Pensions Planning: The NUMBER

Ganga

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 ? 

Have you ever priced one of those cruises up? i think you might get a shock at the price ,a luxury cruise might be more reasonable.

Milltir

This thread originally started with the following "groupings" to allocate costs:

• Food
• Car/transport
• Bills/Utilities
• Holidays/Leisure
• Clothing/Cash/Xmas/Other
• Repairs/replacements 

I plan to speak to at least 1 IFA soon (possibly more) soon so was wondering if there is a standard personal financial planning industry practice for such groupings or is it each to their own? It would be nice not to have to regroup my calculations for different people.

DT2001

westv said:

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?!

It was Royal Caribbean in 2017. Not one of their newer ships but very good all the same.
Value for money when you have non stop eating teenage boys!

Korkyb

german_keeper said:

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.  

You are indeed correct - My salary would be "pro-rata'd" up to full time equivalent.

The problem I may have is that the work I do attracts unsocial enhancements (NHS) & for the last 12 months I've worked night shift almost exclusively so my reckonable salary over the last year is likely to be significantly higher than normal. (unsocial enhancement payments count towards my reckonable salary).

When I reduce hours I'm not sure if the ratio of unsocial hours will still be as high as recently so it may be that I'm currently working my "best year".

I will of course check year by year what my reckonable earnings are & if I don't need to take the pension early then I'll leave it longer. (will probably have to get the calculator & back of a fag packet out to check out if I should jump or not).

I'd be happy to leave it longer as while working part time I shouldn't "need" the income that the pension would provide & if I do need more than my part time wage provides then I can dip into my savings.

Korkyb

AlanP_2 said:

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".

MallyGirl said:

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

I think you are right Alan_P2 that leaving the savings sitting will just guarantee a loss.

I'll look into what options we have - perhaps buying a small flat & renting it out might suit my risk adverse nature. (although I do appreciate that property being "safe as houses" doesn't apply anymore & that being a landlord isn't always a bed of roses).

If I did take end up taking my pension while still working would I be able to start another pension?
Would it be worth starting another pension even only for 3 or 4 years??

It wouldn't be through my employer as I'm planning to reduce hours in my current post & as its NHS once my pension kicks in the scheme closes to me.

I would have to get advice on this as I've got no experience of "private" pensions (always had ones provided through my workplaces).

AlanP_2

I've never had a BTL and have no intention of taking on grief as I retire and look ahead towards longer / further travel.

The big disadvantage I see for retiree landlords is the illiquid nature of property and the fact that you can't sell a few £Ks worth when you want a new car / kids house deposit or whatever leaving you dependent on saving from income as opposed to reducing capital.

3-4 years pension is worth it given tax breaks / employer contribution. 

Terron

AlanP_2 said:

I've never had a BTL and have no intention of taking on grief as I retire and look ahead towards longer / further travel.

The big disadvantage I see for retiree landlords is the illiquid nature of property and the fact that you can't sell a few £Ks worth when you want a new car / kids house deposit or whatever leaving you dependent on saving from income as opposed to reducing capital.

3-4 years pension is worth it given tax breaks / employer contribution. 

I have a few BTLs. They provide very little grief as I pay for full management, so normally the only issue is doing my accounts for self-assessment. In seven years I have only had one bad tenant.  He cost me £10k, but the property went up £50k over the three years he rented it. I remortgaged it and used the extra money as a deposit on another property.

If I needed a few £k I have ISAs and a SIPP. Changes to the tax rules on mortgage interest limit the scheme of living off remortgages, but I always suspect HMRC would crack down on that so never went for it, and as a basic rate taxpayer am no worse off.

Terron

Korkyb said:

I'll look into what options we have - perhaps buying a small flat & renting it out might suit my risk adverse nature. (although I do appreciate that property being "safe as houses" doesn't apply anymore & that being a landlord isn't always a bed of roses).

I sold the flat I owned last year, Due to office conversions prices and rents for flats in that areas had dropped and I was barely breaking even. I wouldn't buy another. Ground rents and service charges eat into the net yields. All my BTL properies now are houses.

cfw1994

Milltir said:

This thread originally started with the following "groupings" to allocate costs:

• Food
• Car/transport
• Bills/Utilities
• Holidays/Leisure
• Clothing/Cash/Xmas/Other
• Repairs/replacements 

I plan to speak to at least 1 IFA soon (possibly more) soon so was wondering if there is a standard personal financial planning industry practice for such groupings or is it each to their own? It would be nice not to have to regroup my calculations for different people.

You're on page 168 here - I think it is safe to say there is almost certainly no 'industry standard' - the bottom line is you need to figure out what The Number is for you!    That's the point of the thread ;-)
Many people consider splitting things as fixed or variable.
You can perhaps refine that to "fixed obligatory" (eg council tax, energy bills), "fixed discretionary" (maybe TV package, sports subs), "variable obligatory" (food, cars), "variable discretionary" (holidays, entertainments).
Bottom line is that you need to figure it out for YOU: the IFA may have their list for you to fill in, but I doubt it will be 'standardised' - that will be their value-add   
Ours broadly has fixed outgoings (Gas, Elec, Council Tax, Water, TV/Broadband/TV Licence, Mobile phones, Dentist, Sports subs, House Insurance) & variable ones (Food, Entertainments - shows, drinks), Cars, Clothes and other odds, Holidays)
We then have ours with 3 columns - the middle one being "comfortable" (what we are aiming for), the left one being "luxury" (might include more holidays than much else!) & a right one for "tight" (what we could drop to on a tough year in the markets!)

There is a decent spreadsheet at https://whatapalaver.co.uk/retirement-planning-couples that a kindly user shared previously that helps you break things down....I also have my own (msg me for a copy) to try to figure this stuff out!

trevjl

..I also have my own (msg me for a copy) to try to figure this stuff out!

Kindly sent it to me a few weeks ago. 

Has been of great use and have now been asking myself ever since why I am still working !!!!

But, that's for another thread I plan to start to get the nudge I need.