Lump sum

A colleague of mine retired recently.

Not FIREd.

Not found himself long-term unemployed for so long he simply gave up on work.

Not married his way up the socioeconomic game of snakes and ladders.

Not won the inheritance lottery.

No, he just got old.

One day he was one with the ranks of the corporate wage slaves, selling off their life by the day.

The next day he wasn’t.

A milestone birthday unlocked a treasure trove of private pensions.

Before tax funds slowly and steadily squirrelled away throughout his working life.

Topped up on occasion by benevolent employers.

Boosted in recent years via salary sacrifice of non-recurring performance bonuses and annual pay rises. One of the few remaining legal avenues for permanent employees to game the tax system.

Amidst birthday cake, greeting cards, and gift-wrapped goodies received on the day was a letter from his pension provider.

He could now crack open his pension pot.

Withdraw the lesser amount of 25% the balance, or 25% his lifetime allowance. Tax-free.

Extract that tax-free amount as a single lump sum, or spread it over several payments.

Exceed those limits however, and pension withdrawals are treated as income.

Taxed accordingly. Potentially taxed a lot.

0%.

20%.

40%.

45%.

60%.

Choose your own adventure. Paying tax is optional.

My colleague dutifully played the good sport on his birthday.

Donned a silly party hat.

Feigned delight with unwanted surprises he hadn’t asked for, or gifts he had bought for himself.

Posed for the obligatory family photo. An image destined for social media. To signal a wholesome yet wholly imaginary happy family illusion to an uncaring audience of doom scrollers and trolls.

Endured a tortured rendition of “happy birthday to you”. A century-old song with a chequered past. Stolen from its composer. Converted into a royalty juggernaut, which continues to generate a seven-figure annual income to this day.

As soon as he was able, my colleague escaped the festivities to run some quick numbers.

The tax-free lump sum pension payment would comfortably clear his mortgage. He silently kicked himself for having spent years contributing to a repayment mortgage, imposing cashflow constraints and lifestyle compromises, when this windfall could have done all the heavy lifting for him.

The ongoing pension income would go a long way towards covering his remaining lifestyle costs. His children were grown and gone. Neither his generosity nor means inclined him to establishing a domestic branch of the bank of Mum and Dad. If they wanted his money, they could wait until he died.

Even after removing housing from his outgoings, his pension income would not quite cover his costs.

However, in another decade or so, the government aged pension should kick in. Twin rivers of retirement income. Combining to provide for himself and his wife, so long as they lived within their means.

So how to bridge the gap?

Continue with the daily grind? Business suits? Commuter trains? Status update meetings? Store-bought sandwiches? Bollocks to that!

Quit, and live off savings until reaching state pension age? Possibly, but the idea made him uneasy. Eating away at the safety cushion he had spent a lifetime assembling. What if the money ran out?

Downshift and coast? Become a consultant. A part-timer. A tutor. Hell, why not a barista?

It would get him out of the house for some externally imposed social interaction.

Probably good for him.

Definitely good for his marriage. That would never survive continuous close contact. Quiet nights in were already strained. Family holidays were torturous, but at least they had an end date.

He realised that he had a great many options and hoped for plenty of time to figure out what to do.

No guarantees of course, as evidenced by the increasing number of funerals he attended for friends, family, and former colleagues in recent years. Accidents and suicides had long since given way to cancers and degenerative diseases as the primary cause. Healthy living might make you feel better, but it was luck and the genetic lottery that determined the outcome.

My colleague had a theory that happiness was found on holidays. Solo holidays in his case. A brief escape from the everyday. Free from expectation. Released from pressure. A chance to just be.

Fulfilment was found in accomplishment. Not calculated in a spreadsheet. Nor hiding in a computer.

None of those things sounded like his current working existence.

Days bookended by commuting alongside grey-faced, grey-suited zombies. Some young. Some old. All looking resigned or stressed on the way in. Defeated and exhausted on the way home.

Long working hours consumed by administrivia and presenteeism. Very busy people filling out their days doing very busy work. Lots of activity. Little value.

One day not long ago, he had looked around and realised he had become the old man on site.

His peers and mentors had been ground up and spat out by the relentless demands of the vast corporate machine. Burned out. Long-term sick. Performance managed. Redundant. Retired. Dead.

Stabbed in the back by smiling assassins.

Manoeuvred out by ambitious underlings.

Done to them as they had done to others. An evolutionary lifecycle. The corporate Game of Thrones.

My friend double-checked his sums, before emailing a quick letter of resignation to HR. He was done.

Returning to his birthday party, he told his unsuspecting family that he had retired.

A stunned silence was heard. Each processing the implications to themselves.

He would be around more.

He would be earning less. Profit centre transforming into cost centre.

His wealth-generating capacity thrown into reverse. Nest egg reducing rather than compounding.

His attention was likely to be more present. Less distracted.

He could focus on things important to him. Not those determined by his employer.

Individually, each of those effects represented major change. Collectively, they were a seismic shift.

His value proposition as a husband altered. Yesterday, primary income earner. His ability to provide offsetting his great many flaws. Today, it was his assets and pension pot that brought the value. Spoils that could be readily divided or won in a divorce. Half the money, none of the hassle.

A thought destined to launch a series of conversations. Raising uncomfortable questions. Was it better to be alone together, that state of being familiar to all too many long-term couples? Or better being together alone, risking ageing without support for the chance of happiness?

The thing that shocked me about my colleague’s sudden retirement wasn’t the fact that he simply vanished from the workplace, refusing to work out his notice period. What could they do, fire him?

Nor was it the troubling notion that he had nothing to retire to. Regularly attending work drinks didn’t magically transform colleagues into friends, it merely provided acquaintances to get drunk with. His lengthy daily commute had left little time for a social life mid-week, and little energy for hobbies on the weekends.

No, what took my by surprise was the fact he was old enough to retire. Logically, I knew he must be in his mid-fifties. But dammit, he didn’t look or sound or act all that different to me! He couldn’t be old enough to enter retirement, because I didn’t feel old enough to think about retirement.

The difference between recognising and accepting proved to be a yawning chasm. In much the same way that my colleague had always intellectually recognised he should one day have access to a tax-free lump sum pension payout. It was something else entirely to have that day arrive. Recognition becoming reality.

My colleague wasn’t the first coworker I’d known who retired. But previously the retirees had always seemed “older”. The elder generation. Members of the old guard. One of them, not one of us.

That illusion had now been shattered.

Reflecting on my peer group, retirement was just beginning to creep in as a topic of conversation. Not the numbers, never the numbers. Just the goals. Ambitions. Hopes. Dreams. Occasionally, in unguarded moments, fears.

Loss of identity.

Loss of meaning.

Loss of relevance.

Gone. Fading away. Forgotten.

Amongst my antipodean friends, retirement causes the siren song of returning “home” to strengthen. A curious notion, given many of them have lived in England for decades, and the British pound is no longer as great as it once was. The nostalgic lives they overfondly remember from their youth no longer existing. Parents in care homes or graves. Siblings and school friends scattered to the wind. Yet still they yearn, and return.

The English seem to follow a different path. Escaping the proximity to the big city. Downsizing and extracting accumulated housing equity to supplement their retirements. Their destinations don’t appear to be “home” in the sense of the returning migrants, but given everywhere in England is within commuting distance of everywhere else, that probably doesn’t matter.

It has taken me a little while to get used to the notion that traditional retirement is no longer so far in the future as not being worth thinking about.

To recognise that any pontificating about “early” retirement I may indulge in starts to sound ironic.

Of course regulatory risk and perpetually broke governments will no doubt continue to shift the goalposts governing pension access. There is also a certain inevitability to means testing eventually being applied to the social security safety net, a practice long implemented in countries richer and more prosperous than the United Kingdom.

This suggests it is probably long past time to dig out my neglected financial plans, dust them off, and apply some newfound perspective to retirement numbers in what could no longer objectively be thought of as the “long term”.

Retirement planning. Who’d have thought it? Definitely a sign of getting old!

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