Pensions Planning: The NUMBER

silver_4444_uk

Hello Everyone,

We have found this a very interesting thread.
My wife and I sat down at the kitchen table yesterday and did our "back of the fag packet calculation" to come up with "our number" which is 19536 net.

We are both in our late forties. I am in a group money purchase, company pension scheme, but my wife has a "chequered" pension history due to being off work looking after our two children. She intends to go back to work once our youngest settles in secondary school this year. Hopefully !

If I rely solely on my company pension and I keep my current level of contributions. My pension will be about 16k net if I retire at 65 or 8k if I retire at 55. We are also fortunate that we have other savings/ investments that could provide us with an income of about 4k net.

I would love to retire at 55 but I doubt it will be possible. I am however going to give it a bl**dy good go !


My father retired at 63 when he sold his business and by that stage he had had enough of work. He always said to me that if you can possibly retire early then go for it, you won't get the time back !
At the same time he went from a really active life to a very sedentary one and it did his health no good whatsoever . I think that a phased retirement is definitely the best idea, for both body and mind.
Another lesson I have learned from my parents is not to retire to a house and garden that is far too big to maintain easily, as they have done. It is a nice idea to be in a big house, but big houses have big maintenance fees.

Our goals are as follows:

1) Put money aside to help our two daughters financially ( as best we can, without spoiling them ! ) through university / or whatever they decide to do. It won't be a massive amount of cash, but it will hopefully give them a good start in life.

2) Clear our own mortgage ( hopefully in about 5/6 years ). I am in the MFIT Challenge on the Mortgage Free Wannabe Forum.

3) Once our own mortgage is cleared, use the mortgage overpayments for a deposit for a buy to let property and additional savings / investments. I could put the extra money into the company pension scheme but I do not like the thought of having all my eggs in one basket. We also want to be able to leave our daughters something when we finally "pop our clogs and the taxman has taken his share.

Should be a piece of cake, achieving all of the above:rotfl:

But that's my goals.

Good luck everyone in reaching "your number" !

Silver_4444_uk

beedeedee

maggieann155 wrote: »

thats really given me hope!
could i ask if you have any savings to fall back on?

Yes, we do - but have NEVER broken into them in 13 years. This again is a matter of some pride, so as far as we are concerned we live totally on our early retirement income of £18000.

beedeedee

Just wanted to add - have done a few sums and we have around £11,700 a year to spend as we wish..........Our "necessities" that we pay are £4140 a year, for council tax, utilites, household insurances and TV licence. We have both a car and a large motorbike for which tax, insurance and breakdown for both costs £550 a year. We choose to have Health Insurance, phones ( landline and 2 mobiles) and broadband which cost around £1600.
This leaves us over £11,650 "spending" money each year.
We choose and adjust accordingly how much to spend on food and petrol - it's not as though we need to go to work each day anymore and have drastically reduced the amount of rubbish we consume - only the best food for us nowadays.
The vehicles, including our caravan are serviced regularly with local garages. We get very few problems which I'm sure is due to this.
We buy £100 of Premium Bonds most months - and have been lucky enough to win occasionally - we always spend any winnings on something we particularly want or add them to Tesco Vouchers or Airmiles to get cheap flights or ferry crossings for our caravan forays to the continent.
As I said before- I reckon we have more "spending"cash available each month than many who are working.

maggieann155

beedeedee wrote: »

Yes, we do - but have NEVER broken into them in 13 years. This again is a matter of some pride, so as far as we are concerned we live totally on our early retirement income of £18000.

that's extremely encouraging!

and many thanks for sharing all your personal expenditure figures. definately gives me hope.

I've got an idea of our 'number' but we'll probably actually have less than we think we may want. we'll just have to work within these confines. work longer/more pension or, early retirement/less pension/more care ! the second option, no question!!!!!!!!:)

then we can go caravanning all year or spend winter in the sun- yay!

jamesd

silver_4444_uk wrote: »

2) Clear our own mortgage ( hopefully in about 5/6 years ). I am in the MFIT Challenge on the Mortgage Free Wannabe Forum.

That's a way to probably make yourself poorer over the long term.

The reason is that investments generally on average over the long term grow by more than the amount saved in mortgage interest payments, so any money put into mortgage payments is likely to reduce your eventual wealth. You can't recover by investing the mortgage payments you no longer have to make once it's cleared because you'll have missed out on many years of compounded investment growth.

For the current situation we're apparently in the start of a general economic recovery so the next five or so years are likely to be a relatively good one for investment growth.

None of this is guaranteed but that's how the general historic trends and current situation appear.

Have you considered instead setting up an investment pot designated to clear the mortgage eventually? This way you can get the investment growth and still see the net mortgage outstanding decreasing. Meanwhile it's not tied up in property but available for any sudden or planned needs that come up, be they employment and paying key bills or a deposit on a place for children to live at university.

silver_4444_uk wrote: »

I could put the extra money into the company pension scheme but I do not like the thought of having all my eggs in one basket. We also want to be able to leave our daughters something when we finally "pop our clogs and the taxman has taken his share.

Have you considered a personal pension instead? You can take a 25% lump sum from that and use income drawdown instead of buying an annuity. Your wife would inherit the drawdown pot without tax charge if you died first, your children the pot after a 35% tax charge if you both die. Even after age 75 the pension pot can be inherited by children, though with a higher tax charge.

If you're interested in BTL property why are you clearing your own mortgage? Using a mortgage on your own home is the cheapest way to finance a BTL purchase because mortgage rates are cheaper this way. You lend the BTL business the mortgage amount and you can still deduct the mortgage interest from the BTL rental income. Not the capital repayments, if any, of course.

silver_4444_uk wrote: »

Should be a piece of cake, achieving all of the above:rotfl:

Nothing quite like a tough challenge!

Gatser

beedeedee wrote: »

Just wanted to add - have done a few sums and we have around £11,700 a year to spend as we wish..........Our "necessities" that we pay are £4140 a year, for council tax, utilites, household insurances and TV licence. We have both a car and a large motorbike for which tax, insurance and breakdown for both costs £550 a year. We choose to have Health Insurance, phones ( landline and 2 mobiles) and broadband which cost around £1600.
This leaves us over £11,650 "spending" money each year.

Excellent NUMBER feedback ...Thankyou!

I like to learn from others experiences so I was comparing your £18k with my original £22k.

• I need to consider adding in Healthcare costs (especially as current employer is not providing any)
• You have £550 car costs...I have £5000! Quite a difference, but I am running two cars and I am including replacement costs over a 6 year period (buying cars at around 2 years old) Now I am revising this cost downwards.
• Other than that and a small £800 extra expenses cost on my side...we are generally are on the same wavelength: reassuring!

It certainly makes you think twice about working all the way to 65 if you can secure enough pension/investments income to fund a comfortable £20k lifestyle.

I share your enjoyment in the challenge of seeking out good deals and bargains to make that income go even further.

beedeedee

Yes, I did notice your car costs at £5000........I doubt we'll ever replace the motorbike as we are getting older now - and it's just nice to go out for a ride occasionally, so we keep it serviced and MOT'd once a year. A good car will last at least 200,000 miles - (well ours do)! but I suppose a lot of people do not like to be seen driving an old car. We long ago, got over that barrier..........
Servicing costs are a matter of choice - some people prefer to do their own - but not us I'm afraid. We can't be doing with scrabbling round under cars, so a local garage gets our custom rather than a shiny main dealer.
As I said in an earlier post - we take far more care of our money now and it goes a lot further than it ever did!

PipPip

In my plan I am assuming that my wife and I will need an income of around £50k pa gross of tax. That comes from nothing more than assuming that we will be able to live comfortably on about 50% of our current income. Future annuity rates are clearly unknown but I have been assuming that I will need total pension pot and assets of somewhere around £1m to £1.2m in todays money. I'm not in a final salary pension scheme, defined contribution. I'm 39 years old and expect I will want to retire at 60, straight after my youngest child, who is 9 months old today, will finish university (assuming he goes!). Today if I include half equity on our home (which I know you should not do but its quite a large house and we will downsize when we retire and probably retire overseas), all the equity on an overseas holiday apartment, all my pension, shares, share options and cash I believe I'm about 40% to my retirement goal. Still a long long way to go but 21 years of work should do the trick if it does not do for me first!

maggieann155

PipPip wrote: »

In my plan I am assuming that my wife and I will need an income of around £50k pa gross of tax. That comes from nothing more than assuming that we will be able to live comfortably on about 50% of our current income. Future annuity rates are clearly unknown but I have been assuming that I will need total pension pot and assets of somewhere around £1m to £1.2m in todays money. I'm not in a final salary pension scheme, defined contribution. I'm 39 years old and expect I will want to retire at 60, straight after my youngest child, who is 9 months old today, will finish university (assuming he goes!). Today if I include half equity on our home (which I know you should not do but its quite a large house and we will downsize when we retire and probably retire overseas), all the equity on an overseas holiday apartment, all my pension, shares, share options and cash I believe I'm about 40% to my retirement goal. Still a long long way to go but 21 years of work should do the trick if it does not do for me first!

wow thats a BIG number !
ours is about a third of that!

jamesd

PipPip, income drawdown would be a more efficient way to go at that retirement age than annuity purchase, provided you're content to manage investments or have someone do it for you. After taking a tax free lump sum and assuming no other income you'd need about £830,000 in the pot to achieve £50,000 a year at a reasonable 6% of capital as income assumption. That 6% allows some margin for growth to cover inflation while still being likely not to see substantial drop in capital value. Use 5% or 4% to be increasingly cautions and allow for stock market variation.