Two hopefully simple questions

kidmugsy

cathybird wrote: »

I will now not be paid a full state pension by either the UK or by Australia

You have inspired me to start a new thread.

cathybird

kidmugsy wrote: »

You have inspired me to start a new thread.

good that I've inspired something :rotfl:

kidmugsy

cathybird wrote: »

good that I've inspired something :rotfl:

Is that a sulphur-crested cockatoo? Maybe that's what inspired me.

The other thing you could check is the charges of the AVC for its various funds. Mine stings me for 0.65% which seems expensive by modern standards. The trouble is that it can be difficult or impossible to transfer out of an AVC, so they are rather insulated from competitive forces.

cathybird

kidmugsy wrote: »

Is that a sulphur-crested cockatoo? Maybe that's what inspired me.

Yes it is Well spotted

The other thing you could check is the charges of the AVC for its various funds. Mine stings me for 0.65% which seems expensive by modern standards. The trouble is that it can be difficult or impossible to transfer out of an AVC, so they are rather insulated from competitive forces.

In fact I had assumed that since I already had a pension with them that any additional charges would be low. Thanks - I'll check.

jamesd

Salary sacrifice is useful, since it increases the pension pot or saves you income by the reduction in NI. But investment choices also matter and it's not worth taking the salary sacrifice benefit if that locks you into sub-optimal investment choices long term.

So think about the investment choices. What can you do compared to what you'd want to do? It might be best using some work contributions to get the employer match and a personal pension of some type, SIPP or not, for the rest.

When can you take or transfer AVC money? Is it only available with the rest of the pension or can you transfer some out to take it earlier and enable earlier retirement with it while still waiting until normal retirement age for the rest? If you can't do this, that makes the AVC less valuable for early retirement planning.

If you want to retire before 55 you'll need non-pension assets like S&S ISA money, just because you can get at that and not pension money. From age 55 you can get at personal pension, including self-invested personal pension, money. However the GAD limit caps how much you can take out and you may need non-pension investments to allow you to draw on capital at a high enough rate to meet your income needs until the work pension starts.

For those like yourself with a defined benefit pension the challenge tends to be to get a high enough income before normal retirement age. That tends to involve heavy capital drawings, something pensions just don't let you do beyond the 25% tax free lump sum. The greater the number of years you retire early, the more useful they are for this planning, because they are about sustainable income.

You probably do have alternative good options, though. For example, you could take out an interest only offset mortgage with pension lump sum as the repayment strategy. Then you can put all of the money into the offset account and draw on it to provide income. Once pension lump sums become available at normal retirement age you could then repay the mortgage if desired. Effectively this shifts income from later, when you'll have more, to earlier when you don't have enough. It can be a very useful tool for enabling early retirement at higher income levels.

cathybird

Thanks, jamesd - lots to think about there. Because 55 is not so far away for me, I doubt that I would be able to retire before then as things stand at the mo. However, I will think carefully about everything you've said. I need to ask the pension providers some questions about the AVCs, that much is certain.