Pensions / Saving / Investments

Notfarfromtheborder

Morning all

Totally new on here, wanting to know if my thoughts are right, or am I missing something.

Both in mid 40's, wanting to get to 55 with options regarding retirement. Mortgage virtually gone, however, no liquid assets as all gone into clearing the big one.

OH is in NHS 1995 scheme, just under higher rate tax threshold and has been in it since 21 so she will get a decent £13k pa pension from 55.

I have 80K in dc pension pots, currently on a 5% + 5% arrangement with employer through salary sacrifice, circa 6K per annum going in at moment. Other pension is an old db pension that is forecast to pay circa £8K pa after 65.

With mortgage now virtually gone, we have circa £2K per month to invest / save / put into pensions.

My thoughts were to put £1K per month in cash savings / investments and £1K into my pension through salary sacrifice by way of sacrificing £1700 per month. Suppose we could increase my ss greater to £3400 per month and not save elsewhere using flexible mortgage as liquidity if needed but this seems extreme as I would like to have some 'tax paid cash' in reserve if retirement ages change and I still want to retire.

That's all presuming I can keep my earnings where they are for next ten years.......

Any other ideas that I am missing?

Thanks in advance

atush

First of all, classic mistake of paying off mtg instead of investing/pensions. With the rates so low, you'd have been better off investing.

Anyway, why have her take her pension at 55? When it will be reduced by as much as 50%? Why not whack as much into a DC pot for her as it will take to leave the DB pension to age 60 or scheme age? AS she can take the DC pension instead at 55? With almost ten years to go you have plenty of time to get a good amt in there. With no income, she would be able to take 10.5K each year tax free from the pension on top of the 25% TFLS.

Second, you do need a cash emergency pot, so put the first months 2K into that. Then up your DC pensions (and take one out for her) to take at least the 25% TFLS at age 55 while again putting a smaller amt away in cash for emergencies and upcoming spending like holidays/maintenance. With salary sacrifice you are basically getting 32% tax relief on your contributions.

kidmugsy

Yup, after you've accumulated an emergency cash fund, you need to plan to bridge the gap to 60 for her, and the gap to 65 and then state pension age for you, in such a way as to let you use your personal allowances against income tax.

There's even a case for taking on a mortgage at low LTV to give you capital for these enterprises, the capital to be paid back principally out of tax free lump sums. Commenter "jamesd" has often written about this idea: you might like to search for his posts.

Notfarfromtheborder

Thanks

She can retire at 55 with no reduction as she is a member of nhs 'special classes'

Am I missing something re dc / ss, as I am the higher rate tax payer is it not better for me to put cash into a pension via ss rather than her?

kidmugsy

Notfarfromtheborder wrote: »

as I am the higher rate tax payer is it not better for me to put cash into a pension via ss rather than her?

You had kept hidden the fact that your wife could take her pension without reduction at 55.

Notfarfromtheborder

Apologies for the confusion.

Is there any point in sacrificing my salary below £42K hrt bracket as 40% tax relief would become 20%, would I be better investing some tax paid cash elsewhere?

I'd also get my child benefit back.

xylophone

I'd also get my child benefit back.

http://www.thisismoney.co.uk/money/pensions/article-2192562/Trick-avoid-losing-child-benefit-boost-pension.html

http://www.moneywise.co.uk/cut-your-costs/family-life/child-benefit-changes-have-you-lost-out

http://citywire.co.uk/money/earning-over-50k-you-dont-need-to-miss-out-on-child-benefit/a682507

kidmugsy

Notfarfromtheborder wrote: »

Is there any point in sacrificing my salary below £42K hrt bracket as 40% tax relief would become 20%, would I be better investing some tax paid cash elsewhere?

I'd also get my child benefit back.

Yes. Investing is risky so you want some advantage that tips the odds further in your favour. That's what the tax relief does.

mania112

atush wrote: »

First of all, classic mistake of paying off mtg instead of investing/pensions. With the rates so low, you'd have been better off investing.

Please don't go there, that's not right. You don't know the OP so can't give them that sort of advice.

Paying off a debt should be priority #1 and only an individual willing to tolerate high-risk should consider anything else.

Notfarfromtheborder

kidmugsy wrote: »

Yes. Investing is risky so you want some advantage that tips the odds further in your favour. That's what the tax relief does.

But am I not just delaying paying tax on this at a later date, also some more liquid assets would be beneficial if legislation changes and I need to access cash before pensions could be released?

atush

Please, get over your new financial advisor self

If you are going to castigate me, who says it only occasionally, it is every other work out of JamesD's mouth but you wont take him on will you?

It is received wisdom you invest in pensions and S&S isas against paying off CHEAP debt such as old style student loans and todays low mtg rates.

It is ALWAYS better to pay off higher rate debts such as unsecured loans and CCs.