Getting the house in order!

saver861

sqwiffy wrote: »

Sorry, this is all a bit disjointed but I'll get the hang of it eventually, before you give me your brand of humour saver 861 .

Oh a real bag of laughs I am ... for sure. Only problem is, I can never remember any jokes .... and when I do say something funny nobody ever laughs!! Aww man .... how bad is that!!!

Anyways, you have gone to a lot of effort to answer everyones post .. don't feel you need to. Ain't nobody gonna take the hump if you don't refer to their particular message.

Now, on the technical side when you want to quote someone then easiest way is to do

at the beginning of the text and [/quote} at the end. That last one is a square bracket too but if I put that on it will come out as a quote on the message.

sqwiffy wrote: »

Sadly no. There was a big redundancy over a year ago and my quote would have really good, ... We were advised that only in exceptional circumstances would they be considered, so I didn't even try.

OK - well that rules that one out. It is more difficult to get it now in any case, the more expensive ones with the years in are being rejected. Usually, if they can't recoup the cost in around one year they turn it down unless it can be pushed by particular bods in high places!

sqwiffy wrote: »

I don't know what you mean by a breakeven point?

Ok - by way of simple example. If you have a pension of say £10,000 at retirement date but wanted to take it earlier by two years say. The reduction is around 5% for each year early so you lose £1,000 per year and get a pension of £9,000. You will have drawn £18,000 of pension in those two years so it would take 18 years to reach a point where you get exactly the same amount of pension money as you would have had you waited to retirement date and no reductions. After 18 years then you are effectively losing as you will still be only getting £9,000 per year pension.

That is just a simple example to explain the concept, there are lots of other factors to consider, tax etc.

You said you can take pension from 55. However, what is your normal retirement date? Most local government is 65 but some are 60. I'm guessing you are 65 and would lose probably over 30% if you were to retire now and draw your pension. You mentioned your pension would be £23,000 so losing 30% would bring that down to around £16,000. Just on those figures, your breakeven point would be around 16 years so, if you retired at 65, you would be 81 by the time you got to the break even point.

I say it again tho, you have to look at all the figures in totality to find out the real break even point. On that £16,000 you would pay around £1,000 tax so you take home £15,000 per year. You then consider all other expenses against all the income you can generate in retirement and it is that amount against your current take home pay that you are currently working for.

Is the Prudential pension your AVC? That will not be reduced if you retire early. If you retire early and draw your lump sum, that will generate some additional income also.


There are lots more points to make but this post is becoming like war and peace so ....

sqwiffy wrote: »

It's given me the impetus to go and do a real sort out of my finances, get the money working for us, and even just know what we've got.

Exactly. You got a bit of work to do but there ain't no hurry. What you do need to ensure is precision. Once you have all the facts and worked out all the figures then you make your decisions.

and... you will also know how to do that quote thingy in posts .... ain't it all just grand tho ....

atush

Your problem with the quotes is not clicking in the right place to either type or paste. You havee to put the blinking cursor exactly in between the 2 Quote boxes


ie ] type or past here [

LXdaddy

atush wrote: »

ie ] type or past here [

[pedant] I think that might need a magic e to make paste [/pedant]

atush

Yes you are a pedant lol

kidmugsy

sqwiffy wrote: »

I forgot to say that we both pay for another pension with the Prudential ( am I allowed to give names of firms? ). Hubby did when he was working for a company who didn't have a scheme, and I did it to top up from when I only worked part time when my children were little. His has a total value of £20,706 and mine is £3,113. He also has about £40,000 in his current company pension.

The way to put some of the £70k into pensions for each of you is as follows.

(i) Note your expected annual earnings for tax year 15/16. That is earnings, paid by your work. Don't include other things such as any interest received.

(i) That equals the gross amount of contributions you can usefully make to a pension in this tax year. (Unless it's more than £40k, in which case a £40k limit applies in principle, called "annual allowance". But you can get around that limit easily by "carrying forward" allowances for the last four years.)

(ii) Now from your earnings you need to subtract any amount you've contributed to another pension e.g. at the Pru. Remember to multiply the amount you handed over by 1.25 to reflect the tax rebate that the Pru will have claimed on your behalf. UPDATE: AND AT YOUR HUSBAND'S CURRENT COMPANY PENSION. YOU NEED TO ALLOW FOR BOTH HIS CONTRIBUTION AND THE COMPANY'S. IF HIS CONTRIBUTION IS MADE IN THE USUAL WAY ("GROSS" OF TAX) NEITHER BIT WILL BE MULTIPLIED BY 1.25.

(iii) Next, you need to subtract an amount to reflect how much more valuable your LGPS pension will have become in this tax year. There you'll need to ask for info from the pension scheme.

(iv) So now you have the amount left over, after those two subtractions: that's the amount you might want to consider contributing to a pension. There are various pension providers you might use: we use Hargreaves Lansdown, whose service is very good. For the modest sums you and we are involved with, their charges are fine too.

To be continued after dinner!

kidmugsy

A very nice spaghetti, thank you, with provolone cheese. NOTE THE UPDATE TO MY EARLIER POST.

And now: once you've done the sums as referred to in (iv), you multiply your answer by 0.8, and that's the amount you'd want to send off to your pension provider. If either of you is a higher rate taxpayer, you also inform HMRC of your contribution, so that they can give you a tax rebate for your own pocket (as distinct from the tax rebates they'll automatically credit into your pension).

If all this seems intimidating I suggest you find an IFA to advise you. Don't use a "tied" advisor e.g. at a bank, you need a fully independent advisor.

The point of this fuss with pensions is that if you were to retire early, in the sense of retiring before you take your LGPS or State pensions, you'd then be able to withdraw money from your private pension(s) to bridge the gap. And if either of you keeps your annual income below £11k, there would be no income tax to pay on it. Since the money will have had a 25% boost on the way in, and (let us assume) pays no tax on the way out, that's pretty attractive.

sqwiffy

saver861 wrote: »

Oh a real bag of laughs I am ... for sure. Only problem is, I can never remember any jokes .... and when I do say something funny nobody ever laughs!! Aww man .... how bad is that!!!

Just keep practising, or find some online:rotfl:

saver861 wrote: »

However, what is your normal retirement date? Most local government is 65 but some are 60. I'm guessing you are 65

Not yet:eek:.The printout says your normal retirement age, so will be 66 for me.

saver861 wrote: »

and... you will also know how to do that quote thingy in posts .... ain't it all just grand tho ....

Well, lets see if I followed the instructions correctly, or they were clear enough:T

sqwiffy

Thank you all for your posts. I'm reeling from Kidmugsy's two part one. With my maths aversion, I'll need to sit and go over this a bit more!

I've never heard of Provolone cheese by the way, so something else to try.

LXdaddy

sqwiffy wrote: »

Thank you all for your posts. I'm reeling from Kidmugsy's two part one. With my maths aversion, I'll need to sit and go over this a bit more!

I've never heard of Provolone cheese by the way, so something else to try.

Try not to let Maths aversion get in the way of benefiting from the advantages of using a pension. kidmugsy's posts are detailed and the arithmetic (let's not promote the calculations to Maths level) are quite straight forward

they boil down to...
1. What's the lower figure of a) How much have you earned or b)£40,000?
2. take away what has already been contributed to a pension this year. (OK this step is a little complicated)
3. the difference is how much more can be contributed
But you only need to put in 80% of that - the nice tax man will add the other 20% for you so
4. multiply by 0.8

I realise this sounds very patronising - I'm not trying to be. Just trying to break through the dreaded Maths barrier.

No cheese for me thanks.

saver861

sqwiffy wrote: »

Just keep practising, or find some online:rotfl:

Right:
Have you heard the one about the cat, the dog, and the fox?
No?
Actually, neither have I!!! :rotfl::rotfl::rotfl::rotfl:

Why does nobody ever laugh when I tell that joke?? huh? What is it with peeps these days. Mannnnnnnn .....

sqwiffy wrote: »

Not yet:eek:.The printout says your normal retirement age, so will be 66 for me.

Your state pension age and occupational pension age may not be the same.

sqwiffy wrote: »

Well, lets see if I followed the instructions correctly, or they were clear enough:T

Brilliant!! Clearly I am a better technical instructor than comedian it seems!!

LXdaddy wrote: »

Try not to let Maths aversion get in the way of benefiting from the advantages of using a pension. kidmugsy's posts are detailed and the arithmetic (let's not promote the calculations to Maths level) are quite straight forward

I think you are correct there but for the OP, as in many cases, its not about absence of intellect rather than absence of familiarity with pension concepts and what the numbers represent.

The OP needs to step back a number of paces and just get familiar with the fundamentals of the pension and distinguish the different areas. Working with numbers but not been fully aware of that these numbers represent gives the impression of maths aversion.

If the OP keeps coming back on here she can learn a great deal - she may then need some assistance or advice from an IFA but I always say its necessary to have a certain degree of familiarity even before getting external advice. This forum can provide much of that basic advice.