Soon to retire -- a sustainable income?

Linton

Uncle_Stinky wrote: »

Not sure what sort of thing these may be? (Certain ITs, ETFs?)

Yes - Unit trusts, ETFs, ITs. Collective investments that invest in a wide range of shares and bonds. These are particularly useful for diversifying income sources into otherwise difficult to access areas such as foreign shares, global corporate bonds and global property. I think it is important to ensure that you get your income from as many different sectors as possible.

Uncle_Stinky

kidmugsy wrote: »

By the way I've just remembered another stunt that you MUST consider - deferral of your state pension, and Auntie's too.

Auntie Stinky delayed the start of her SP by 10 months but then decided (forget the reason, but probably not based on logic or rationality) to take it.

A section from the DWP document Deferring your State Pension states:

"If you are working when you reach State Pension age, you can choose to get your State Pension then or you can put off claiming it.

"If you are already getting State Pension, you can choose to stop claiming it for a while to build up more money for the future, but you can only do this once".

Does the phrase "but you can only do this once" refer only to the second paragraph?

In other words, can Auntie Stinky stop claiming her State Pension (once), even though she postponed commencing it?
.
This would be really useful if it was the case, although I suspect I am clutching at straws.

kidmugsy

Uncle_Stinky wrote: »

In other words, can Auntie Stinky stop claiming her State Pension (once), even though she postponed commencing it?
.
This would be really useful if it was the case, although I suspect I am clutching at straws.

Oh yes she can. We taxpayers can be awfully generous, can we not?

If she deferred for 2.5 years she'd end up on £9870 p.a. + inflation-protection over the 2.5 years. That compares with her personal allowance of £10k (or £10.5k, depending on her age) plus any increases it gets over the 2.5 years. Lovely biscuits!

planteria

Uncle_Stinky wrote: »

Auntie Stinky delayed the start of her SP by 10 months but then decided (forget the reason, but probably not based on logic or rationality) to take it.

:laugh: come on now.

and good advice kidmugsy.

moneyfoolish

Sorry to jump on your bandwagon, Uncle Stinky, but I could also do with some constructive advice!

I am 68 years old and retired last year. I had deferred my State Pension but am starting to take it in April of this year. My wife is taking her State Pension but had deferred it for 4 years before she began to take it.
I am a basic rate taxpayer and my wife is a non-taxpayer.

I am married and we own our home, worth about £400,000.
Wife is currently receiving SP of approx £8,000 pa.
I have 2 dual life pensions. One is worth approx £20,000 pa and increases at 50% of RPI each year capped at 5% (ha! ha!). The other is worth approx. £9,000 and is increasies at CPI each year. Initially, my State Pension will be worth approx. £7,000 pa but I will have to decide whether to increase it by approx. 41.6% (for 4 years deferral) or take a taxable lump sum.
If I die before my wife, she will receive approx. £10,000 from my main pension and £3,500 from my other pension in addition to her State Pension.
Once I take my State Pension our overall income in April will be approx. £47,000 and were I to "pop off" my wife would have an income of approx. £21,500.

Currently our assets (excluding house) are approx £210,000.
Almost all of this money is in savings accounts.
We have 2 Santander accounts at 3%, 2 NS&I Index-linked accounts at RPI+0.5% and almost everything else is in Cash ISAs with interest rates varying between 1.5% and 2.1%.

Because these interest rates are so low, I've recently moved this year's unused ISA allowance of £5760 into a fund consisting of approx 76% Equities, 21% Bonds and 3% Property. Adventurous at my age but only a small proportion of our assets.

I guess my questions are whether our pension arrangements look reasonably efficient and I'm very undecided about whether to take a lump sum or increase my pension. My wife increased her pension after deferral which made good sense as her income will reduce when I die. However, given the fact that whoever is left will almost certainly sell the house and downsize, my wife should be quite comfortable.
My other uncertainty is how much, if any, of our cash I should move into equities and bonds and what level of risk would be reasonable at my age.

atush

It might be wise to be adventurous with your Wife's S&S Isa allowance too?

moneyfoolish

atush wrote: »

It might be wise to be adventurous with your Wife's S&S Isa allowance too?

Yes. I'm really talking jointly as all our money is evenly split so she has as many Cash ISAs as I do.

ontrack

Hmmm you have a pension of over £23000 pa and assets of over £400K really unless you have a really wild lifestyle or have the secret of eternal life no matter where you put your money you shouldn't have any worries :rotfl:

kidmugsy

moneyfoolish wrote: »

My wife is taking her State Pension but had deferred it for 4 years before she began to take it... approx £8,000 pa.


Initially, my State Pension will be worth approx. £7,000 pa but I will have to decide whether to increase it by approx. 41.6% (for 4 years deferral) or take a taxable lump sum.
If I die before my wife, she will receive approx. £10,000 from my main pension and £3,500 from my other pension in addition to her State Pension.
My other uncertainty is ... what level of risk would be reasonable at my age.

(i) The extra pension is a much greater bargain than the lump sum: look upon it as investing the lump sum forgone in an index-linked annuity at a cracking rate. (ii) Check what happens to your extra pension, 'bought' by the deferral, when you die. My reading is that it all goes to your widow on the extra "basic" bit, and 50% on the extra S2P/GRB bit. So she'd get (say) somewhere around 90% or more of the total extra pension, depending on your personal circs.

The extra pension is therefore a large part of the solution to your wondering how risky an investment you should go for. If you are effectively putting ca. £30k into an investment reminiscent of Index-Linked Gilts, it's reasonable for you to go for equities and whatnot with some of your cash. If I were you I'd hang on to the ILSCs to maturity, and perhaps roll them over then. I'd also consider buying some gold sovereigns and bunging them into the safety deposit at your bank: gold is an insurance against the collapse of fiat currencies and God-knows-what other extreme events. All fiat currencies collapse in the end - it's just that we don't know when that end will arrive. A bit of insurance would not go amiss, in my view.

The other way to lookat your decision is that you clearly look on investing with some trepidation. So why take the lump sum and amplify your problem?

moneyfoolish

kidmugsy wrote: »

(i) The extra pension is a much greater bargain than the lump sum: look upon it as investing the lump sum forgone in an index-linked annuity at a cracking rate. (ii) Check what happens to your extra pension, 'bought' by the deferral, when you die. My reading is that it all goes to your widow on the extra "basic" bit, and 50% on the extra S2P/GRB bit. So she'd get (say) somewhere around 90% or more of the total extra pension, depending on your personal circs.

The extra pension is therefore a large part of the solution to your wondering how risky an investment you should go for. If you are effectively putting ca. £30k into an investment reminiscent of Index-Linked Gilts, it's reasonable for you to go for equities and whatnot with some of your cash. If I were you I'd hang on to the ILSCs to maturity, and perhaps roll them over then. I'd also consider buying some gold sovereigns and bunging them into the safety deposit at your bank: gold is an insurance against the collapse of fiat currencies and God-knows-what other extreme events. All fiat currencies collapse in the end - it's just that we don't know when that end will arrive. A bit of insurance would not go amiss, in my view.

The other way to lookat your decision is that you clearly look on investing with some trepidation. So why take the lump sum and amplify your problem?

Thanks for the reply which is very helpful.

I had originally thought that extra pension was the best option but then began to wonder if taking the lump sum would be better for my wife in case I die earlier than I hope! However, if I understand correctly, you're telling me that my wife will get some benefit from my extra State Pension produced by the deferral? I was completely unaware of this so I will investigate further.

I had intended to roll over the ILSCs but hadn't considered holding any gold although I can certainly see the logic.

I agree that it's probably reasonable to move a bit more of the cash into equities which I'll do via our ISAs.