Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • Straight Shooter
    • By Straight Shooter 11th Oct 16, 5:28 PM
    • 8Posts
    • 1Thanks
    Straight Shooter
    Risk Averse Dilemma
    • #1
    • 11th Oct 16, 5:28 PM
    Risk Averse Dilemma 11th Oct 16 at 5:28 PM
    I have always saved and never invested - would like to retire in 10 years at state pension age, and I currently have £250k cash in fixed rate bonds and Isa's. I would like to generate sufficent funds from this to pay myself £10k per annum throught my retirement (20 years)
    Would very much appreciate thoughts, advice & strategies from those far wiser than me...
Page 1
    • dunstonh
    • By dunstonh 11th Oct 16, 7:10 PM
    • 85,103 Posts
    • 50,126 Thanks
    dunstonh
    • #2
    • 11th Oct 16, 7:10 PM
    • #2
    • 11th Oct 16, 7:10 PM
    Risk Averse Dilemma
    Using cash for the long term actually increases the risks. Shortfall risk and inflation risk mainly.

    Would very much appreciate thoughts, advice & strategies from those far wiser than me...
    Unless you start to accept that you need to be using investment risk, there is little to discuss.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Thrugelmir
    • By Thrugelmir 11th Oct 16, 7:13 PM
    • 51,249 Posts
    • 43,034 Thanks
    Thrugelmir
    • #3
    • 11th Oct 16, 7:13 PM
    • #3
    • 11th Oct 16, 7:13 PM
    £10k won't be worth £10k in 10 years time. Rumour has it that inflation is on the way. Possibly 3%-4% next year.

    What personal pension provision do you have?
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • tacpot12
    • By tacpot12 11th Oct 16, 7:19 PM
    • 364 Posts
    • 295 Thanks
    tacpot12
    • #4
    • 11th Oct 16, 7:19 PM
    • #4
    • 11th Oct 16, 7:19 PM
    You can already pay yourself £10K a year for 20 years. What are we missing?

    Do you need the £10k per year to increase with inflation so that your purchasing power remains the same?
    • Straight Shooter
    • By Straight Shooter 11th Oct 16, 7:41 PM
    • 8 Posts
    • 1 Thanks
    Straight Shooter
    • #5
    • 11th Oct 16, 7:41 PM
    • #5
    • 11th Oct 16, 7:41 PM
    Sorry, should have clarified, my risk averse nature is why I have saved rather than invested, but the reason for my post is the realisation that rising inflation and falling interest rates mean I will likely have to invest in order to achieve my goal.
    The £10k per annum is based upon today's value - in addition to my savings I have £40k in a pension which I am no longer contributing towards, and a current company pension ( 1 year old) where contributions are the minimum levels. other than that, mortgage, dependent and debt free.
    • Apodemus
    • By Apodemus 11th Oct 16, 9:49 PM
    • 298 Posts
    • 211 Thanks
    Apodemus
    • #6
    • 11th Oct 16, 9:49 PM
    • #6
    • 11th Oct 16, 9:49 PM
    I would like to generate sufficent funds from this to pay myself £10k per annum throught my retirement (20 years)...
    Originally posted by Straight Shooter
    Personally, I would plan on surviving longer than 20 years past retirement age! Or at least, I don't want to run out of money at 87, so would want a strategy that allowed my income to continue as long as required.

    From what you outline, it looks like you might benefit from putting a decent portion of your cash into additional pension provision. Why are you only putting the minimum into your most recent scheme?
    • AnotherJoe
    • By AnotherJoe 11th Oct 16, 11:22 PM
    • 4,134 Posts
    • 4,165 Thanks
    AnotherJoe
    • #7
    • 11th Oct 16, 11:22 PM
    • #7
    • 11th Oct 16, 11:22 PM
    Sorry, should have clarified, my risk averse nature is why I have saved rather than invested, but the reason for my post is the realisation that rising inflation and falling interest rates mean I will likely have to invest in order to achieve my goal.
    The £10k per annum is based upon today's value - in addition to my savings I have £40k in a pension which I am no longer contributing towards, and a current company pension ( 1 year old) where contributions are the minimum levels. other than that, mortgage, dependent and debt free.
    Originally posted by Straight Shooter
    Because ??? If you put the minimum in, guess what you'll get out ?
  • jamesd
    • #8
    • 12th Oct 16, 12:58 AM
    • #8
    • 12th Oct 16, 12:58 AM
    Given current state pension ages this means that you are already at least 55 years old. Which means that you can get at pension money immediately. Which in turn means that you are throwing away lots of free money by not making pension contributions.

    Pension investments can include a wide range of things including just holding the money in cash or near-equivalents like money market funds.

    The maximum permitted level of pension contributions is the lower of your earned income or £40k a year plus unused annual allowance from the past three tax years. So your first step is to arrange to make those pension contributions because they are one of the most effective investment choices available to you because of the effect of the tax relief. Even if you were just to use cash.

    If you were to take any of the taxable 75% out of a pension you would have your annual contribution allowance reduced to no more than £10k a year and could no longer use carry-forward. Exception is three small pots per lifetime of up to £10,000 each.

    Twenty years from age 65 is not a prudent assumption since it's lower than normal life expectancy at age 65 for both men and women.
    • atush
    • By atush 12th Oct 16, 11:47 AM
    • 15,288 Posts
    • 9,163 Thanks
    atush
    • #9
    • 12th Oct 16, 11:47 AM
    • #9
    • 12th Oct 16, 11:47 AM
    Bump up your pension, keep your cash investments which are still paying decent interest, look at S&S isas for remaining cash going forwards.

    Look to invest those S&S isas in multiasset funds such as the Vanguard series (which have varying amounts of equities so you could gofor one with say 2-40% equities) and look at Income funds, and long standing investment trusts which have maintained AND increased dividends for decades.

    As an example, say you use 100K to buy x number of units of a trust that currently pays 4%. So you get 4% on each share you own. So you get 4K per year in a dividend.

    But the share value can go up or in fact go down. But the dividend isnt affected as it still pays out regardless of the capital price of the shares you bought. So the volatility of the asset doesnt affect your income.
    • Straight Shooter
    • By Straight Shooter 12th Oct 16, 6:06 PM
    • 8 Posts
    • 1 Thanks
    Straight Shooter
    Personally, I would plan on surviving longer than 20 years past retirement age! Or at least, I don't want to run out of money at 87, so would want a strategy that allowed my income to continue as long as required.

    From what you outline, it looks like you might benefit from putting a decent portion of your cash into additional pension provision. Why are you only putting the minimum into your most recent scheme?
    Originally posted by Apodemus
    Mostly because have been focusing on my cash savings - and have only now got round to seeking advice including my pension arrangments. There is not a lot of wiggle room within my salary to up the % - but had considered puttting all of my salary in to the scheme and using my saved cash (to the value of) to live on (if I am guided that this would be a sensible approach)
    • Straight Shooter
    • By Straight Shooter 12th Oct 16, 6:15 PM
    • 8 Posts
    • 1 Thanks
    Straight Shooter
    Given current state pension ages this means that you are already at least 55 years old. Which means that you can get at pension money immediately. Which in turn means that you are throwing away lots of free money by not making pension contributions.

    Pension investments can include a wide range of things including just holding the money in cash or near-equivalents like money market funds.

    The maximum permitted level of pension contributions is the lower of your earned income or £40k a year plus unused annual allowance from the past three tax years. So your first step is to arrange to make those pension contributions because they are one of the most effective investment choices available to you because of the effect of the tax relief. Even if you were just to use cash.

    If you were to take any of the taxable 75% out of a pension you would have your annual contribution allowance reduced to no more than £10k a year and could no longer use carry-forward. Exception is three small pots per lifetime of up to £10,000 each.

    Twenty years from age 65 is not a prudent assumption since it's lower than normal life expectancy at age 65 for both men and women.
    Originally posted by jamesd
    I figured that by the age of 87 (if still alive) my thirst for wine,women and song may have run it's course and the need to pay myself £19k with it - reverting back to reliance on state pension solely...
    Last edited by Straight Shooter; 12-10-2016 at 6:19 PM.
    • bowlhead99
    • By bowlhead99 12th Oct 16, 7:30 PM
    • 5,107 Posts
    • 9,038 Thanks
    bowlhead99
    I figured that by the age of 87 (if still alive) my thirst for wine,women and song may have run it's course and the need to pay myself £19k with it - reverting back to reliance on state pension solely...
    Originally posted by Straight Shooter
    Based on usual life expectancy you are about as likely to be alive as not.

    If the answer is that you're alive, you might be disappointed with what you can buy with the state pension that you're trying to live off for the subsequent 10 or 15 years (or more). And you probably won't enjoy the quality of life you get off the state during that time once carers or care home fees burn through your house sale proceeds at £1k+ every couple of weeks.

    If you want to guarantee you don't need more than the state support after your mid-80s, I expect Dignitas have some sort of prepaid plan you could sign up for now.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

371Posts Today

2,186Users online

Martin's Twitter