Pensions Planning: The NUMBER

TBC15

lisyloo wrote: »

An offset mortgage is the same as your one account except NOT in one account.
Debts are in one and surplus (savings/current) are in other accounts.


Similar except if it came to means tested benefits.

And what's the strategy for using it in retirement?

Bimbly

TBC15 wrote: »

And what's the strategy for using it in retirement?

Rather than have your cash (say, you're emergency fund) in a normal savings account earning piddly amounts of interest, you have it in a linked savings account where the balance saves you mortgage interest.

But you can still take it out as you would from a savings account. If you need to buy a car or a new boiler or whatever.

You could also keep your cash buffer in there. For example, in drawdown, you will probably want to keep one to three years of spending money in cash. Instead of having this in a cash fund in your pension, earning next to nothing, you could take it out and have it in an account linked to your offset mortage, saving that mortgage interest.

Assuming you can take cash out of your pension without going up a tax band.

You could also take out of your pension all your income for one year at the beginning of the tax year and put it in the offset mortgage account. Then your day to day spending across the year will come out of that account. So the money is saving your mortgage interest until you spend it, rather than being in cash/low-earning low risk funds in your pension.

That's my understanding. Others may have other ideas.

lisyloo

TBC15 wrote: »

And what's the strategy for using it in retirement?

It's a guaranteed line of credit that's immediately available.



One way to use it is an an emergency fund.


It could also be used for equity release prior to downsizing. There are risks there, but would probaby be a much better deal than a formal equity release.

TBC15

So, is it viable to stay fully invested and draw out as required from the current account mortgage over the year, then if at the end of the year if all has gone well sell some units to bring account back to an even keel?

If so are there any simulations or illustrations out there?

blisteringblue

Bimbly wrote: »

You could also take out of your pension all your income for one year at the beginning of the tax year and put it in the offset mortgage account. Then your day to day spending across the year will come out of that account. So the money is saving your mortgage interest until you spend it, rather than being in cash/low-earning low risk funds in your pension.

That's my understanding. Others may have other ideas.

Exactly how I see it too. I also have a One Account and will be putting some of my TFLS in here but I won't be closing the account as in paying off the mortgage until I actually need to. I think it's about 8 years after I retire anyway.

This is very much my emergency fund if the Markets take a hit when I am in drawdown. Would rather take money out of the offset than my Drawdown pot that has taken a hit.

I will do sums to see if it's worth not crystallising all my TFLS too, because it might even work as you say Bimbly, take out the years drawdown and offset the mortgage that isn't clear yet. Obviously need to work this out. Its a few years off yet.

TBC15

blisteringblue wrote: »

Exactly how I see it too. I also have a One Account and will be putting some of my TFLS in here but I won't be closing the account as in paying off the mortgage until I actually need to. I think it's about 8 years after I retire anyway.

This is very much my emergency fund if the Markets take a hit when I am in drawdown. Would rather take money out of the offset than my Drawdown pot that has taken a hit.

I will do sums to see if it's worth not crystallising all my TFLS too, because it might even work as you say Bimbly, take out the years drawdown and offset the mortgage that isn't clear yet. Obviously need to work this out. Its a few years off yet.

Ref the One Account. Is there something in the small print saying it runs up to retirement? Just wondering if they get boot faced if the monthly pay cheque doesn't turn up.

blisteringblue

TBC15 wrote: »

Ref the One Account. Is there something in the small print saying it runs up to retirement? Just wondering if they get boot faced if the monthly pay cheque doesn't turn up.

Possibly, but there is retirement age and there is early retirement?

I think I took it out for 20 years back in 2007 so there will be around 4 years (not 8) in early retirement till it's time is up anyway, I'm sure I can wing it, and pay it back anyway if they make a fuss.

Northamptonblue

I genuinely hope that it is an urban myth. The very thought cheers me up as I would no longer have to feel guilty about using the phrase. Trying to be reasonable, measured and avoid giving offence is a surprisingly exhausting business.

gadgetmind

blisteringblue wrote: »

Possibly, but there is retirement age and there is early retirement?

Retirement age is the age at which you retire.

There is also the age at which you can get State Pension, but that's entirely different (if you choose it to be.)

TBC15

And there is the age the money tap turns off. Mr TBC15 we would like a word your account is looking progressively odd.