Pensions Planning: The NUMBER

AlanP_2

Korkyb said:

I haven't got a clue what my number is.

I have to admit to not really keeping close tabs on my expenditure although I do make sure that I get VFM for anything I am shelling out for.

I'm 54 at the moment and am lucky enough to have a decent final salary pension which I may (have to) take before my NPA of 60.

The reason I might have to take it early is that I'm hoping to reduce my hours at work in the next year and as my pension is based on the best 12 months salary in the 3 years before the pension is taken I may have to activate the pension early to ensure it captures my wage at its highest point.

I've worked out that if I take the pension when I hit 56 years old I should receive 22k ish (after actuary reduction).
My wife's pension (also final salary & able to be taken without actuary reduction at age 55) will be around 9k ish.
Her indoors will also receive a smaller pension of 2k ish when she reaches 60.

Mortgage is paid off, we have no debt & around 50k in savings.

Both our pensions pay out lump sums which should amount to 85k ish between us so unless I splash out on a Bentley or a new wife we should have 130k+ in savings in a few years.


So ignoring the fact that I (& probably she) will still be working part time our income from pensions alone should be:

31k in pensions if we take them in around 2-3 years when I hit 56 ish & she 55 years old (22k + 9k).

This will rise to:

33k when wifie is 60.
50k+ when our state pension kicks in (we are both on track to get the full pension).


It seems crazy to me our income will be that level for "not working" but I guess that's why we knocked our pans in since we were 16?


So I feel we are in a much better position than many (or than we ever expected to be) and the only uncertainties / concerns / questions I do have are:

- If I do take my pension early at 56 ish but continue working part time a fair chunk of the pension will be lost through tax (I guess that's life & I wouldn't be able to do much about that).

- What to do with our savings - rather than watching them slowly depreciate in a savings account should I be doing something else with them?  p.s. I'm pretty risk adverse - I don't mind spending my money but I don't like gambling with it (the house always wins imho).

If there is any other advice you feel might be relevant please fire away!

Stay safe y'all.
 

Like you we are in a smiliar fortunate position as regards DB / SP income levels when they all start paying out.

To minimise the tax hit you could pay some /all of your part time salaries in to a SIPP or workplace pension. After the 25% tax free aspect is allowed for the return is at least 6.25% (+ or - any investment returns).

If the thought of investments seems too mnuch like gambling then you could just leave the contributions as cash inside the pension. OK for a few years at current inflation levels but not ideal longer term.

You say you are pretty risk averse. Many people who only have DB pensions have that mindset but I would disagree with your assessment. In my opinion you are 100% full on for accepting risk, and the risk you are willingly accepting is virtually guaranteed to come to pass - inflation will erode the real value of your savings over the remainder of your lifetimes.

Taking a measured, sensible approach to investing in assets that generate a return greater than inflation over an extended period is a strategy that suits those who are risk averse as it takes away the guaranteed outcome of "losing value" and provides a very high probability of "gaining value".

PJM_62

LHW99 said:

Have you tried living on your projected income for a bit to see how you manage?

Travel .. is the only thing I'm struggling to project and put a number on.
Our budget for travelling I'm thinking will need to double or treble.  Lots more long weekends away in hotels or campervan. Abroad twice a year instead of once. No cruises or 5 star hotels for us.  Although I quite fancy one of those river cruises I see on the telly box.

What are folks factoring for their yearly retirement travel plans ? 

MallyGirl

Korkyb said:

- If I do take my pension early at 56 ish but continue working part time a fair chunk of the pension will be lost through tax (I guess that's life & I wouldn't be able to do much about that).

If wherever you end up working does salary sacrifice into pension then you can keep yourself at low/no tax or NI by sacrificing down to NMW

german_keeper

Korkyb said:

I haven't got a clue what my number is.

I have to admit to not really keeping close tabs on my expenditure although I do make sure that I get VFM for anything I am shelling out for.

I'm 54 at the moment and am lucky enough to have a decent final salary pension which I may (have to) take before my NPA of 60.

The reason I might have to take it early is that I'm hoping to reduce my hours at work in the next year and as my pension is based on the best 12 months salary in the 3 years before the pension is taken I may have to activate the pension early to ensure it captures my wage at its highest point.

I've worked out that if I take the pension when I hit 56 years old I should receive 22k ish (after actuary reduction).
My wife's pension (also final salary & able to be taken without actuary reduction at age 55) will be around 9k ish.
Her indoors will also receive a smaller pension of 2k ish when she reaches 60.

Mortgage is paid off, we have no debt & around 50k in savings.

Both our pensions pay out lump sums which should amount to 85k ish between us so unless I splash out on a Bentley or a new wife we should have 130k+ in savings in a few years.


So ignoring the fact that I (& probably she) will still be working part time our income from pensions alone should be:

31k in pensions if we take them in around 2-3 years when I hit 56 ish & she 55 years old (22k + 9k).

This will rise to:

33k when wifie is 60.
50k+ when our state pension kicks in (we are both on track to get the full pension).


It seems crazy to me our income will be that level for "not working" but I guess that's why we knocked our pans in since we were 16?


So I feel we are in a much better position than many (or than we ever expected to be) and the only uncertainties / concerns / questions I do have are:

- If I do take my pension early at 56 ish but continue working part time a fair chunk of the pension will be lost through tax (I guess that's life & I wouldn't be able to do much about that).

- What to do with our savings - rather than watching them slowly depreciate in a savings account should I be doing something else with them?  p.s. I'm pretty risk adverse - I don't mind spending my money but I don't like gambling with it (the house always wins imho).

If there is any other advice you feel might be relevant please fire away!

Stay safe y'all.
 

Have you checked the scheme rules re reckonable earnings? As I understand it a final salary pension is worked out on full time equivalent earnings. The effect of going part time is that you don't build up as much service as you would if full time.  

openside50

bownyboy said:

openside50 said:

I'm asset rich cash poor, we have downsized to a nice flat in Surrey, also have a house abroad which we dont rent out just use it as a second family home, plus we have inherited a half share in my wife parents house which we rent out providing us a reasonable £700 per month income, no mortgages on any of them
Sounds good on the face of it, but we have no private pension, have approx £40k savings but we both will be in receipt of the full state pension 
We are looking then at an income of approx £28k when we reach retirement age of 66 in 3 years time, havnt a clue as to wether it's enough, fortunately I have never been a worrier so will just suck it and see 

You both need to get a state pension forecast from HMRC if you haven't already. 
Let's assume its £179.60 from April 6th 2021 which equals £9,340 per year so £18,678 for the both of you. 
Add in £700 rental income which is £27,078 in total. 
Congratulations, you're on track!

Thanks!
My main conundrum is that I'm of the opinion we flog my wifes mums house and bank the half share - approx £250k - - she wants to keep the house which provides approx £8k pa income
Other than that I think we just go with what we've got - As there ain't anything going to change without a lottery win!

bownyboy

Thanks!

My main conundrum is that I'm of the opinion we flog my wifes mums house and bank the half share - approx £250k - - she wants to keep the house which provides approx £8k pa income
Other than that I think we just go with what we've got - As there ain't anything going to change without a lottery win!

I guess it comes down to whether you want to be landlords or not? Personally I wouldn't be bothered with all the faff that goes with it just for £8k a year. 
If it was me I'd sell and put it in a Vanguard fund that matches your risk / volatility profile.

openside50

bownyboy said:

Thanks!

My main conundrum is that I'm of the opinion we flog my wifes mums house and bank the half share - approx £250k - - she wants to keep the house which provides approx £8k pa income
Other than that I think we just go with what we've got - As there ain't anything going to change without a lottery win!

I guess it comes down to whether you want to be landlords or not? Personally I wouldn't be bothered with all the faff that goes with it just for £8k a year. 
If it was me I'd sell and put it in a Vanguard fund that matches your risk / volatility profile.

bownyboy said:

Thanks!

My main conundrum is that I'm of the opinion we flog my wifes mums house and bank the half share - approx £250k - - she wants to keep the house which provides approx £8k pa income
Other than that I think we just go with what we've got - As there ain't anything going to change without a lottery win!

I guess it comes down to whether you want to be landlords or not? Personally I wouldn't be bothered with all the faff that goes with it just for £8k a year. 
If it was me I'd sell and put it in a Vanguard fund that matches your risk / volatility profile.

I agree with selling it, but it is my wife's property and I dont want to interfere too much

I will wait till we are destitute!

DT2001

PJM_62 said:

LHW99 said:

Have you tried living on your projected income for a bit to see how you manage?

Travel .. is the only thing I'm struggling to project and put a number on.
Our budget for travelling I'm thinking will need to double or treble.  Lots more long weekends away in hotels or campervan. Abroad twice a year instead of once. No cruises or 5 star hotels for us.  Although I quite fancy one of those river cruises I see on the telly box.

What are folks factoring for their yearly retirement travel plans ? 

When I 1st came across this thread I think I estimated £20k p.a. roughly doubling our number (£20k for everything except travel). It was a real bag of fag packet guess as I think we have only ever spent that amount once (included were cost of our 4 children). We swap homes, self cater and seek out bargains so our money goes a long way.

Now I think in terms of anything we ‘make’ in excess of £20k will go into the travel pot. Allows my ‘peace of mind’ flexible approach to safe withdrawals to be appeased.
Maybe we’ll use some organised travel as that is easier but more expensive however I have my doubts as OH loves to bring a plan together. She managed to book a 10 day cruise from Singapore to Shanghai for under £500 each and then find a house swap before the cruise, a private tailor made 3 day tour in China (for less than joining an organised one) after and then a stop off in Dubai (another house swap) - less than £2k each. So maybe the budget needs dropping or a Lions/Barmy Army tour added!

AlanP_2

Maybe we’ll use some organised travel as that is easier but more expensive however I have my doubts as OH loves to bring a plan together. She managed to book a 10 day cruise from Singapore to Shanghai for under £500 each and then find a house swap before the cruise, a private tailor made 3 day tour in China (for less than joining an organised one) after and then a stop off in Dubai (another house swap) - less than £2k each. So maybe the budget needs dropping or a Lions/Barmy Army tour added!

A business opportunity by the sounds of it, after you have vetted all the packages first obviously.

We are similar, much prefer to put our own "package" together than go for something organised. Works out cheaper and you tend to see more of the "real" country / people in our experience.

westv

DT2001 said:

PJM_62 said:

LHW99 said:

Have you tried living on your projected income for a bit to see how you manage?

Travel .. is the only thing I'm struggling to project and put a number on.
Our budget for travelling I'm thinking will need to double or treble.  Lots more long weekends away in hotels or campervan. Abroad twice a year instead of once. No cruises or 5 star hotels for us.  Although I quite fancy one of those river cruises I see on the telly box.

What are folks factoring for their yearly retirement travel plans ? 

 She managed to book a 10 day cruise from Singapore to Shanghai for under £500

Are you sure it's not a ferry rather than a cruise?!