Retirement planning

Ghost_of_JonSnow

Myself and husband are soon to be 50 , so have been looking at our pension plans, we plan to retire at 62/63. We should both qualify for full state pensions at 67.
At present, our pensions are as follows:
I have an old Lgps pension that is currently worth a lump sum of £10000, so I'm assuming even at modest growth it will be iro £ 15k in 12 years time.
I have a H L SIPP and am paying £100 per month (inc. Tax relief) , so hopefully £20k +.

DH : will have a military pension at 60 of approx £7k p.a. with a lump sum of £15k, this will be invested in a S&S ISA for 2 years, or whatever a good platform is in 10 years time.
He has £22000 in a plan with Aegon/Scottish equitable - cautious lifestyle plan, from an old job that is averaging at @7% growth and £21000 with DHL/Friends provident that is in a freestyle plan: global equity 30:70 , that is growing nicely too.
His current pension plan is rubbish, it's his employer's SMART scheme and only @£100 a month is going in, he is looking to change jobs and will be upping his contributions significantly to at least £200. So hoping for a fund for him of £120 - 130 k in total to all go into a drawdown, I don't think an annuity would be a good thing as it would have to support me if he went first.
We will be wanting a total income of @£24000 at SPA, so is drawdown of £5000 p.a. a reasonable amount from a pot of £120k?

We will be able to live for the 4 years between age 63 - 67 on income from lump sums and savings- £10k , his RAF pension - £7k and drawdown of £3 - 5k , our mortgage will be paid off within 10 years BTW.
I haven't factored in inheriting half of FIL's house (£75k) in any of this , he is 75 and in poor health but he could live to 100 for all we know
Do my sums look correct or have I overlooked something important?

atush

You say your LGPS is worth 10K, is that a confirmed CETV?

What is the annual pension and is there a set Lump sum?

Do you have other savings and investments outside of pension? As putting more into pension in these next 10 years or so would be wise?

Drawing 3% from a DD pot is considered 'safe', 4% isn't unsafe but a little less safe. I certainly plan on drawing at 4%, but initially at 5-6% to cover the years up to SPA, then dropping to 3%.

All this can depend on the investments int he DD pot, and also you should aim to have 2 years or more of cash to live on when you begin to DD, as then you will not be forced to sell units in a downturn.

So you may need to up your cash savings in t he next 10 years as well.

Ghost_of_JonSnow

My lgps latest statement gives figures of £500 yearly pension / £700 lump sum with a payment date of 2028, this year's increase was £65 p.a. The £10k assumption is 20x £500 to take the whole pension as cash.
I am putting £100 a month into a S&S ISA so am hoping for @£20k in 12 years.
DH has £4k in a share save scheme that he will invest when he leaves his current job, unless the share price suddenly shoots up, he won't make much on them but at least he will get all his money back as it's guaranteed.
I had thought that 4% DD was very modest!
We will be ramping up our savings in the coming years but I'm very aware of not sacrificing a nice life now for what might be in the future, MIL died at 57 so all their retirement plans counted for precisely nothing.

atush

I think the 20K is a valuation for other purposes, a CETV would be higher.

BUT there are other things to think about iike survivors pension, death benefits etc. And the fact that the pension would grow, even if the market doesn't. And that you might live into your 90's.

The Isa money is good, but if you put it into a pension it would be worth far more so look to do this in a lump sum, some time ont eh future. It could even stay with the same company (I assume it is a S&S and not a cash ISA).

Cash isas should not be used to long term savings due to dire rates. Sure inflation is low right now, but hasn't been all of the time since the crash, and has been losing ground to that inflation.

Triumph13

That £24k pa target should be pretty easily achieved as 2 full single tier pensions, a £7k military pension and £500 LGPS (assuming you don't cash it in) come to about £23,200. Deferring your state pensions by one year would get you the extra bit to tip you over your £24k target.
You therefore just need enough to fund the period from retirement to 68. Assuming you go at 62 that's 6 years @ 24k = £144k. £71k of that comes from the military pension leaving £73k to find from your other pots (£49k if you go at 63 instead) which sounds doable. 63 gives you more chance of having a decent sum left in drawdown over and above your £24kpa for luxuries or as a cushion for the survivor after one of you passes on.
I think the key thing is going to be to stuff as much into your pension as possible before retirement to make sure that you can use up your personal allowance in the years between retirement and drawing state pension as that gives a straight 25% return from the tax man. I'd take a look at diverting money from the mortgage to your SIPP and then using pension lump sums to pay it off when you stop work so as to maximise the funds available for tax relief.

Triumph13

On second thoughts, it would be better (assuming you are in good health) to take your husband's state pension on time and defer yours for 2 years rather than defer both equally. It's more tax efficient as you'll have unused PA and it also helps towards equalising the survivors pension after the first of you passes on.

Ghost_of_JonSnow

I don't want to put everything into pensions in case they do a u turn in the future and you have to buy annuities, 12 years seems far away but the way things are changing, who knows what the rules will be by then.
My SIPP and ISA are both with H L, I've gone for fairly high risk investments in my ISA, it's split into two funds, as is my SIPP.
When DH cashes in his shares, he will start a SIPP too.
We actually don't really know what his military pension will pay, £7k is the *now* figure, he left service 20 years ago and it rises every year, so hopefully it will be closer to £10k. I would get half as a widow, for life.
His pension at 60 will definitely go into a plan for a few years, as you say it will give us 25% tax relief on top, assuming he's not a top rate tax payer by then, he earns £40k atm, I earn £10k.

atush

I serously think there wont be return to compulsory annuities. The pension paying public wouldn't stand for it?

dunstonh

atush wrote: »

I serously think there wont be return to compulsory annuities. The pension paying public wouldn't stand for it?

Although Australia is now considering it after their pension freedoms have caused problems with people spending the money on other things. Although it took a very long time for them to move from offering it to realising it was failing.

atush

Well hopefully we will be quicker off the mark.

I am not sure, but I read an article recently that said that there was less draw than forecast (but still too much for some pension firms to handle)?

given the alarming number of people here who still want to cash in dB pensions I am not sure we wont go Aus's way.