planning for my retirement, pension questions

stolt

ok second attempt i wrote whole thread out, submitted it and it failed and ive lost the lot .


I've been overpaying our mortgage for the last few years and ive just fixed that for next 2 years with unlimited overpayments so i should get that down to around 15k in 2 years time.


ive now turned my attention to pensions, ideally i would love to retire at 60-65, i'm 43 this year.
I'm a higer rate tax payer and have a company pension which is provided by Aviva
Series 6 Av Mixed 40-85% Shares S6


just looking online the payments have been just over 120k but the plan is worth just over 149k


I've pulled this figure out of thin air but i'd lik to have a pension of around 25-30k a year after tax so i'm wondering is their anyway to do this.
Increase my monthly payments or choose different funds to invest in, where is best to read up on this?


My wife doesnt work and only had a private pension about 10 yrs ago and hasnt paid into it all this time. So would best to pay her NIC's first so she gets state pension. She does get child allowance and carers allowance so im sure i read that NIC contributions are paid on her behalf so i may not need to do that


aviva have a online retirement tool, i put the montly pension contributions of £713 in the tool plus i said i'd pay another £100 a month and it based the figure of 4% and said the paln could be worth around 604k


so its shown me an income drawdown at £27,500 a year upto 86yrs old then nothing
or a annuality at £13,900 a year from 67yrs old for the rest of my life.




do i need to take the 25% cash lump sum or can that stay in the pension to provide a bigger payment each year

stoozie1

Just my thoughts but:

pay into your pension to get higher rate tax relief

pay £2880 p.a for your wife, to get grossed up to £3600 and better maximise her personal allowance during retirement.

Yes her CB gives her NI protection until youngest child is 12.

nicknameless

And if your mortgage rate is low then stop overpaying and make sure you get tax relief on all your higher rate tax via the pension.

stolt

thankyou, im pretty clueless on this kind of thing i really should of been more interested in this many years ago, however im trying to make up for lost time now.


Mortgage is fixed at 1.59% for 2 years, just signed up for it

bostonerimus

Do a detailed budget and then account for costs that you might not have in retirement......like a mortgage and you'll be able to estimate your retirement income requirements. That's the starting point.

Are you also using your ISA allowance as that gives some nice retirement flexibility.

LHW99

do i need to take the 25% cash lump sum or can that stay in the pension to provide a bigger payment each year

Assuming this is a DC pension, then you can (will probably be able to) use the new(ish) UFPLS so that 25% of each payment you take is tax free, rather than having all the 25% "up front" so to speak

stolt

bostonerimus wrote: »

Do a detailed budget and then account for costs that you might not have in retirement......like a mortgage and you'll be able to estimate your retirement income requirements. That's the starting point.

Are you also using your ISA allowance as that gives some nice retirement flexibility.

neither of us have savings or ISA's at the moment my only aim was to reduce the mortgage.

stolt

LHW99 wrote: »

Assuming this is a DC pension, then you can (will probably be able to) use the new(ish) UFPLS so that 25% of each payment you take is tax free, rather than having all the 25% "up front" so to speak

i just had to google that, tbh i dont know if its defined contribution, Could i leave the up front payment in the pension if needed or is their no benefit for doing that.

atush

I've been overpaying our mortgage for the last few years and ive just fixed that for next 2 years with unlimited overpayments so i should get that down to around 15k in 2 years time.

First thing, I feel this is a mistake. Even if you pay basic rate tax, esp if you pay HR. 100 into a pension would cost you 60, ad that 100 would probably/most likely, over the next 5-10 years plus make you more money than you pay in interest

ust looking online the payments have been just over 120k but the plan is worth just over 149k


I've pulled this figure out of thin air but i'd lik to have a pension of around 25-30k a year after tax so i'm wondering is their anyway to do this.

Use an online pension calculator and see how much you need to pay in to achieve this.

ust looking online the payments have been just over 120k but the plan is worth just over 149k


I've pulled this figure out of thin air but i'd lik to have a pension of around 25-30k a year after tax so i'm wondering is their anyway to do this.

Here, monevator, books, or you can hire an IFA

My wife doesnt work and only had a private pension about 10 yrs ago and hasnt paid into it all this time. So would best to pay her NIC's first so she gets state pension. She does get child allowance and carers allowance so im sure i read that NIC contributions are paid on her behalf so i may not need to do that

Going forwards she/you can pay in 2880 for her per annum, and this will increase to 3600 with tax relief.


Nics, she would have gotten nics for the years she worked, plus 3 for age 16-18 plus all years she got CB when the children were 12 or less. But to be sure, get a statement of contributions and forecast from DWP.

LHW99

Could i leave the up front payment in the pension if needed or is their no benefit for doing that.

As I say, using UFPLS you only take a bit of the tax free part each time.
So for example (assuming no growth):

Assume a pot of £100,000:

a) Take all the tax free bit at first leaves you with £75,000 to carry on growing, which will all be taxable whenever you take it.

b) If you only need, say £8,000 each year, taking that as a UFPLS means you get £2000 tax free, and pay tax on £6000, and leave £92,000 in the pot.
You can repeat that as required.

Without growth you would actually get the same result in the end, but what actually happens with growth is that:
a) immediately frops the pot to £75,000, so you only get the growth on that.

b) In year 1 the pot only drops to £92,000 giving you an extra £17,000 to earth the growth on compared to a). In year 2, you would still look to have more in the pot in this scenario than in option a) (maybe an extra £9,000 + some growth). In year three you would still have more (£1000 + some growth).

That may not work out as very much, or it may be significant, depending on how the pot grows each year, and what you actually need to take out.

I think the only way of foregoing the tax free bit would be to buy an annuity, which isn't generally good value unless you are beyond normal SPA or have a life shortening illness.

AnotherJoe

Stop overpaying the mortgage and put it into the pension, you are throwing away free money as a high rate taxpayer it's practically criminal not to do this, especially as this perk won't last forever the next goivernment with a decent majority will almost certainly remove it or begin that process. Especially if it's all left wing one, stop giving freebies to high earners spend it on making safe tower blocks instead, for example..

As said every £100 in your pension costs you only £60 and when you cash that £100 in (which will have grown at a better rate than your 1.59% mortgage saving, so will be bigger than £100, you'll be able to take out £85. a free £25 for each £60. At the moment you are getting a free £1.59 for every £100 when you overpay the mortgage, (and that £100 probably cost yout £200 to earn, because it's after tax.)

People,focus on the mortgage because it's the big debt in front of them they can see, but a pension is in effect a reverse debt which they often ignore. You also need time to build it up but in contrast to a mortgage the government is giving you free money to do that. Why on earth would you turn that down ???