Early-retirement wannabe

gallygirl

hugheskevi wrote: »

Why are you not planning on a joint basis? If, for example, one partner has access to salary sacrifice pension arrangements but the other does not, it may well be more efficient to have unbalanced retirement incomes.

I really would not advise that. When my children were small hubby paid a lot into pension and I didn't need to worry (was SAHM at the time) as 'we' would have 'his' pension. Marriage broke up, I've been trying to build my own pot ever since. Always make plans for yourself. You never know what's round the corner.

FatherAbraham

bownyboy wrote: »

Currently live with GF in forever home, overpaying by £500 a month means the mortgage will be paid off in 6 years.

Well, it's a forever girlfriend, then you should look at the benefits of marrying, if only in terms of the taxation and death-benefits related to pensions and inheritance.

Of course, if it's not a forever girlfriend, you might want to look at the benefits of not marrying her, in terms of being able to ditch her when she's outlived her usefulness.

Warmest regards,
FA

hugheskevi

I really would not advise that [planning on joint basis]. When my children were small hubby paid a lot into pension and I didn't need to worry (was SAHM at the time) as 'we' would have 'his' pension. Marriage broke up, I've been trying to build my own pot ever since. Always make plans for yourself. You never know what's round the corner.

There are pension on divorce rules which will take into account and potentially split pension assets in the event of divorce.

To take a more extreme but nonetheless realistic position, take a 20% tax payer with no access to salary sacrifice and compare them to a 40% tax payer with salary sacrifice and all employer national insurance contribution savings refunded.

Each £100 in a pension costs the 20% taxpayer £80 of net income.

Whereas each £100 into the pension costs £51 of net income (£100 less £40 higher rate tax, 2% employee national insurance and £13.80 employer national insurance savings added to the £100).

So correctly choosing who makes the pension contributions in this hypothetical couple would lead to a pension which is up to 57% higher. As well as the initial difference, compounded returns will exaggerate the difference over time. Unless the total contributions are trivial (in which case it doesn't really matter) this will more than pay the fees for any pension sharing order.

Bigger differences are possible if incomes are above £100,000 but that is relatively rare. Note that if either individual will be a higher rate taxpayer or nil rate taxpayer in retirement the incentives will be different. Note it would always be sensible to take a pension with employer contribution regardless, the numbers above are just to illustrate how planning who makes additional contributions can make a big difference.

atush

I agree, unequal pensions can be a good idea due to scheme rules/tax/employers contribs.

but I agree with Gally, unless you marry the girlfriend, she has no claim on your pension (nor you hers) so you cannot plan effectively until you are married. You cannot share assets tax free, nor use other discrepancies between you tax wise in your favor.

So forever home? Forever girl? Marry her, and you will both be better off saving tax. And will make sure you each inherit the others assets, unlike now.

ally18

Hi,

I have finally managed to read the whole of this thread and was wondering if people on here could possibly advise me as I don't know what to do for the best? I may be doing the wrong things at the moment?

I'm 47, employed with 22 yrs service in the CS but only 18 yrs towards the pension. I have had my forecast recently which states the following
Age 55 - £5300pa
Age 60 - £8200pa
Age 65 - £9500pa
plus a small lump sum
I have checked with the online pension forecast for NI which states I have 31 years in and would receive the pension of £107pw when I reach age 67.
Now this is nothing compared to others on here but should do me ok as I will live to my income, as I do now. But I would like to know what is the best way to improve this if I can do it now.

I still have a mortgage and my aim is to get rid of this first so I overpay as much as possible each month. I do have a low rate but the security of having a home to live in is ultimate for me. I also have managed to save an emergency fund which is in an ISA. I could possibly have another £100 spare to fund this.

Could anyone give me some advice?

Many thanks

atush

First of all, you won't be getting 107 per week. You need to get a breakdown and see if you have any state second pension earnings to date, you won't get them for the years in your DB scheme, but should for any others. This part of your pension should be preserved once you go onto the New state pension which should be higher for many. And for this you will need a min of 35 years which you should have.

second, cash ISAs for emergency fund is fine, but if you want the max pension you can get under the CS it would be best to wait til between 60-65- the later the better. S&S isas would be good here. So up your savings into those.

ally18

Hi atush and thank you for replying. I have printed out the statement from the ps and it says the following:

Breakdown is -
I have 31 qualifying years worth £110.15pw
They estimate that my additional state pension and graduated retirement benefit based on my NI is £7.04pw totalling £117.19pw.

So, the best thing for me is to put money in the S&S isa after I get to 60 then? Should I not be doing anything else now?

atush

I'd be doing that NOW, not at 60. The more years to go the better.

Then consider living on savings and ISAs until you decide to take your CS pension.

Ideally, you'd have enough savings to get to 65, but I can see from your figures that the pension isn't reduced as heavily form 60-65 so if you caoudl at least make it til over 60 it would be better.

What age do you want to retire? this would help you know how many years of income you need to cover. And you also have to decide how much you will need each year to live on.

FatherAbraham

ally18 wrote: »

I have checked with the online pension forecast for NI which states I have 31 years in and would receive the pension of £107pw when I reach age 67.

Now this is nothing compared to others on here but should do me ok as I will live to my income, as I do now. But I would like to know what is the best way to improve this if I can do it now.

Well, you've maxed out the UK basic state pension, once you got to 30 years. If you want to up that, you should consider moving to a job in another EU (actually, another EEA country might do) country, to start accumulating state pension bennies in that country.

Warmest regards,
FA

ally18

atush wrote: »

I'd be doing that NOW, not at 60. The more years to go the better.

Then consider living on savings and ISAs until you decide to take your CS pension.

Ideally, you'd have enough savings to get to 65, but I can see from your figures that the pension isn't reduced as heavily form 60-65 so if you caoudl at least make it til over 60 it would be better.

What age do you want to retire? this would help you know how many years of income you need to cover. And you also have to decide how much you will need each year to live on.

Well, I would like to retire at 60 if I could but that is only 13 years away and I need to get rid of my mortgage first. I have £58k left still. I have worked out my payments as I'm making now and it would leave me a shortfall of around £16k which I could use the lump sum to pay it off with. But ...... the pension of around £600pm is going to be tight. I just don't think it would be feasible. I would be purely paying bills to exist each month.

This is looking at the bottom of the pay ladder so I should imagine an eye opener to people on here which is why I wanted to ask for advice.

I will look into the S&S isa aspect but I am dubious about this. I cannot afford to lose any money.

Thanks for your help.