get the odd panicky feeling that I’m making a big mistake with my calculations.

Most other times however, it makes complete sense to me.

I’m sure there won’t be many (if any) but anyone else include the state pension in their plans?

Change of Manchester FIRE Meet Up Venue

I’ve been advised that the Manchester FIRE meet up on Friday 29th November will now be at The Salutation Pub, 12 Higher Chatham St, Manchester M15 6ED (just off Oxford Road), not at The Bank.

It’s looking unlikely that I will be able to make it but if there’s a chance I can show my face there (even briefly), I will try!


66 thoughts on “State Pension + Change of FIRE Meet Up Venue

  1. I am not alone in nit counting on the state pension but perhaps the underlying reason is because I think that you should take responsibility for your own situation and not rely on others too much – be it your with profits investment, that superstar fund manager or the government.
    Looking at oir finances now – we’ve probably got too much in the pensions but not enough to FIRE.
    Fire is almost obsessed with SWRs be it 2.5/3/3.5/4/5% – the pension does give a bit of protection against a very long retirement but since we’ll all be much older (another 30 years for, 28 for you) we won’t find out if we need it until it’s too late!

    I keep an eye on he value of the pension (the Lady only has 9 years of NI contributions to date) but I won’t start counting my chickens before they hatch and treat it as a bonus easter egg instead.

    • Hi GFF

      I’m not sure what else I need to do to take responsiblitiy for my own situation – is aiming for FIRE not enough? 😉

      And if I can’t rely on my investments either, then I may as well just give up right now, sleepwalk into retirement poverty and just hope that ‘something’ will sort itself out in the future. Or start buying lottery tickets!

      Aiming for FIRE is a massive leap of faith – I won’t know if my plan works until it doesn’t. Just as I don’t really know if I will get a state pension but the chances are that I will get something. It’s too big a number for me to ignore and leave out of my plans.

      • I might have come off as being a little arrogant – “I don”t need your state pension!” but in reality it would be bonkers to not consider it.
        I do keep a track of its value but I don’t particularly extrapolate it (with only 15/35th collected, it should increase over time).
        My problem is not so much retirement finance it’s early retirement finance. So, I’ll continue to not rely on it or count on it but I’ll not forget it (when the time comes).

        Remember that the pension is only available (for me) a 68 – although that might change.
        Also, if you retire abroad will you get it? Will it increase?
        Who knows these things – hopefully it’ll be the cherry on top when I get it instead of the bedrock of my retirement plans.

        • You can get it paid direct to you when you retire abroad. Whether it increases or not depends on which country you retire to – my parents’ pensions are frozen at whatever it was when they started drawing it 10-15 years ago and with the pound sterling being rather rubbish lately, it’s fortunate they don’t totally rely on it for income.

  2. I’ve not been including it in any of my calculations, but I don’t necessarily think that I shouldn’t. It’s probably something that I’ll start counting further down the line, depending on how many years I meet the NI threshold. I’m currently pegged for nothing as you need a minimum of 10 years of work earning over a certain amount (I believe).

    I wonder, do you still get the personal allowance from a private pension if you also draw a full state pension? If so, that would be amazing! £12,500 tax-free from your personal allowance, £8,767 from the state pension.

    Actually, writing that, it’s probably combined and taken as your total income, right?

    • Hey SN

      Yes, you need a minimum of 10 years’ NI to qualify (currently) – if you haven’t paid that, then it makes no sense to include it in your calculations.

      And as clarified by GFF, state pension is taxed as income so reduces your allowance.

        • Hi Firelite

          Yes, I also got NI paid for the years I was at uni as well as sixth form.

          I do however have 3 incomplete years, the years after I graduated where I was working temporary contracts and I didn’t claim benefits when I wasn’t working.

          If only I had and I would be at 33 paid up years!

          • How did you manage to get NI paid whilst you were at uni? I have a 3-year gap in my record because of uni, notwithstanding working during holidays.

            HMRC (or Inland Revenue as it was back then) did invite me, a year or so after graduating, to make voluntary payments to fill the gap in my record but as I wasn’t earning much and figured I would be working long enough to accrue the qualifying number of years, I passed on the opportunity.

            And can you draw down your DB pension before 65 albeit on actuarially-reduced terms?

          • I have three ‘year not full’ records from when I was at uni, although there is a full year which corresponds with my placement year when I was working (I did a 4-year course).

            I too received something from the Inland Revenue to make voluntary payments but I had no idea that not paying them would have an impact on future state pension payouts – I just thought that if it was optional, I was going to opt not to pay!

            I am able to draw on my DB pension before 65 but the penalty is harsh at 8% for every early year! Depending on how desperate I am (ie my FIRE plans have gone pear-shaped!), I might consider taking it a year early, ie stomach an 8% hit. If I wanted to take it at 60, that would be a 40% hit so that’s not an option!

          • Yeah, 8% pa is way harsh: take it at 55, and receive a 20% slither – ouch! I can see why you might need a relatively large future fund to keep you going for 10 years. That, and being an expensive lady 🙂

  3. As a mid-20…er, if I’ll be happy enough with a state pension that covers a monthly haircut, but obviously I hope there will be something slightly more significant than that available. But that’s the beauty of following FI, hopefully the state pension will be just the cherry on the icing on the cake when I come around to drawing it.
    Even though most pursuers of FIRE don’t include the state pension, your plan seems more than rational to me 🙂

    • Hi AMM

      At your young age, I can imagine not considering the state pension because a lot can happen in the next 40 odd years.

      As you say the beauty of aiming for FI or FIRE is that the state pension will be in addition to what you have built financially and not be the sole income you will rely on, like some others.

      Because there will always be those who haven’t saved (either unable to or just YOLO’d their way through life), I think there will be some sort of state pension.

  4. Your plan is pretty much the same as mine. Pure Fireists tend to overcomplicate things.
    The state pension is cash you’re going to get so why not count it.

  5. It’s great to hear that younger people are making steps towards FIRE.
    I think that absolutely you should count your State Pension as income.
    I FIREd at 47 (5 years ago) and currently draw an income from equity/bond ISAs and a little from P2P lending.
    At aged 55 I plan to readjust and start drawing from my SIPP.
    At 60 my work pension will kick in as another income tranche…
    And finally at aged 67 (God willing!) my State Pension will complete the picture.
    By looking at all your assets as diversified income streams, the future seems that bit more assured.

    • Hi David

      Firstly, congratulations on FIREing at 47! It would be interesting to know if you just did this on your own or were inspired by the early FIRE pioneers (or you could be a pioneer yourself!).

      My plan is a little similar to yours:

      At 55, I will draw income from my ISA, SIPP and a bit of rental income.
      At 65, I will start drawing from my work pension
      And at 67 (yes, God willing!), my state pension.

      For me, the most complicated part will be ensuring that the funds I have built up will last the 10 years before my work pension kicks in – this will be when I’ll be most at risk from sequence of returns risk so I need to ensure I have a decent cash buffer too.

      • Such a great post Weenie! I’m about the same age as you and def count SP in. I won’t necessarily fully hit FI (came late to it and have 4 boys) but I am aiming at reducing the need to work 40 hours. So my plan is complete the equity /house hack thing I’m busy with currently; pay off new large mortgage asap within 11 years as well as maximise savings (tenants plus airbnb/hosting students will help with these). Within that time husband wants to change work, poss retraining. By 10 years’ time I will be 58 and should be able to work less, and begin the drawdown by the time I’m about 60. My other half is 6 years older, so while he doesn’t get into any of this, I have his age in mind and am trying to maximise now to make the future easier. His SP will kick in and help us significantly, before mine joins it. I’m also caring for my mother, so we co-live and have tiny monthlies. All the best!

        • Hi Chantal

          Sounds like you have a great plan but also a lot on your plate! Although you say you won’t necessarily reach full FI, aiming towards it will allow you to do the things you want, ie reduce working hours, your husband to change jobs/retrain etc and ease burdens in the future. The SP will help with that certainly.

      • Thanks Weenie,
        I didn’t actually hear about FIRE until I was about 2 years away from it – via the lads. So I suppose you could say I was a self-(FIRE)starter…
        I began with Hargreaves Lansdown in the late 80s, taking out a wide range of different geographical funds. Then I discovered I could do this more simply and cheaply (only 2% pa!) with Legal & General’s first generation of index funds in the early 90s – and I just continued from there.
        I’m in that “complicated part” (before the work pension kicks in) now; I use a 3 year cash buffer, but I always keep a separate bond fund in case there’s a protracted downturn; that way I hopefully won’t have to sell equities at a bad time.
        Anyway, so far so good and steady as she goes…

        • Hi David
          That’s fantastic that you did it all so early on your own.
          Interesting that you mention a 3-year cash buffer; I’m just thinking of 2 years at the moment. As I get closer to my goal, my risk tolerance might veer towards more cash.

  6. We’re also not relying on state pension in our calculations because it still feels so far away and it keeps changing.

    It makes sense that you count it though because even if things change, the government seems to protect those closer to retirement age from any changes so I think your bet is pretty safe. Although nothing is guaranteed.

    The downside of our own plans is that we may end up working for longer and investing more than we need to if we end up getting a state prison. That’s a pretty big downside considering how valuable time is but we’re cautious and rather play it safe.

    • Hi CfC

      I get that when NRA is so far away that it’s not easy to factor in the state pension but at some point, perhaps it would be worth considering, to as you say, avoid working longer and investing more than you need.

      I understand the need to be cautious and in my case, I’ve not factored in the full amount I’m expecting but a lesser figure, which I think might be more realistic in light of possible future changes.

      PS – I think you meant state ‘pension’ in your last paragraph, not ‘prison’ – ever the law enforcer! 😉

  7. I don’t include it for my main number, but I do think about it when I’m playing with other variables. For me, the fact that it’s ~30 years away (but I don’t know how many) and inflation (and the gov messing with CPI, RPI, etc) could change the value so much means it’s less work at the moment to ignore it than to try to calculate it. The cost of underestimating it is low (have more to spend in later retirement) but the cost of over estimating is high (don’t have enough).

    Also, due to the timing, the SP or lack of isn’t likely to change my FIRE date at all: my challenge (like your Future Fund) is bridging the gap between FIRE and 55/57/58 whenever I can access my private pension. By the time the SP arrives (or doesn’t) I’ll have already won or lost.

    But philosophically, I don’t see a problem with it being included. I’m just too lazy to include it for me.

    • I’ve tried to mitigate the overestimating bit by not using the full amount to which I’m entitled.

      If the government delays my SP, then that isn’t going to change my FIRE plan either, unless they plan to announce changes in the next 5 years.

      When I’m FIRE’d and changes are announced, it could be that I may have to adjust my spending, make my money last longer but this is something I would have to do anyway, depending on the stockmarkets so I anticipate some kind of variance.

      • Yeah, that makes sense. I imagine that once you’re FIREd you’ll probably be in the zone where you are close enough that changes won’t impact you. As I’m behind you and hope to have longer between FIRE and my SPA I’m not sure I’ll have the same certainty for me. Fingers crossed though!

  8. Hi Weenie

    I can understand why people in their 20’s and 30’s don’t factor in the pension to their calculation as it is so far away. I didn’t think about it then either, but my strategy was to ensure I was saving regularly and compounding the interest (when I was in my 20’s interest rates were something like >6%, but mortgage rates did hit 15%).

    Later on I did count it as I stopped working two years ago when I was 58 and if I hadn’t counted it I would probably still be having to work to save the extra money to “replace” the state pension value from 66 onwards.

    Not sure why anyone would “ignore” almost £9k per year of income because the government might change things around, but they are almost certainly not going to cancel it.

    • Hi FIUK

      I haven’t worked out how much longer I would have to work or how much more I would have to save if I didn’t count the SP, but I agree that it is too big a number to ignore totally. Maybe when I’ve got a little time, I run through the numbers to see what they would look like if there was no SP….

      I too can’t see how they could ‘cancel’ it – there are too many people who will rely on it solely as they don’t have any retirement savings.

      I think I can cope with any changes they might make – just have to make sure I plan for it.

      Hope all’s well with you in your retirement.

  9. Hi Weenie, I would count State pension in your calculations. As an oldie of 66 I have a lot of friends who didn’t make it to this age and a lot of friends who are becoming too infirm to spend their money – about 85 is a good line in the sand for that at the moment. So, my advice to the really young is to take State Pension into account when doing their sums at present value – this will leave more money available to live on & enjoy life with during the saving period. It may be worth a lot less when you come to draw it, but that is a risk. There is always the risk that you may die before you get to 67 as well, so life has to be a balance between saving hard for FIRE and actually enjoying life incase you don’t make it to FIRE. And remember that all your hard earned savings may be grabbed by the council to pay for your care in later life, while those who saved nothing but went on 4 holidays a year for most of their life get a bed next to you 🙂

    • Hi Ken

      Balance is the key. I could have fast-tracked my FIRE plan and be years ahead but that would have meant me being extremely frugal and cutting out things I enjoy in life. It’s obvious that if I didn’t include the SP, my path to FIRE would take longer or probably not be possible at all.

      By the time I’m in some bed, I think I’ll be past caring whether the person next to me paid for it or not, but I hope to have lived a good life (which I’m trying to do and ensure now!)

  10. Makes sense to include it. Don’t forget that while “we” are personal finance geeks, there is another 99% of the population that doesn’t even give this a second thought. They might rely on state pension far more then “we” do. In the end everybody will have to make ends meet one way or another. Hence, I do still expect to receive a state pension as well (somewhere in 2051!).

    • Hi Berry

      Great to see that you are optimistic for the future! Bar some apocalypse, I can’t see there not being a state pension in some form or another, otherwise, what would the 99% do?

      I’m fairly confident that I will make ends meet although I would like the ends to overlap for a more comfortable retirement! 🙂

  11. Great post Weenie, am in v much the same position as you – age and thinking wise, I count it in, if not I’d need to rethink things significantly!!

    As Financial Independence UK says I can appreciate why younger people don’t as it feel so far away and they are thinking, what will be left for us, but as a Cashflow cop says the government is likely to look after retirees – everything points to the State Pension being around for quite a while yet – triple lock – society’s view this is an entitlement not a benefit …

    What will change though is when we can take it. Which I personally do not have a problem with. We are currently living longer and healthier lives – statistically. I have been doing a bit of research (googling) about the relationship between state pension age and life expectancy (its fun at my house!) which I might write up – its a question for us all if we are living longer can we expect to receive the state pension at the same age?

    Interms of Ken’s point about the money being grabbed by the council for care home fees – again not how I see the world – my plan is to reduce the risk of being in a care home by living a healthy life, still a risk I could be in one, and if I am I want to be in one of my or my families choosing which meets my needs, not what the council thinks or can afford.

    See here for a great episode of Maven Money’s podcast on financial planning for care home fees.

    • Hi the Squirreler

      Because I started so late in the game, I’m not sure FIRE would be worth pursuing if I didn’t count the SP!

      I can’t see the triple lock staying much longer to be honest – I’m not counting on it anyway, hence I used a fixed amount in my calculations.

      If they delay the pension, it’ll put a bit of a spanner in the works, but I’d just have to adjust my spending accordingly (no more cruises haha!).

      I would hope that if I needed care, that I (or my family) would have a choice in saying where it would be but there’s every possibility that there might not be that choice. Like you, I plan to be as healthy as possible for as long as I can, but life can throw obstacles to wreck all the best intentions and hard work.

      I do occasionally listen to Maven Money podcasts but not the one you linked, which could be interesting – cheers!

  12. I treat the state pension like a big insurance policy, that i’m not relying on, but that will hopefully be there if my calculations are off plan for whatever reason. i’m fully expecting some major volatility in the finance world over the next decade and it’s somewhat reassuring that the state pension should be sitting in the background if everything else goes pear shape.
    Having your DB (and state) pension to cover much of your day to day living expenses should be a massive boost to your peace of mind, and for me definitely the way to go. i have many colleagues who have opted to transfer their DB pensions (advised by their financial advisers…i wonder why!) and i suspect some of them may have sleepless nights in the years to come if the stock market doesn’t perform as they’re expecting.
    For me, the decumulation stage is far more complex than the accumulation, but i think your plans are good. So long as you have a few buffers for if/when things take a downturn you should hopefully be able to navigate your way through the golden years right up until you get your telegram!

    • Hi KC

      I too know of colleagues who have transferred their DB pensions to get a rather large sum. There is going to be volatility without a doubt and unless they’ve got their massive sums sitting in cash accounts, there will be sleepless nights. I haven’t even bothered to get a valuation for my DB pension – I’d rather not know, lest it turn my head…

      My DB and SP pensions will be my annuities in effect – although I like tinkering with my investments now, there will come a time when all I want is the comfort of an amount being paid to me without me having to think/stress or check my investments.

      The 10 years before my DB starts paying out will be the difficult or complicated phase as I have no idea how I will cope with decumulation.

      I don’t hold a lot of cash though so I do need to build those buffers up at some point.

      • > The 10 years before my DB starts paying out will be the difficult or complicated phase as I have no idea how I will cope with decumulation.

        Decumulation is harder than accumulation – and does not seem to get as much coverage in the FIRE blogs.

        I know you have been following ERMINE and IMO there is a lot of real-world practical experience and ideas on that site. IMO he took a reasonably prudent approach to his Gap, but, as he clearly acknowledges, with the benefit of hindsight, it could have worked out very differently!

        If you like the F&U approach, then the first key things to know is what you are likely to spend once you jump ship. I guess you must have a decent handle on this as you seem to have been tracking your spending for at least the number of years you have been blogging – ie it is roughly (1 – your savings rate)* net salary.
        Then it is worth roughly establishing how much of this annual spend will be covered each year by your DB/SP Income Floor.
        If the floor coverage exceeds 100%, then your only liability is probably just the cost of your spending in the Gap. If the floor coverage is 100% is healthy (but not necessarily sufficient), whereas <100% means you need to either gather more Assets (ie work & save longer) or reduce your Liability (ie less cruises / year).
        P.S. there are many refinement that can be made to this calculation around e.g. annual spending trends, Other Income sources, inflation rates, investment returns, longevity, etc but IMO these can be ignored at a first cut.

        • P.S. should have said that in all the above I have assumed you work with net (ie after tax) numbers for both Assets and Liabilities.
          At a first cut your DB/SP could be taxable, as might your SIPP and other taxable accounts. However, if you play it right the Gap offers tax optimisation opportunities over and above those provided by tax free lump sums from pensions (DB and/or DC).

          • I know already that I will find decumulation a lot harder – my entire focus right now is saving and holding onto investments; selling and spending isn’t something I’m looking forward to really!

            Yes, I have a fair idea of my annual spending and my DB/SP income floor covers >100% but not by a huge margin, so I know it may still not be sufficient when the time comes. As long as I’m aware though, I can try to do something about it.

            And yes, I work with net numbers. My DB/SP will be taxable but I am hoping to not pay any tax (or as little as possible) during the Gap.

          • I’m struggling finding much in the way of decumulation strategies, particularly in the gap before I can take my DB benefit.

            Where can I find out more about “the gap offers tax optimisation opportunities” to which you refer?

  13. Wow – you’ve given the game away Wennie – you are *** years old (the same as my sister) 😉
    I would agree that it seems reasonable to include state pensions in your calculations; on the other hand, i) it could be frozen and effectively reduced through inflation, and ii) the Government could change the basic rate of income tax (upwards) and personal allowance (downwards), so it might not buy as much as you might have hoped; having said as much, we are all, young and old, subject to changes in taxation!
    I’m confused over your comment on “contracted out” pension contributions – your DB pension effectively means that you were not enrolled in SERPS, but the figure you are referring to here is Statutory State Pension; it probably makes very little difference, as you can’t opt out of paying National Insurance after working your 35 years (assuming you are still earning a wage).

    • Hi Felice

      Haha, I gave the game away earlier this year when I posted that I had reached my half century! 🙂

      I’m trying to anticipate any government changes by underestimating the amount of pension I will get, ie I’m not using my full entitlement in my calculations. If they delay it further, I’m sure I will get a bit of warning and adjust my spending/saving accordingly.

      With regards to ‘contracting out’, I was contracted out for 18 years and during that time, I paid reduced NI. The difference was apparently accounted for in my DB pension. However, as I am still working, I can ‘make up’ for the reduced NI payments with full NI years from my current employment.

      Hence why instead of 5 years to get the full entitlement (35 years), the website is showing 7 years.

  14. It probably all comes down to what view you want to take. And, almost certainly, this will vary with age.

    As I am sure you may recall, I personally view Floor and Upside as a far safer approach than a systematic withdrawal plan using an unknown (and in fact unknowable in advance), so-called, safe withdrawal rate.
    IMO your plan is therefore just fine – and all you need concern yourself with once you have accumulated sufficient safe funds to bridge the gap between jumping ship and taking your DB pension is, how will you:
    a) fund any lifestyle extras (over and above your guaranteed minimum income Floor); and
    b) probably more importantly, the thorny and deeply personal topic of risk management.
    That is, how much Upside do you need/want and how will it be invested.

    Your current dilemma is really just about what to include in your safe Floor. And whilst there is some understandable scepticism amongst, mostly younger folks, regarding the state pension, I suspect it is no more risky than your DB plan.

    Lastly, a subtle point that may be of interest is that your 7th extra year of NI will buy you very little state pension – at todays rates: about £0.50/year whereas the previous six will buy about £4.80 / year each!

    • Hi Al

      Yes, Floor and Upside makes the most sense to me – I just need to make sure that I have enough over the guaranteed minimum income floor provided by DB and SP to have a comfortable retirement (the odd cruise etc!). This means ensuring I don’t spend all my pot during the gap!

      Thanks for the pointer about the 7th extra year of NI – I had wondered how much more it would add to my SP. If when I get to the 35 years and the 2 years seem negligible, I may not bother paying the extra (if I’m not working).

  15. As things stand today, IMO, even if not working, year 6 is probably a good buy; year 7 is much more questionable. VFM in this case is principally driven by your view of your longevity.

  16. I am 53 and definitely counting State Pension into my plans.
    Definitely worth checking how many years you still have to contribute.
    Also if you are a grandparent looking after children or a carer for someone in receipt of Attendance Allowance you may be entitled to a credit for you National Insurance.
    Even if you do have to pay to get the full credit you recoup it within about 4 years.

    • Hi Anned

      I have no dependants so my plan is just for me.

      I’ll see what it looks like in 5 years’ time to see if I want to continue contributing for the last two years.

  17. Sounds to me like you are already in a pretty good place – well done!

    I would use the time remaining until you pull the plug to further consider the threats and opportunities to your whole overall plan (including the role played by the other factors I mentioned above, e.g. inflation, Other Income sources, etc) and configure things in accordance with your risk tolerance/preferences. Stress testing is one way you could conduct such an analysis.

    I understand exactly what you say about “selling and spending”, but, I guess this is what you were saving the money for in the first place.

    As mentioned elsewhere, “Mind the Gap!” is sound advise! However, if things go well, you may be able to traverse the Gap with most of your Pot (at least in nominal terms) intact; see e.g. ERMINE. On the other hand, you may wish to prioritize never running out of money (or being short of liquidity) during the Gap. Your choice, but you do have the luxury of some time to think this all through.

    P.S. I understand that you can defer the decision on paying up to 6 years of missing NI contributions until just before you reach state pension age – although it probably makes sense to allow a reasonable period for HMG admin to wash through properly

  18. Pingback: UK State Pension – should you include it in your net worth or not? – Gentleman's Family Finances

  19. Hi Weenie,

    Thanks for writing this post, it reminded me to go and check my own projected allowance. I still have 12 more years NI to pay to cover my full amount of contributions. Sadly I missed a year when I was working on cruise ships (for a US company) and did not know until it was too late (6 year window) that I could have topped up. Never mind eh.

    I don’t count the State Pension in any of my FIRE plans. Anything I get will just help to improve my quality of life. With the way government likes to means test for everything I don’t trust that they won’t try to introduce means testing for the state pension and those of us who have diligently saved into pensions/savings would be impacted. Perhaps this is not something they could do, being funded from NI rather than income tax, I don’t know, I just prefer to plan for the worst case scenario and be pleasantly surprised if it’s better than I planned!


    • Hi Corinna

      Yes, the 6 year window is annoying – until people were able to check online, how were they to know that they had missed a year?

      I think younger folk may only be able to see the SP as a bonus, but who knows what will happen in the next 10-20 years?

      The good thing is that you are planning to fund your own retirement so fingers crossed you will be pleasantly surprised!

  20. Yes, the State Pension forms a major part of our retirement planning, (I regard myself and my wife as a single economic unit), but then we’re nearer to receiving it than most FIRE folk. In fact I’m not sure we qualify for the Early bit.

    I stopped working in March 2018 when I was aged 56, and as of now my wife reaches State Pension age in under 5 years, me just over 9. Our target retirement annual income (after tax, but we aim not to be paying much of that) is £36,000 in today’s money. Combined State Pension at the moment is £17,545, or just under half of the target. At the moment we’re getting that income from a combination of Defined Benefit pensions we built up in the 1970s and 1980s and drawing down from Defined Contribution pensions we paid into more recently. Once we are both getting the SP, we will only need the DB pensions to meet our target.

    I think significantly watering down the State Pension would be political suicide and so I regard it as pretty safe. Remember also that the pension forecast you get from the Government website does not include inflation so assuming the Triple Lock or something like it remains in place, that part of our income is inflation proofed.

    • Hi Phil

      You stopped working at 56, so I would put you in the FIRE category – some seem to think that FIRE can only be achieved by those in their 30s or 40s but us in our fifties really will be doing the RE bit, whereas I think the youngsters focus more on the FI bit.

      To err on the side of caution, I don’t include inflation in my calculation and I reckon the triple lock can’t be sustained.

      Notwithstanding the removal of the triple lock, I do agree that I can’t see any government wanting to significantly water down the SP but can’t see any party really doing anything that will help boost the coffers without rocking the boat too much. Whoever they tax more is going to be unhappy.

  21. When planning for my wife (I am older and retired with a DB pension) we definitely took state pension into account. She took early retirement earlier this year, from a job with a DC pension but also will get some bits of DB pension eventually from previous jobs.

    The calculation was how much to put into her DC scheme so that (after retirement and conversion to a SIPP allowing drawdown) she could use it to pay herself a pension of the income tax threshold until the first DB pension became available, then draw down somewhat less until the next ones, and finally get all her income from DBs plus SP at age 67. The money now in a SIPP may fall slightly short, depending on whether the invested portion increases more than inflation.

    Of course the only reason we could optimise tax benefits by her taking just the income tax threshold is that we have the security of my DB pension plus SP. It gives us the joint income we had calculated as desirable, though to be honest we have been adding quite a lot of extra spending from savings (generated by the 25% tax free lump sum) in the first year we are both retired. (We need to make sure that doesn’t become a habit!)

    • Some great planning there, Jonathan.

      In the ‘gap’ between me retiring early and drawing down on my DB pension, I will attempt to keep under the income tax threshold by using income/capital from my ISAs as well as SIPPs.

      I haven’t gone so far as to consider whether I will take 25% tax free lump sums – probably, but haven’t really worked out what I will do with it. Maybe plough some of it back into the SIPP to get a bit of tax relief up to the max £3k a year? This will surely change by the time I get there, so I’ll consider closer to the time.

      Thanks for sharing your plans!

      • You do not have to take the tax free PCLS.
        I was amazed at the number of options that are now available re SIPPs/DC’s. For example:
        Have you looked at UFPLS rather than income drawdown from your SIPP/DC. Provided you have no LTA issues UFPLS may suit you better, see, for example
        Even if your SIPP and/or DC do not offer UFPLS I am fairly sure that they will be transferable to somewhere that does.
        Yesterday Vanguard made some commitments to their long-awaited SIPP. See
        Initially the Vanguard SIPP will only support accumulation, with decumulation to follow.
        Finally, the current rules about drawing from a SIPP vs an ISA are straightforward: ISA’s are never taxable. SIPPs are always taxable (with some tax free options (including personal allowance)). So, in most cases, burning through your SIPP in the Gap makes most sense. As usual, DYOR!

        • Yes, there are lots of options for SIPPs now upon drawdown but I’ve not read into it in too much detail yet. From the little I have read, UFPLS does seem the way to go and yes, I intend to burn through my SIPP in the gap!

  22. Hi Weenie, you’re right it seems that most don’t include it in their calculations but it’s an important thing to consider. Personally I simply tend to forget about it altogether, probably because it just seems so far away.

    After a quick check, my current estimate is £88.36 a week, and I have a fair few years of contributions to get to the £168.60 a week figure.

    To be honest I’m going to treat it as contingency in case something happens that means I need to draw down my private pension faster than I expected. In that respect I suppose it’s more of a bonus!

    • Hi AO

      For youngsters, it’s still worth considering in the long term plans (there’s life after FIRE) but I can see why it’s seen as more of a contingency because it’s so far away. Let us all hope it will be there as a bonus!

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  25. Hi Weenie,

    Thanks for covering this topic and for pointing out that someone who was contracted out prior to 2016 can still obtain a full new (flat rate) state pension with some more years of NI contributions.

    I too was contracted out for a while and it feels “suspiciously generous” to both qualify for a full new state pension and also have benefited from lower NI contributions. When I’ve tried to research this I end up drifting into a quagmire of “CODs” and “COPE” deductions and trying to work out how those affect the amount of state pension that I will get in practice.

    I did come across this document from Royal London written by the former Pensions Minister, Steve Webb. It seems to explain things more clearly than most other articles I’ve encountered:

    On p7 it says:

    “””Those with several years of contributions from 2016/17 onwards therefore
    have the potential to build up towards a full flat rate state pension even if they had past periods of contracting out.”””

    So it really does seem like we can get a full new state pension despite periods of contacting out. In my case I probably have another 20 years of NICs to contribute. I may not FIRE, but I can at least FIR!



    • Hi Charlie

      Thanks for the detailed comment.

      I was flummoxed by the COPE number for a while but apparently just need to ignore that and concentrate on paying my full years of NI contributions.

      Thanks for linking Steve Web’s document – I think I had read a synopsis of it elsewhere but it was good to read it in full.

      So yes, we do get the full new state pension (future government meddling notwithstanding!) – good luck with your FIR journey! 🙂

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