How long will it last

fjh

I have tried to find an online calculator to do this to no avail
Hope someone may have one and can calculate for me please.
Trying to work out if I TF FSP - value 920k at aged 61 then leave apart from 200k tax free draw down until 65 how long will it last at 'conservative growth i.e not more than 3% if I draw 32k pa
I can calculate straight line but not with deferment of 4 years built in which would I hope mean 4 years capital growth compounded onto to 720k
thanks

jennyjj

Have you tried modeling it at https://www.retireeasy.co.uk/ ?

DancingBadger

OP - if you go back to the first thread you started, you'll find the link to a pension calculator I posted this morning.

fjh

Thanks but as far as I can see that will not let me build in deferring the 4 years from taking transfer of pension to drawdown

jamesd

See Drawdown: safe withdrawal rates and the cfiresim calculator discussed there, as well as the linked worked examples.

At just 32k you're almost certain to die a millionaire. Sustainable income over 40 years using modern rules is likely to be well over £50k once the effect of the state pension is included.

Your challenge is more likely to be spending as much as you could than too much given the low income you're considering.

fjh

jamesd wrote: »

See Drawdown: safe withdrawal rates and the cfiresim calculator discussed there, as well as the linked worked examples.

At just 32k you're almost certain to die a millionaire. Sustainable income over 40 years using modern rules is likely to be well over £50k once the effect of the state pension is included.

Your challenge is more likely to be spending as much as you could than too much given the low income you're considering.

Thanks
The 32K pa excludes state pensions which are projected to be #7394 for me & 7971 for wife .
I have just constructed own spreadsheet and starting with capital of 700k, drawing 32k pa and adding interest at 1.5% net, 2% & 3% min expectation is 100 before money runs out.
In addition I would have already taken 200k tax free
and even after all that I still cannot decide to Opt out or stay in FS pension.!!!!

maximumgardener

mmmmmm.......In your shoes I'd stay in !!

+ construct other ISA's cash etc etc around your KNOWN pension amounts

fjh

The only reason I am thinking of Transfer out is my wife has a rare form of Leukaemia - no one will say impact on life expectancy but it will reduce her expectation - thus Final salary would cease on my death.
My family already had experience of my father who was divorced only living 6 years on Final salary pension- , both sides of my family have poor health history average survival over both mum & dad's family is 72 years

jamesd

Given that you might consider plugging these assumptions into cfiresim:

Total planning time until your 95th birthday.
Reduce planned spending from her 85th birthday by adding fake extra income to cut to just single person spending level.
Minimum income 32k including state pensions and fake income.

What that will do is give you a higher starting income for the early years when you're both more likely to be around and in good health and enjoy things like travel more.

It'll still be quite cautious because the safe withdrawal rate is for the worst investment performances seen and you're not likely to experience that. In reality you'll probably be able to review say once every five years and increase the income.

At the moment it's quite easy to get around 10% after possible bad losses from P2P. Just the tax free lump sum from £920k could be generating £23k net of bad debt allowance.

Draw more of the taxable pot at a low average tax rate with the help of some lower risk end VCT buying and it'd be easy enough to generate your whole income need from perhaps half of the pot. Say draw another £22k that will be taxed at basic rate and £22k more taxed at higher rate so average tax rate of 30% with £44k of VCT buy to eliminate all of the tax; £13.2k back from HMRC via tax code or tax return claim; rest staying invested for at least five years.

Or draw £22k more at basic rate and £48k at higher rate. £23.6k income tax, 33.6%. £70k into VCTs gets £21k of tax relief so net tax paid is 2.6/70*100=3.7%. £70k chosen to stay below £100k where you start to lose personal allowance. Or really do less VCT buying to take more income at higher effective tax rate. Or use some of the tax free lump sum instead. Five years on you can sell the VCTs to get at the money with no more tax to pay on it. In effect you're using the VCTs to cut your effective tax rate on the pension income by deferring getting some of the pension money for five years.

Also good to use your ISA allowances so that the money outside the pension eventually ends up generating long term tax free income for you.

fjh

jamesd wrote: »

Given that you might consider plugging these assumptions into cfiresim:

Total planning time until your 95th birthday.
Reduce planned spending from her 85th birthday by adding fake extra income to cut to just single person spending level.
Minimum income 32k including state pensions and fake income.

What that will do is give you a higher starting income for the early years when you're both more likely to be around and in good health and enjoy things like travel more.

It'll still be quite cautious because the safe withdrawal rate is for the worst investment performances seen and you're not likely to experience that. In reality you'll probably be able to review say once every five years and increase the income.

At the moment it's quite easy to get around 10% after possible bad losses from P2P. Just the tax free lump sum from £920k could be generating £23k net of bad debt allowance.

Draw more of the taxable pot at a low average tax rate with the help of some lower risk end VCT buying and it'd be easy enough to generate your whole income need from perhaps half of the pot. Say draw another £22k that will be taxed at basic rate and £22k more taxed at higher rate so average tax rate of 30% with £44k of VCT buy to eliminate all of the tax; £13.2k back from HMRC via tax code or tax return claim; rest staying invested for at least five years.

Or draw £22k more at basic rate and £48k at higher rate. £23.6k income tax, 33.6%. £70k into VCTs gets £21k of tax relief so net tax paid is 2.6/70*100=3.7%. £70k chosen to stay below £100k where you start to lose personal allowance. Or really do less VCT buying to take more income at higher effective tax rate. Or use some of the tax free lump sum instead. Five years on you can sell the VCTs to get at the money with no more tax to pay on it. In effect you're using the VCTs to cut your effective tax rate on the pension income by deferring getting some of the pension money for five years.

Also good to use your ISA allowances so that the money outside the pension eventually ends up generating long term tax free income for you.

Thanks - my stance will be 'cautious' and I would need to use an IFA certainly first few years .
I am currently reworking spreadsheets to look at draw down v taking FS pension early with lump sum to see how that looks
Thanks for input