Retirement Planning

nookey_bear

gadgetmind wrote: »

Given you're 22 years off, all you can do is tweak funds, try and minimise fees, and try and maximise current contributions.

Regards income, do bear in mind that you won't have NI in retirement, won't be contributing to a pension, and can also make things pretty tax efficient, so you might need less gross that you expect.

All taken into account, but thanks for commenting

gadgetmind

nookey_bear wrote: »

All taken into account, but thanks for commenting

OK, great.

BTW, have you allowed for max lump sums from all DCs/PPs (not from DB!) as these can then be invested in tax free vehicles of various kinds and can also (with care!) by recycled into pensions?

nookey_bear

gadgetmind wrote: »

OK, great.

BTW, have you allowed for max lump sums from all DCs/PPs (not from DB!) as these can then be invested in tax free vehicles of various kinds and can also (with care!) by recycled into pensions?

Projected pension is based on no lump sums being taken, but in my calcs I have highlighted effect of taking a lump sum on pension amount. Is it recomended to always take max lump sum, (presumably as its tax-free) or does this depend on the impact on the reduced annual pension?

gadgetmind

nookey_bear wrote: »

Is it recomended to always take max lump sum, (presumably as its tax-free) or does this depend on the impact on the reduced annual pension?

For Defined Benefit, it's usually a bad thing, but you'll need to check the exact impact.

For most other pensions, it makes a lot of sense as it moves money from an environment where money comes out via income tax to one where it can be tax free by using ISAs or investments that pay out dividends. If you take out 25% from a personal pension, you will get 25% less income from the pension, but can almost certainly do better income wise by doing this.

However, you don't need to make this decision until age 55.

ffacoffipawb

nookey_bear wrote: »

Due to a recent major change of the work front and therefore my pension arrangements, I have been checking my current fund forecasts and comparing against my target retirement income to see if I’m still on track. Think I am but just wanted to stick the detail down and see what people think. Obviously I can have little influence over the pensions that I don’t contribute to (apart from moving into more/less riskier funds but I am happy with those for now) but I have listed them all for my own purpose more than anything.

1. Clerical Medical Flexible Pension Plan – 60% Balanced Managed, 30% UK Growth, 10% UK Special Situations. AMC is 1.49% for 1st 5 yrs, not entirely sure the charge after that.

This is an amalgamation of several smaller pensions. No current or future planned contributions.

Fund value = 2008 £10716, 2010 £13874 (up 14% yoy)

Estimated value at NRD (in 22 yrs) = £35700, Estimated pension = £1329 pa

2. Final Salary Pension –
Estimated pension at NRD(in 27 yrs) = £4210 (or lump sum £19,000 & £2,800 pension)

3. Money Purchase (Defined Contribution) Pension – 50% Mixed Lifestyle, 50% L&G Global Equity.

Left scheme after 2yrs in mid 2011 as moved to 100% self-emplyed/commission-based income role with same company so had to set own pension up. During those 2 yrs, I contributed 6% and work put in 8% of salary

Fund value = 2010 £4375, 2011 £9005 (up 7% yoy after contributions)

Estimated value at NRD (in 22 yrs) = £unsure
Estimated pension = £5220 pa (based on 7% growth)

4. Current Stakeholder Pension – recently set up.

50% Managed fund, 50% Mixed fund. AMC 1.5% for 1st 10yrs, then 1% from yr 11.

I have chosen to pay in £200 per mth, £250 with tax relief. My ‘employer’ will match my contributions providing I put in 8% of expected salary, so max. annual contribution could be 16% of salary = around £5600

Estimated fund value at NRD (in 22 yrs) = £126,000
Estimated pension = £5,100 (or lump sum £31,500 and ann. pension of £3,800)
(based on 7% growth)

My target pension is £20,000 pa, based on various calculations, assumptions etc. Current pension projections = £15860 pa, and together with state pension (who knows?) of £5000 then I hit my target figure. I also contracted out with a few pensions and my latest state pension forecast says my Additional State Pension ‘may be’ around £3000, so that will help to balance out any shortfalls in my other pensions. I have other ‘pots’ on the boil (ISA’s, other savings etc)

Anyone spot anything ‘not right’?

£20,000 in today's money may well be worth £10,000 (in today's terms) at retirement. Have you allowed for this?

Is your target today's money or 22 years' time's money?

gadgetmind

ffacoffipawb wrote: »

£20,000 in today's money may well be worth £10,000 (in today's terms) at retirement. Have you allowed for this?

Is your target today's money or 22 years' time's money?

All of those figures looked like today's money figures to me. My spreadsheet has a "today's money adjust" to map everything back to current buying power, and I use a blend of CPI and RPI for this for no reason I can fully justify.

I also only work in after tax figures. I know the take-home I need now, and I know what I'd like in retirement, and it's only by modeling and optimising tax that I can ensure I have my investments in the right name/place/etc.

fairleads

A couple of formulas / principles might be of help.
Determine annual retirement needs/wants in today's money.
Divide that sum by the GAD rate / dividend yield available on an equity income unit trust = retirement pot.
Eg need 20K p/a in today's money. GAD rate @ age 68 = 6.8%
20,000/6.8% = 295K

Monthly contribution X (1+ the real return per month) ^ number of investment months = 295,000
In this case the gross monthly contrib, for 22 years, using a real monthly rate of return of 6%/12 would be around 550 gross which equals 440 personal contrib for a BR taxpayer. Or 330 for a 40% er
(Can also use the Excel FV function)

Increaseing the monthly contribution each year by the rate of inflation should inflation proof your investment.

Suggest you also familiarise yourself with the Excel goal seek facility, its great for transformation of formula / working backwards from a known final sum. And constructing charts from your data is invaluable.

nookey_bear

ffacoffipawb wrote: »

£20,000 in today's money may well be worth £10,000 (in today's terms) at retirement. Have you allowed for this?

Is your target today's money or 22 years' time's money?

my target is todays money. pretty sure all the pension estimates take inflation into account but I probably best double-check