Start planning early if you want to retire early 

Many people yearn to retire early - well before their 60s if possible. The trouble is that this is hard to achieve without careful preparation; relatively few people achieve a comfortable early retirement, and it may even be getting harder. 

Part of the problem is that early retirement has become increasingly expensive: 

• Many employers with final salary pension schemes are facing substantial deficits and can no longer afford to offer generous early retirement terms as a way to soften redundancy. 

• Life expectancy has continued to rise, increasing the period over which pensions are paid and hence their cost.
 
• Annuity rates have fallen since the turn of the century, due both to rising life expectancy and generally lower long-term interest rates. 1

Two future changes, already legislated for, will further constrain your early retirement options: 

• From 6 April 2010, the normal minimum age at which you can draw pension benefits will rise from 50 to 55. In practice retirement before age 55 is usually too costly: for example, at current annuity rates a 52 year-old man in good health would need a pension fund of nearly £220,000 to provide a level pension of £ 1,000 a month gross. Add inflation protection to the pension and the cost nearly doubles. 2
 
If you are in the affected birth date range and are considering drawing your pension benefits (including tax-free cash) now rather than at age 55 or later, please contact us as soon as possible. Experience suggests that turning a pension fund into retirement benefits can be a slow process, particularly if your pension fund is spread across several providers. 

• From 6 April 2010, the State Pension Age (SPA) for women begins a phased increase that will see men and women have an equal SPA of 65 by 6 April 2020. Four years later a further phased increase of one year will be introduced, raising the SPA to 66 by 6 April 2026. Another year will be added in 2034-2036 and 2044-2046, so that by 6 April 2046, the SPA will be 68. 

If you want to retire before the state thinks you should, your starting point should be to arrange an initial discussion with us. We can then assess what would be required to meet your retirement objective, taking into account your existing pension provision and investments. 

Even if the result is that you need to rethink your retirement age - not an uncommon outcome - you will be better informed about when you can realistically stop work. 

Levels and bases of, and reliefs from, taxation are subject to change and their value depends on individual circumstances. 

1. National Statistics, October 2009 and www.employeebenefits.co.uk, November 2009.
2. FSA comparative tables (70/11/2009).