Pensions Planning: The NUMBER

HedgehogRulez

optoutDB said:

kinger101 said:

 I think a hybrid approach of getting enough from SP + DB + annuity for one's basic needs makes a lot of sense.

I agree with this,

Annuity + DB + SP + House = Basic needs
Investments = Gravy

I put house in there because it seems that in 80% of retirement planning it gets ignored and everyone just assumes a paid off house that will get passed on when they die. When I looked at my brother's retirement plan, my first question was "where do you sell the house?" 

Same general geographical region where it’s currently located I guess?

Needastrongone

Hoping I’ve found the correct place to post my first ever post!

I will be finishing work in a month or two (depending on exit strategy at work). Very young at 53, but OH is older and has developed very significant care needs within the last 3 years. I am unable, for my own health and that of my family, able to continue to balance both parts of the equation (work/home) without burnout. Retirement will be different to that which I might have imagined, and that is reflected in the number below (care, some additional help in the home but less in ‘entertainment’ costs). I do not plan on moving within the next ten years, but there will be significant equity to release when we do in addition. IFA is here next week in any event with forecasts but there may be things to consider I haven’t already.

Combined DC pension pot of £1m (fluctuating a little given current climate but circa).
Total cash savings in various pots of £300k
£250k sale of significant asset.
£350k equity minimum as required.

We need £5k a month to live. That’s factoring in everything I can possibly think to factor in. All monthly outgoings, budget for holiday, annual costs, Christmas, pets, repairs, presents etc. That seems high, but I’ve tried to consider absolutely everything I can feasibly think of. This will reduce somewhat as some costs (pets) are no longer required and our children eventually leave. I can probably tighten that if absolutely needed but I’ve tried to balance realism with the things that help my life as it is. 

Thank you. 

Roger175

You might be better starting a new thread rather than adding to this specific one.

A few thoughts from me. You don't give many details, but with that amount saved at 53 and your relatively high anticipated monthly 'number', I suspect you may be a higher rate tax payer. Therefore, do consider getting as much into your pension as possible before you leave. I regret not being able to do this due to our circumstances (unexpectedly sold a BTL at the point we were retiring and didn't have the relevant income to get it into pension). You will be able to start accessing your pension in 2 years and have plenty of cash in the meantime, so this could be very worthwhile for you, given that you might be able to get tax relief at 40% and then get the first £12,570 tax free and only pay 20% on the remainder (assuming you don't start drawing £60k/annum out)

Nebulous2

Needastrongone said:

Hoping I’ve found the correct place to post my first ever post!

I will be finishing work in a month or two (depending on exit strategy at work). Very young at 53, but OH is older and has developed very significant care needs within the last 3 years. I am unable, for my own health and that of my family, able to continue to balance both parts of the equation (work/home) without burnout. Retirement will be different to that which I might have imagined, and that is reflected in the number below (care, some additional help in the home but less in ‘entertainment’ costs). I do not plan on moving within the next ten years, but there will be significant equity to release when we do in addition. IFA is here next week in any event with forecasts but there may be things to consider I haven’t already.

Combined DC pension pot of £1m (fluctuating a little given current climate but circa).
Total cash savings in various pots of £300k
£250k sale of significant asset.
£350k equity minimum as required.

We need £5k a month to live. That’s factoring in everything I can possibly think to factor in. All monthly outgoings, budget for holiday, annual costs, Christmas, pets, repairs, presents etc. That seems high, but I’ve tried to consider absolutely everything I can feasibly think of. This will reduce somewhat as some costs (pets) are no longer required and our children eventually leave. I can probably tighten that if absolutely needed but I’ve tried to balance realism with the things that help my life as it is. 

Thank you. 

Are these joint figures for pension? Is the 5k a net figure?

If your pension resources are unevenly split, you may find, that more of the pension is taxed than it would be if you could both use your tax allowances. 

You have significant resources, but your biggest issue is that you are intending to draw a lot from them. They could need to last a 40+ year period for you. 

If your OH has significant health problems an impaired life annuity might be a consideration. 

Needastrongone

Apologies - I’ve not used the forum before and just working out the way it works.

The pot is combined 60/40% in OH ‘favour’. He is able to draw from it already being 63. Yes, higher rate tax payer. The IFA has flagged pensions already - and we can utilise this very well (including previous years allowances), without going into too much detail.

It’s a net figure. I can shave a good amount off if required in truth. I’ve just tried to
be overly generous I guess. The kids are both at home (helping re care) and the expenses currently cover 4 adults. I don’t envisage needing £50k pa net.forever. There’s probably more in the house re equity and I’ll likely inherit £100k plus (even helping the kids).

I shall perhaps start a new thread. Appreciate the advice thus far very much. But all advice very welcome and appreciated. 

fistfulofsteel

My "number" is less than the state pension amount. I'm saving into a SIPP with the intention of using it to bridge the gap between 57 and state pension age. Are there any calculators that allow you to put in an end date for when you intend to have used up all the money in the SIPP? All the ones I've found allow you to input a start date for drawdown but no end (presumably they use average life expectancy?)

Nebulous2

fistfulofsteel said:

My "number" is less than the state pension amount. I'm saving into a SIPP with the intention of using it to bridge the gap between 57 and state pension age. Are there any calculators that allow you to put in an end date for when you intend to have used up all the money in the SIPP? All the ones I've found allow you to input a start date for drawdown but no end (presumably they use average life expectancy?)

You're in a fortunate position if your state pension will meet all your needs after you reach that point.

You will also be in a position, assuming your needs aren't significantly higher prior to SPA, that everything you draw from your SIPP will not be subject to income tax. 

You will need to think about what you will hold in your SIPP during drawdown. 

I'm sure some more knowledgeable people will be along soon to respond, but a quick and dirty way would be simply to use current values. So you need 10 years drawdown, at £10,000 a year as an example. You'll need £100k in your SIPP. Then any interest / income you accrue in it gives you a little bit spare to work with, or to provide a modest increase on what you draw in future years.  

If you want something more complex than that you could construct a gilt ladder. This thread discusses a tool to do that. I haven't used it, and don't know if it is still up-to-date, but gilt ladders have generated a bit of discussion here, particularly during the recent market uncertainty. 

Gilt Ladder building tool questions — MoneySavingExpert Forum

barnstar2077

fistfulofsteel said:

My "number" is less than the state pension amount. I'm saving into a SIPP with the intention of using it to bridge the gap between 57 and state pension age. Are there any calculators that allow you to put in an end date for when you intend to have used up all the money in the SIPP? All the ones I've found allow you to input a start date for drawdown but no end (presumably they use average life expectancy?)

Ah, a fellow frugal!  Do you have any experience making spreadsheets?  If not, then as Nebulous2 says, you may want to just work it out with a notepad and pen.  If you do not take the 25% upfront then you can withdraw £16,760 a year tax free (assuming you have no other taxable income that year) and put anything you do not use into an ISA. 

collinsca

An interesting read on this topic (Use 'Immersive Reader' mode to view):
How much you really need to NEVER run out of money in retirement - even if you live to 100 | This is Money

kimwp

collinsca said:

An interesting read on this topic (Use 'Immersive Reader' mode to view):
How much you really need to NEVER run out of money in retirement - even if you live to 100 | This is Money

Needs a subscription to read, does it assume a full state pension alongside that?