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  • FIRST POST
    • Rodders2409
    • By Rodders2409 7th Sep 17, 5:19 PM
    • 25Posts
    • 6Thanks
    Rodders2409
    Life's swerve ball - need to plan differently!
    • #1
    • 7th Sep 17, 5:19 PM
    Life's swerve ball - need to plan differently! 7th Sep 17 at 5:19 PM
    Hello All,

    I've not posted before but need to get some basic advice ahead of probably enlisting an IFA in the coming months.

    To cut a long story short my better half is going to face some medical / life challenges in the coming years (PD) and we need to plan accordingly, so this is a first stab!....any and all advice very welcome.

    Really want to know if I'm way out in thinking I can retire at 60, with the following parameters...

    Me
    50 yrs / M / Born 1966
    Employed

    Her
    57 / F / 1960
    Housewife...oldskool ..
    Zero income

    We have zero mortgage and no other borrowings

    My pensions
    Aegon - current company pension £169,341...only active one.
    Friends Life 1 £66,998
    Friends Life 2 £4,529
    Friends Life Managed fund £14,341
    Total pension pot (to date) £255K

    Missus' pension
    Prudential - £27,573...no contributions for >15 yrs

    I have recently increased my personal contributions, in anticipation, to £1167 p/m excluding tax relief, and the company pay £205 pm into the same scheme.

    I have a property which I rent out and get £7000 p/a net of all costs...and am looking to get this put into my other half's name if it's tax beneficial. This would form quite a big part of our pension plans I guess.

    We aren't big spenders and have worked out, based on 2 years of trawling through statements etc, that we could fairly comfortably live on £28K pa.

    Question is ...is that possible if I retire at 60?

    Thanks to all who read this!
Page 1
    • MatthewAinsworth
    • By MatthewAinsworth 7th Sep 17, 5:40 PM
    • 2,862 Posts
    • 1,141 Thanks
    MatthewAinsworth
    • #2
    • 7th Sep 17, 5:40 PM
    • #2
    • 7th Sep 17, 5:40 PM
    Maybe her pension can be accessed early on better terms given the medical condition?
    • Stubod
    • By Stubod 7th Sep 17, 5:41 PM
    • 428 Posts
    • 266 Thanks
    Stubod
    • #3
    • 7th Sep 17, 5:41 PM
    • #3
    • 7th Sep 17, 5:41 PM
    ..insufficient information really as you don't say what your current income is and whether this exceeds your current outgoings (enabling you to save / invest anything else prior to 60), and whether or not you have any other savings / investments that you could live off post 60?

    Also is you current pension a final salary scheme?

    ..a rough (very) calculation / projection suggests you could have a final pension pot (at 60), of at least circa £600K which may be enough to give you an inflation linked pension of £20k per year? (then add on your rental income of 7k, so maybe just enough subject to how you manage your tax. (eg rental house in spouses name if they have no other income so would be tax free?)..or take some extra drawdown in the early years pending your state pension kicking in at 66/67 which should then easily give you your £28+ target income.

    Hopefully somebody who is more qualified can give you a more accurate answer...
    Last edited by Stubod; 07-09-2017 at 5:48 PM.
    • intowhere
    • By intowhere 7th Sep 17, 5:51 PM
    • 36 Posts
    • 5 Thanks
    intowhere
    • #4
    • 7th Sep 17, 5:51 PM
    • #4
    • 7th Sep 17, 5:51 PM
    What do you do / have done that has allowed you to be mortgage free at 50 and with a decent pension?

    I think its possible as you're state pension will kick in 6 years later/

    Hope it works out for your wife and yourself.
    • Rodders2409
    • By Rodders2409 7th Sep 17, 5:51 PM
    • 25 Posts
    • 6 Thanks
    Rodders2409
    • #5
    • 7th Sep 17, 5:51 PM
    • #5
    • 7th Sep 17, 5:51 PM
    Many thanks Mathew and Stubod..

    We will ask the Prudential if that's possible.

    Salary is £please ask via PM...and we do not live outside our means so could possibly add more to the pension pot, but have kids in university so needed to balance the next 9 years till 60.

    None of the pensions are final salary schemes.

    We have some savings (£20K) but will probably look to keep this as danger money.

    I had played with some on-line calculators that suggested with this level of pension and continued payments, at the rates I detailed, and the property rental income...plus her Pension kicking in at 66 with mine at 67...we should be OK. However I don't really know if the calculator is OK or not !!
    Last edited by Rodders2409; 11-09-2017 at 11:48 AM. Reason: Private info so possibly sensitive!
    • xylophone
    • By xylophone 7th Sep 17, 5:56 PM
    • 23,441 Posts
    • 13,625 Thanks
    xylophone
    • #6
    • 7th Sep 17, 5:56 PM
    • #6
    • 7th Sep 17, 5:56 PM
    Missus' pension
    Prudential - £27,573...no contributions for >15 yrs
    Might be worth considering £2880 pa contribution to get tax relief added.

    Have you both obtained state pension forecasts?

    https://www.gov.uk/check-state-pension

    Re property

    https://www.taxinsider.co.uk/681-How_to_Correctly_Gift_Property_to_Spouses.html

    All your current pensions are DC with no safeguarded benefits?
    • Rodders2409
    • By Rodders2409 7th Sep 17, 6:00 PM
    • 25 Posts
    • 6 Thanks
    Rodders2409
    • #7
    • 7th Sep 17, 6:00 PM
    • #7
    • 7th Sep 17, 6:00 PM
    Hello intowhere...

    I was burnt back in the late 80's as anew mortgage owner at 20 yrs old and too many credit cards!
    I ended up selling my stuff and moving into mates house whilst renting my place out.

    Since then I've never owned a credit card, spent only what I earnt...that's not easy...and am handy so fixed most things from Cars to boilers and didn't pay for too many trades.

    We had one of those offset Tracker mortgages on the family home and just paid all the spare cash we had into it as often as we could. There were a couple of lump sums from my parents (3-5K) which we shoved in there too...it was cleared about 5 years ago.

    The rest is basically being a bit lucky with my job....working stupid hours...getting paid OK money and putting a decent % into the pot each month and forgetting it's happening!!

    I'm not smart enough to have developed any kind of plan :-)
    • intowhere
    • By intowhere 7th Sep 17, 6:03 PM
    • 36 Posts
    • 5 Thanks
    intowhere
    • #8
    • 7th Sep 17, 6:03 PM
    • #8
    • 7th Sep 17, 6:03 PM
    gd luck to you.
    • Rodders2409
    • By Rodders2409 7th Sep 17, 7:01 PM
    • 25 Posts
    • 6 Thanks
    Rodders2409
    • #9
    • 7th Sep 17, 7:01 PM
    • #9
    • 7th Sep 17, 7:01 PM
    Thanks.

    Yes we've logged on to the.Government site and I am eligible for the full £8K pluso...my missus will need to top up a little for her to get the full £8K plus....but it's worth it ....hopefully!

    I'm not sure what DC or safeguards means.....can you please advise...
    • Mnd
    • By Mnd 7th Sep 17, 7:22 PM
    • 236 Posts
    • 272 Thanks
    Mnd
    I would agree with the suggest to pay the 2880 into your wife's pension fund for the tax relief she will get.
    As she has zero income she will be able to take her money out tax free 25% and up to her personal allowance.

    Good luck to you
    • BLB53
    • By BLB53 7th Sep 17, 7:37 PM
    • 1,154 Posts
    • 932 Thanks
    BLB53
    Looks like you will end up with a pot of ~£450K (conservative estimate) in 10 yrs which could provide a rough drawdown of £22,500 at 5% so including your rental income you should be OK at 60.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • Stubod
    • By Stubod 7th Sep 17, 7:50 PM
    • 428 Posts
    • 266 Thanks
    Stubod
    ..with your quoted salary and your £28k outgoings, 10 yrs to run and your current pensions I would say that retirement at 60 with £28k pr/yr should be fairly straightforward. Get yourself a food IFA, and add what you can to SIPPS / SS ISAS, and you may find you can go even earlier!!..

    ...good luck to you both....
    Last edited by Stubod; 11-09-2017 at 12:57 PM. Reason: OP request to remove some personnal info
    • Rodders2409
    • By Rodders2409 7th Sep 17, 8:08 PM
    • 25 Posts
    • 6 Thanks
    Rodders2409
    Any thanks to all of you for the responses.

    A few basic questions if that's OK?

    How do you calculate the extra amount to pay into her pension...and why?

    What is the 5% drawdown?
    • BLB53
    • By BLB53 7th Sep 17, 8:27 PM
    • 1,154 Posts
    • 932 Thanks
    BLB53
    How do you calculate the extra amount to pay into her pension...and why?
    Anyone who is not employed can put £3,600 (gross) into a pension - you pay £2,880 and the taxman will contribute the rest.

    What is the 5% drawdown?
    When you come to the point of living off your accumulated pension pot you will withdraw a certain amount each year (assuming you do not go for an annuity). This is drawdown. You could possibly draw 4% indefinitely as the pot remains invested and would grow by 5 or 6% each year to replace what you have taken out.

    You could take a slightly higher amount until your state pension kicks in so 5% may be a reasonable figure from 60 to 67.

    Here a more elaborate article on DIY Investor which explains in detail.

    http://diyinvestoruk.blogspot.co.uk/2016/08/a-look-at-sustainable-drawdown.html
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • Rodders2409
    • By Rodders2409 7th Sep 17, 9:31 PM
    • 25 Posts
    • 6 Thanks
    Rodders2409
    Thanks BLB53....this is proper learning!

    So there are no restrictions in adding to her Prudential pension even after such a long time?
    And we just pay the £2880 with the tax man adding the balance (25%)...that's great info.

    I scanned the Blog and need to re-read again (probably multiple times!)...but the gist seems to be there are many variables and, depending on our risk levels and ability to follow and manage the investments, we could start a retirement plan where...

    from 60-67 yrs with pension pot at approx £450K
    4 % drawdown = £18,000 (or £22,500 @5%)
    Property rental income = £7,000
    ....giving an income of approx £25,000 before tax (or £29,500 @ 5%)

    Then....
    at 67 yrs we will both be starting our State pensions at approx £16,000 p/a total giving ...
    £25,000 + £16,000 = £41,000pa

    Which is great to hear if correct?!!

    Obviously I appreciate that we'll be paying tax and there will be inflation....but have I understood correctly?

    Cheers
    • BLB53
    • By BLB53 7th Sep 17, 9:41 PM
    • 1,154 Posts
    • 932 Thanks
    BLB53
    Obviously I appreciate that we'll be paying tax and there will be inflation....but have I understood correctly?
    Yes, that summary looks just about right.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • michaels
    • By michaels 7th Sep 17, 11:01 PM
    • 19,750 Posts
    • 90,212 Thanks
    michaels
    Won't your DW be getting her hopefully full state pension by the time you are 60? Add on 7k rental and you are at 15k so only 13k needed from pensions, reducing to 5k once your state pension kicks in. 450k pot should be more than enough for this!
    Cool heads and compromise
    • bostonerimus
    • By bostonerimus 7th Sep 17, 11:03 PM
    • 1,121 Posts
    • 628 Thanks
    bostonerimus
    If we assume 5% annual growth of your pensions for the next ten years then at age 60 you should have around 678k. A 3.5% annual drawdown will give you ~24k and add the 7k rent you'll have 31k annual income. So you should be ok and the state pensions and the equity you have in real estate give you a nice safety margin.
    Last edited by bostonerimus; 07-09-2017 at 11:05 PM.
    Misanthrope in search of similar for mutual loathing
    • xylophone
    • By xylophone 7th Sep 17, 11:41 PM
    • 23,441 Posts
    • 13,625 Thanks
    xylophone
    I'm not sure what DC or safeguards means.....can you please advise...


    https://www.pensionwise.gov.uk/en/pension-types

    http://adviser.royallondon.com/technical-central/pensions/transfers/safeguarded-benefits/
    • kidmugsy
    • By kidmugsy 8th Sep 17, 12:24 AM
    • 9,848 Posts
    • 6,641 Thanks
    kidmugsy
    Her
    57 / F / 1960
    Housewife...oldskool ..
    Zero income ......

    Missus' pension
    Prudential - £27,573..

    I have recently increased my personal contributions, in anticipation, to £1167 p/m excluding tax relief, and the company pay £205 pm into the same scheme.

    I have a property which I rent out and get £7000 p/a net of all costs...and am looking to get this put into my other half's name if it's tax beneficial.

    We aren't big spenders and have worked out, based on 2 years of trawling through statements etc, that we could fairly comfortably live on £28K pa.

    ....Salary is @@@@...and we do not live outside our means so could possibly add more to the pension pot, but have kids in university so needed to balance the next 9 years till 60. ...

    Question is ...is that possible if I retire at 60?
    Originally posted by Rodders2409
    (i) Your wife can already draw her pension: no need to ask the Pru. If the Pru doesn't offer drawdown, transfer to a provider that does. (Our small SIPPs are with Hargreaves Lansdown whom we find excellent. Other people speak highly of Cavendish, and of A J Bell.)

    (ii) She should indeed contribute £2880 net in each tax year. She should then drawdown enough to use her personal allowance against income tax. So, currently approx £11,500 - £7k = £4k p.a., but rather more in 17/18 because she won't have received the rent for the whole tax year. Plus she might take her tax-free lump sum. The point of her drawing this income would be to make it easier for you to contribute more to your pension e.g. to get your income down to the higher rate tax threshold (£45k, but £43k in Scotland). You should take maximum advantage of the 40% tax relief while it's still available.

    (iii) The point is to increase your pension pot ASAP so that you could even conceivably retire at 55, depending on your wife's health.

    P.S. Put the children on short commons if necessary. But note that you can borrow far more cheaply by taking a mortgage loan than your children can by taking govt loans.
    Last edited by kidmugsy; 11-09-2017 at 12:08 PM.
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