Missus fed up of work.

TESCOBABE56

Yep, she has had enough, but she wants to maintain an income.

She has ten years to SRP age, and has 35+ qualifying years giving her £125 a week.
From a job she left many years ago she has a deferred defined benefit pension, it will pay(now) £1650 pa plus £11k lump sum or £2150 pa (index linked min 3% max 5%)
The transfer value is around £60k, which I reckon should be good for £120 a week for ten years.

What do you think?

molerat

Have you accounted for £5.5K to top up the SP to the full amount ?

kidmugsy

TESCOBABE56 wrote: »

The transfer value is around £60k, which I reckon should be good for £120 a week for ten years.

What do you think?

It would leave her a bit exposed to inflation.

TESCOBABE56

molerat wrote: »

Have you accounted for £5.5K to top up the SP to the full amount ?

I have no idea what you mean.
She doesnt earn enough to pay NI now, so I assume she isnt accruing credits any more.

jamesd

She should plan to buy years as required to get to the full flare rate income cap level. It is possibly the best income buying deal available in the UK.

jamesd

The transfer value looks reasonably good.

She can make £720 a year tax free by paying 2880 net into a pension, having it grossed up to 3600 then withdrawing it. Can only do the withdrawing part from age 55. Can only pay in for this until age 75.

jamesd

Say she takes 1650 and does the pension pay in, take out to add 720 a year. That's 2370 a year, 45.56 a week but with the 1650 for life not just til age 75 like the 720 part.

11000 / 10 / 52 = 21.50 a week.

That's 67.06 a week tax free before considering investment gains. Is it enough, in exchange for getting to keep the 1650 for life?

She might get around 1100 a year before tax from P2P investing of the 11000 instead of just taking it at no growth. That changes the income for this part from 21.50 to 21.15 a week plus a bit more from gradually drawing on the capital part. Say 35 a week total, raising the combined weekly to 80.56. Enough?

jamesd

That 1650 for life means you could "lend" her the 40 a week difference from now until state pension age then she can pay you 75% of what the 1650 grows to after she reaches state pension age until she has repaid it. Should leave you both better off long term.

To be fair to you keep a running total of what you have paid her and add 5% a year plus CPI inflation to the balance each year. Then when she starts to repay reduce the balance each week.

[Deleted User]

Hi,

kidmugsy wrote: »

It would leave her a bit exposed to inflation.

mmm, could be nasty,

jamesd

If she was to take the whole transfer value that might pay around 6000 a year from P2P. So 115 a week without spending any of the 60k of capital. But no IFA is likely to agree to this and it is mandatory for her to get that advice. Taking the 1650 and lump sum requires no advice, so it's easy. And that 1650 is protected against inflation and comes with no investing decisions or risk, so it's a nice deal.

jamesd

So, I suggest taking the 1650, doing the 720 a year pension pay in, take out, you topping up by 40 and being repaid with 75% of the 1650's final income until repaid in full and her buying extra state pension years each year until she gets to the maximum. If you can afford it you can lend her the cost of the state pension buying and her paying you 75% of the increase until that is paid for.

Doing it like this with loans makes you both better off and keeps her independent since she is going to repay you later.

If you die first it leaves her with an income of about £9000 to £9650 a year tax free, not too bad for many of us, and inflation protected. Way more than just the £6500 that 125 is if she took and spent the 60k and did nothing to get to the full state pension level. £9650 is if she manages to get to flat rate maximum plus the 1650 on top.