Ok how do I do this?

bowlhead99

Dansmam wrote: »

the 11k is what I would get if I accessed pension tomorrow, maybe a bit more as based on last year's figures - projecting 32k if I work to 65. Far too many former colleagues dying at 60 has focussed the mind more than a bit.

12k income passive from lettings is realistic based on local knowledge as is 20k with added activities as extension to daughters current businesses. They are happy working flexibly and living a very simple life.

So, to be clear, if you hang around working for 8 years until 65 like a normal person you would get £32k index linked pension for the rest of your life which would be a million quid in real terms assuming you only live to mid-90s (not unusual for someone in reasonable health and good wealth whose cohort life expectancy is late 80s).

You would also have had the capacity to save £1500 a month for those £96 months until retirement which is getting on for £150k of contributions assuming barely any investment growth and zero tax relief when in fact there may be decent investment growth and substantial tax relief if the LGPS valuation doesn't consume your annual allowance every year. The tax relief boosting the pot up to £250k instead of £150k and still only assuming modest investment growth.

So, keep working and you will be wealthy with no income worries throughout a long retirement, and no concerns for your kids' inheritance who get your share of your home and the few hundred thousand of private pension or ISA investment.

Alternatively, take your DB pension and trash it, pay a load of tax and end up with only four-fifths of the cash amount you need to invest into a business in the hope of generating a passive income of only £12k a year which you need to keep generating through thick and thin for the next 40 years because you trashed your gold plated pension.

You can dream that it's £20k not £8k because of the extra coming from "an extension to the daughters' business" but presumably that extension is contingent on your daughters doing some work and presumably they would want income from that work for themselves; and may want to move on from that business in due course when their business fails or something more interesting comes along in their life.

I'm sure many people's best laid plans got entirely screwed over when they had relied on their kids supporting them for half a century but the kids decided they no longer had simple dreams and were no longer happy to live "flexibly" due to getting growing lives and families of their own.

Obviously if you have adequate current household income because of your non-committing long-term partner having a good income, then it is tempting to cash in your chips early and cut your hours and do the odd bits and pieces of consulting work while living the dream, with a business that doubles as a holiday home when you and your daughters aren't trying to use it properly as a business.

So, do that if you like, but it is a massive and fundamental lifestyle question which could probably cost you the best part of a million quid in real terms and move you on to living hand to mouth from a "passive" business which requires time, oversight and talent to nurture.

It is not really a "how do I do this pensions thing"-question that we get from people here from time to time on this forum. It is a "should I / shouldn't I do this huge lifestyle gamble" question, and other than stating the obvious, none of us (including the financial gurus and mathematical savants) are qualified to answer it for you because we don't know what you want to prioritise, what your family and partner want, and what risks you are willing to take to live your dream.

Personally I wouldn't do it and there doesn't seem much wrong with the standard advice that cashing in DB pensions is typically the wrong thing to do, especially if you have a "follow my dream" kind of goal rather than a sound financial one. But there's no accounting for tastes and preferences of individuals.

Some would say hey you're only young once, could get hit by a bus tomorrow, go for it. Of course, they don't have to live with the consequences of you burning your life savings in a poorly conceived venture. And they would like to hear about your adventure and live vicariously through you because if they have any common sense they'll be unwilling to live their own life with the expectation they will be hit by a bus tomorrow, they know they need to plan for 40 years of life post-retirement.

Good luck with it all anyway.

Durban

Being a landlord with all its responsibilities is certainly not "passive" and can be a legal minefield.
You will need at least a 30percent deposit.
Look into the upcoming Section 24 which, as a higher rate taxpayer, will wipe out your profits.
Add in maintenance , boiler replacement , void periods , non payment of rent to name just a few.
Do not make the very amateur error that property letting is an easy, passive income.
Your LGPS pension wins hands down

Malthusian

Dansmam wrote: »

Far too many former colleagues dying at 60 has focussed the mind more than a bit.

Colleagues dying at the horrendously early age of 60 would focus my mind on going for a run, volunteering or other healthy mental and physical activity, not on cashing in my final salary pension and making myself poorer in the long run.

Unless they all died of pure bad luck (acute illness or accident), in which case I would sympathise but it's not a factor in my own planning. A tiny minority of women your age will die at 60 or earlier - less than 2%. You have more chance of living past 100 than you do of dying before 60.

(The mortality tables say roughly the same chance for an average person, but as all I know about you is that you are a high earner, well-educated and working in - probably - a white-collar career, you aren't an average person.)

Silvertabby

We're not married (and that's not going to change, long story,don't ask ...) so if I draw pension at any point then pop my clogs it's 350k down the Swanee.

Yes I'm still in local government

Then your partner would be entitled to a cohabiting partner's pension should you pre-decease him. Assuming, of course, that you both meet the criteria by being free to marry ie - neither of you are still married to someone else. If that indeed is the 'don't ask' reason for marrying, then that is another matter to factor in to your planning.

Incidentally - regardless of how long a member of the LGPS has been co-habiting with a partner, if he/she is still legally married to someone else at the date of death then the widow's'widower's pension goes to the legal spouse.

atush

Dont cash you DB pension in to buy a property- gift your daughters money for a deposit. Financial suicide to pay all that tax on the CETV.

Contribute to a DC pension (which can be drawn anytime in future) and leave your DB alone- unless you or your partner are still married to other people. If you are, consider a transfer out to a DC pension, but leave the money in the pension for now and continue contributing.

OldMusicGuy

Dansmam wrote: »

He has 35k pension plus ad hoc income from bits and pieces so with that and even without my wages we won't starve unless/until he pops his. So I need to be sensible in case that happens.
Option I'm pondering is to put 280k into property to create a business daughters can run, save on their rent and generate 12-20k pa towards property costs while I continue earning to pay it off asap.

Two thoughts. First, your partner is likely to die before you, so as you say you need to be sensible in case that happens. Giving up a good DB pension doesn't seem sensible to me, especially if your kids don't need the money now. Second, like Durban said, buying property to rent can be hard work and not the "easy money" that many perceive it to be. I'm looking at doing something similar and am having second thoughts based on what I'm reading so far. But maybe you are thinking about a holiday let, which is a slightly different proposition. That can be run as more of a business, which sounds like what you may be thinking of. Couldn't you just get a mortgage based on what you are earning now and even use your pension to pay it down?

Dansmam

Thanks all for your thoughts - all much more informed than mine. Thank you all.
Silvertabby you're spot on DH exited a marriage incompletely while he was young and imho unwise. Half a lifetime ago and well before we met. We (well I) are/am well and truly stuck with that. Too traumatic to unpick and it would hurt his children's mother which would hurt them. So we (I included) won't be going there. I pays my way and I takes my choice.
Old music you are also spot on, holiday let for girls to live in and run. Smashing spot. So passive income for me but input required from them. Costings still working well even taking account of the dire warnings here. You've all convinced me pension is a keeper so will move over to mortgages now. But meanwhile any views on avc v sipp for suddenly spare income? I am a novice at this pensions lark so really appreciate the wisdom here.

Dansmam

kidmugsy wrote: »

It's a statement of the bleedin' obvious but why not use your surplus income to make personal pension contributions so that you avoid higher rate tax? Then you may be able to retire early by drawing your personal pension whenever you want. Meantime the VR possibilities might change.

You're in a position that huge numbers of people can only dream of: 55, secure job you still enjoy, handsome salary, safe DB pension accumulating, mortgage-free. Count thy blessings.

Oh but I do. Born in the UK even at the very end of the baby boom is a very privileged place to start.

atush

Dansmam wrote: »

Thanks all for your thoughts - all much more informed than mine. Thank you all.
Silvertabby you're spot on DH exited a marriage incompletely while he was young and imho unwise. Half a lifetime ago and well before we met. We (well I) are/am well and truly stuck with that. Too traumatic to unpick and it would hurt his children's mother which would hurt them. So we (I included) won't be going there. I pays my way and I takes my choice.
Old music you are also spot on, holiday let for girls to live in and run. Smashing spot. So passive income for me but input required from them. Costings still working well even taking account of the dire warnings here. You've all convinced me pension is a keeper so will move over to mortgages now. But meanwhile any views on avc v sipp for suddenly spare income? I am a novice at this pensions lark so really appreciate the wisdom here.

I'd use a PP or a sipp. And until it grows large enough to make it wise to pay put for an IFA, put it into a global tracker or a Vanguard LS fund. You can, with a good DB pension backup, take a fairly higher risk approach.

AS for the incomplete marriage thing, you really need to do some work on this point. Esp as his wife and other children will inherit all. Make sure he makes a will, and names his children (not their mother) in his expression of wishes for his pension if not you (and should really be you as he will get a spousal pension on yours not your kids).

And if he left when he was still young, surely any children are grown so really he should be able to divorce?

How do you own your house? There are scenarios here where his ex could inherit half of your home?

Your situation is fairly perilous, or could be if you dont take proper steps.