Small Pension Forecast

thriftylynny

I am worried about being able to manage sufficiently on my not very big pension forecast & can anyone please help with some advise as to whether i can improve this over the next 4/5 yrs , i feel as if i have left it all too late & am starting to panic since my health is none to brilliant, i can hopefully manage f/t hours 4 yrs max !
I am 56, single & work f/t in local govt for a net salary of £1300 p/m & £98 p/m goes from my salary into the lgps. If i continue working f/t till i'm 60 i will receive around 3k p/a from this pension , i will also receive around 3.5k from an old preserved civil service pension with an 11k lump sum , so total of 6.5k Is there any way i would be build up an extra 3.5k pension income thereby giving me 10k p/a which i would be able to survive on before i reach state pension age at 66? My mortgage will be paid off in a few months & i will have around £500 p/m disposable. At this stage is downsizing to release capital to live off the interest my only option because that's how i'm feeling & i don't really want to do this ? Any advise please?

kidmugsy

If you bung the £500 p.m. into a personal pension of some sort, it will gross up to £7500 p.a. (i.e. after your provider claims the tax rebate from HMRC). So after 4 years you will have £30k there. (I'm assuming that on the short time horizon you won't put the money into equities, because it will be too risky, so the money will probably sit on deposit.)

If you draw it down over the six years until SRP begins, you can take out £5k p.a., of which 25% is automatically tax-free and the remainder is exposed to income tax, but it won't have to pay any because your income will be below the Personal Allowance.

So you'll have an income of £11.5k p.a. Hurray!

You'll have to deduct a bit for charges, but not much if you select your pension provider carefully, and act in a manner aimed to minimise charges (e.g. it may be cheaper to drawdown once every tax year rather than monthly). You'll probably also find that tax will be taken off the drawdown initially, but that HMRC will pay it back after you phone them, albeit at a somewhat leisurely pace.

atush

yes, you can open a personal pension or an AVC and pay every spare penny into it.

If you do, every 80 you put in will become 100, and might be more if your AVCs are salary sacrifice ( i can't remember if LGPS ones are).

Avcs can be takesn (like a PP) once you are 55 or older and befoe your main scheme pays out.

So 400/m for 4 years is 19200, plus 4800 TR, so w/o any investment growth (or loss) that would be 24K, or 6K tax fee, then 3600-4500 pre year over 4-5 years or however you want to draw it down.

EDIT Kidmugsy and I cross posted and my figs are for 400/m and his are for 5. But you can see you should do this in either case?

If you are earning 6.5K, and your PA is 10.6K, you could draw 4100 per year w/o any tax to pay?

mdeleon

I'm not an expert, but I was wondering if your health is poor if an annuity might be better as the amount paid is positively impacted when the recipient has poor health.
Also have you included your state pension, you might be able to make up any missed contributions to ensure you get a full state pension.
Good luck

p00hsticks

mdeleon wrote: »

Also have you included your state pension, you might be able to make up any missed contributions to ensure you get a full state pension.
Good luck

The OP says that they will get their SP, but this won't be until they are 66 - their concern is that they don't think they can carry on working full time beyond 60 (when their private pensions are payable) due to their health, so need to get some additional income to cover the shortfall between years between 60 and 66

sleepless_saver

You said you'll be getting £3k at 60 from your LGPS pension. Is this taking account of reduction for taking it early? http://www.lgps.org.uk/lge/aio/17380433