My plan - does this sound about right

keithyr

hi,

new poster but long time lurker.

Before going to an IFA for a review I wanted to get some thoughts on my current situation.

I'm currently 40 years young.

We currently have a mortgage of £34k which we are aiming to pay off in next 2 years. No other major debts, no kids. No plans of moving after we pay off the mortgage.

My wife has a local government pension.

i have a Aviva personal pension plan with current pot value (protected contracted out and non-protected rights) total of £60k. I pay £260pm to this

i am targeting an income of £12-15k in retirement (excluding sate and wifes pension).

My plan is to pay of the mortgage then increase my pension payments to c£500-600pm.

does this sound about right or am i missing something.

Thanks in advance for any advice.


keith.

DavidLaGuardia

Assuming your £550 will be net (another 25% will be added to this figure since HMRC pay 20% of the total cost + higher tax payers can claim more back).

1. The plan will depend on what you invest in over the next 20-25 years and (importantly) your ability to increase the payments with inflation. You need to think about a high equity content in any portfolio over this length of time
2. You will need an income in the future that is more than your target income to compensate for inflation over all those years.
3. Having done some of my own calculations on your figures for fun based, on expected returns in excees of inflation, your plan seems a good one.
4. Would you be in a postion to consider salary sacrifice and get your employer to put in money for you to get a much higher relief?

keithyr

hi

thanks for the info, very uesful.

when increasing the payments i will get them to change the investment ratio to increase UK equity.

yep would be intending to increase as inflation or 5% p/a whichever is greater.

the £12k is taken from the online calcualtor and is in today's terms rather than the actual pension value from the online calculators.

i've heard about salary sacrifice but not really looked into it. but yes I should be ok to do that , will have to read into it and how bes tto get my company to do it also.

thanks again some very useful tips in there.

JoeCrystal

Just wondering, do you have any employer willing to contribute to it as well?

Cheers

Joe

bilbo51

So to produce £15,000 in retirement at 65 (you may retire earlier or later of course) you would need a pot of around 20 (annuity rates are currently around 5%) times that = £300,000. You've already got £60K, thus leaving you £240K to find. Over 25 years, that's £9,600 a year, ignoring inflation or growth of your fund. Which is £800 a month gross (ie if paid before tax.)

For a basic rate taxpayer, this will cost you £640 from your take home pay; for a 40% taxpayer, £480.

With these calculations, I generally make the (very) gross assumption that fund growth and inflation will cancel out, and hope that fund growth is actually > inflation.

All the figures above are very rough of course, but I hope this adds some clarity for you...