Only 10-12 years to retirement and only basic pension. What to do?

EdInvestor

Emu

It's definitely worth you trying to invest as you have the house IMHO.

Re immediate vesting pensions, this involves putting money in a pension, and then immediately buying an annuity with it ( after taking 25% out in tax free cash).But annuity rates are very low at your age - lower even than cash interest at present, and by the time you retire the annuity income would have already been reduced by up to a third by inflation. So it's not a suitable strategy for now.

Also, if considering getting an annuity using non-pension cash, always look at "purchased life annuities" which pay a higher income because they have better tax treatment. As a general rule these days however, a woman in good health would be best trying to avoid buying an annuity before reaching about age 70, because longer life expectancy and lower rates make them a bad deal.

jamesd

emu, please say more about the current value, current mortgage and equity you might have available if you sell the house. Is it practical to sell now and move to a smaller place in the same general area?

The potential advantage is freeing up significant capital and possibly ongoing mortgage payment value to invest and that may well make it clear that you can do significantly better in retirement by investing for it. There is a risk that the housing market may do better than the other investments.

From the stock market investments it appears that taking action to shield investments from pension credit consideration or investing much more aggressively for retirement will be best. Can't say which yet, since it would depend on your ability and willingness to increase the amount available to invest by downsizing early.

Assuming after inflation growth of 7% in investments for 11 years and 5% of the fund value as income from annuity purchase, each 10,000 you free and invest now could gain you 1050 a year in after tax income if you retire at 65. Investing 100 a month for 11 years could produce 995 a year on the same basis.

If you freed up 50,000 in equity for investments by moving now it would be pretty clear that you can make yourself sufficiently better off for it to be desirable to aggressively pursue the option of investing to produce income in retirement. The effect of that plus your existing share funds and 100 a month could well be enough to take you to a reasonably comfortable 11-12000 a year in retirement income after tax.

Doing the selling now has the advantage of allowing you to gain from more years of compounding and get the money into tax shelters like pension or ISA investments (a mixture would be best, up to about 8000-10000 income from pension, including state, the rest from ISA).