Hi all , first time post and it’s a biggie so please bear with me…

eddyj

good advice folks , especially the education angle.
looks like i'll need to stick it out a while longer but thats not so bad.
i am grateful for my circumstances which are a good head start on a lot of souls slugging it out as we speak
ed

Svenena

Don't worry too much about saving for education at the expense of enjoying your own life. I graduated a couple of years ago and while I was studying my mum very kindly contributed £100 a month (as my student grant was decreased due to her income - the government assume a contribution if household income is over a certain amount). So my university education cost her £3,600 - not as bad as the picture painted by the poster above. I know fees are increasing, but students won't have to cover this up front - it will be paid back after graduation, as now. It's very easily possible for students to pay their own way with no help from parents, and many people do this. I think you understand the value better when you're paying yourself, and you also have to learn how to manage your own money. Of course there's no way of saying what the case will be in x years time, but its unlikely the government will want to discourage too many people from going to university, as it's important to the economy.

I really like Bendix's idea of a year out. Is this something you'd consider?

eddyj

hi
a year out would be good but ive just been off for 3 months unpaid paternity leave which was great. thats probably why im getting thoughts about getting out all together!
ed

hcb42

I would do it OP. You have a healthy fund to fall back on, and you can live frugally. There is no substitute for living in the here and the now. You can even do a few years off, and see how you feel, or a year or so and then do a few bank shifts. Go and smell the roses and don't worry too much over the future, as long as you are sensible, you can probably fund a lot of day to day living from your interest

Manual_Reversion

eddyj: Can you go part-time and keep your current pension arrangements? Probably you'd get less benefit, pro-rata, but can you stay in your scheme if you went 50:50 for example?

In my occupation many people work part-time and it's changed their lives for the better. A good example of hedging your bets perhaps - see how you like two weeks a month looking after a baby/two weeks at the 'millstone', and then pick the one you prefer.

jamesd

Income is taxable, though hopefully the money is mostly in ISAs where there's no tax to pay. No NI to pay on it, though. Given your plans you should ensure that you're using the full ISA allowance every year, moving money from elsewhere into an ISA so you use all £10,680. You start by putting interest-paying investments (corporate bond funds) into the ISA because there's no tax on interest in a S&S ISA (though there is a 20% charge on cash interest, doesn't apply to investment interest). Because dividends are taxed at only 10% and that's already paid before you get it, so no more tax is due, you leave dividend paying and capital growth investments until later.

A general assumption if you use investments instead of savings accounts is that you could take about 6% of the capital as income and still have the capital and income grow fast enough to cover inflation. That's £20,400 a year. For a greater safety margin you'd use 5% or 4%, £13,600.

You have £12,000 of pension available in 19 years and another £6,000 in 21 or 22 (I don't think you're old enough to get your state pension at 66, 68 looks more likely).

Your current taxable income is £35,000 a year which produces £26,162 net, £2,180 a month, ignoring pension contributions you're making. Those pension contributions reduce your real income.

So you have a gap of 26,162 - 20,400 = 5,762 to cover from capital or other earnings, assuming that you can make all of your investment income tax free or tax paid, which you probably can, at least substantially.

After say 22 years you have £18,000 from pensions and need an annual top up of 26,162 - 18,000 = 8,162 to maintain your income level. At 6% of capital as income that requires 136,000 in capital remaining. At 4% it requires 204,050. So your target is to avoid drawing on so much capital that the remaining capital falls below these levels.

Assuming a 6% income level plus inflation you can take the £26,162 and have -4560 left at age 68. A negative number is failure, but it's close. However, this doesn't leave any of the capital you need to top up your income after pensions start. It also ignores tax. So it's a clear failure to maintain your full current income if you start living on the money now. You could do both if you waited six years, and that's ignoring any future savings you make.

Next step is to work out what you could take as income and still do it.

If I drop the income requirement to £24,400 you can take that income at 6% and still have £109,950 left at 68 to continue that income as a top up to the pensions. If this is sufficient income and ignoring tax, it's doable.

Looking at extra safety margins, dropping the sustainable income level to 5% you could take £22,400 income and have £89,000 at 68 to top up the pensions to that level.

Increasing the safety margin to 4% of capital as income the sustainable income level drops to £20,600.

So with very generous safety margin you could stop now if you're content to live on £20,600 less whatever tax takes from it. With less safety margin you could live on £24,400. Any higher isn't sustainable from now until the end of your life and if you went as high as £26,000 you might not even make it to state pension age.

Every year you wait makes it easier and increases the possible income. Here's a selection of delays:

1 year : 4% 21000 6% 24600
2 years: 4% 21300 6% 24900
3 years: 4% 21600 6% 25300
4 years: 4% 22000 6% 25700
5 years: 4% 22400 6% 26100

I've assumed that both pensions start at age 68 and that you need the income for the whole of your current year. Both of those are pessimistic and equivalent to about a year of delay. There's still a fair chance that the state pension age will be raised again before you reach it.

All of this assumes that you're using investments. Savings accounts are grossly inadequate for this job - you don't get any income at all after inflation, while the numbers I'm using are reasonable for investments after inflation.

eddyj

hi, many thanks for that detailed response.
i do have mainly investments btu there are deposit accounts also which are pretty poor. ill need to get them sorted into something better.
the idea of investing the capital for income somehow is appealing-
all being well it looks like waiting for another few years is the way to go.
thanks - ed