Life's swerve ball - need to plan differently!

Stubod

..with your quoted salary and your £28k outgoings, 10 yrs to run and your current pensions I would say that retirement at 60 with £28k pr/yr should be fairly straightforward. Get yourself a food IFA, and add what you can to SIPPS / SS ISAS, and you may find you can go even earlier!!..

...good luck to you both....

Rodders2409

Any thanks to all of you for the responses.

A few basic questions if that's OK?

How do you calculate the extra amount to pay into her pension...and why?

What is the 5% drawdown?

BLB53

How do you calculate the extra amount to pay into her pension...and why?

Anyone who is not employed can put £3,600 (gross) into a pension - you pay £2,880 and the taxman will contribute the rest.

What is the 5% drawdown?

When you come to the point of living off your accumulated pension pot you will withdraw a certain amount each year (assuming you do not go for an annuity). This is drawdown. You could possibly draw 4% indefinitely as the pot remains invested and would grow by 5 or 6% each year to replace what you have taken out.

You could take a slightly higher amount until your state pension kicks in so 5% may be a reasonable figure from 60 to 67.

Here a more elaborate article on DIY Investor which explains in detail.

http://diyinvestoruk.blogspot.co.uk/2016/08/a-look-at-sustainable-drawdown.html

Rodders2409

Thanks BLB53....this is proper learning!

So there are no restrictions in adding to her Prudential pension even after such a long time?
And we just pay the £2880 with the tax man adding the balance (25%)...that's great info.

I scanned the Blog and need to re-read again (probably multiple times!)...but the gist seems to be there are many variables and, depending on our risk levels and ability to follow and manage the investments, we could start a retirement plan where...

from 60-67 yrs with pension pot at approx £450K
4 % drawdown = £18,000 (or £22,500 @5%)
Property rental income = £7,000
....giving an income of approx £25,000 before tax (or £29,500 @ 5%)

Then....
at 67 yrs we will both be starting our State pensions at approx £16,000 p/a total giving ...
£25,000 + £16,000 = £41,000pa

Which is great to hear if correct?!!

Obviously I appreciate that we'll be paying tax and there will be inflation....but have I understood correctly?

Cheers

BLB53

Obviously I appreciate that we'll be paying tax and there will be inflation....but have I understood correctly?

Yes, that summary looks just about right.

michaels

Won't your DW be getting her hopefully full state pension by the time you are 60? Add on 7k rental and you are at 15k so only 13k needed from pensions, reducing to 5k once your state pension kicks in. 450k pot should be more than enough for this!

bostonerimus

If we assume 5% annual growth of your pensions for the next ten years then at age 60 you should have around 678k. A 3.5% annual drawdown will give you ~24k and add the 7k rent you'll have 31k annual income. So you should be ok and the state pensions and the equity you have in real estate give you a nice safety margin.

xylophone

I'm not sure what DC or safeguards means.....can you please advise...

https://www.pensionwise.gov.uk/en/pension-types

http://adviser.royallondon.com/technical-central/pensions/transfers/safeguarded-benefits/

kidmugsy

Rodders2409 wrote: »

Her
57 / F / 1960
Housewife...oldskool ..:)
Zero income ......

Missus' pension
Prudential - £27,573..

I have recently increased my personal contributions, in anticipation, to £1167 p/m excluding tax relief, and the company pay £205 pm into the same scheme.

I have a property which I rent out and get £7000 p/a net of all costs...and am looking to get this put into my other half's name if it's tax beneficial.

We aren't big spenders and have worked out, based on 2 years of trawling through statements etc, that we could fairly comfortably live on £28K pa.

....Salary is @@@@...and we do not live outside our means so could possibly add more to the pension pot, but have kids in university so needed to balance the next 9 years till 60. ...

Question is ...is that possible if I retire at 60?

(i) Your wife can already draw her pension: no need to ask the Pru. If the Pru doesn't offer drawdown, transfer to a provider that does. (Our small SIPPs are with Hargreaves Lansdown whom we find excellent. Other people speak highly of Cavendish, and of A J Bell.)

(ii) She should indeed contribute £2880 net in each tax year. She should then drawdown enough to use her personal allowance against income tax. So, currently approx £11,500 - £7k = £4k p.a., but rather more in 17/18 because she won't have received the rent for the whole tax year. Plus she might take her tax-free lump sum. The point of her drawing this income would be to make it easier for you to contribute more to your pension e.g. to get your income down to the higher rate tax threshold (£45k, but £43k in Scotland). You should take maximum advantage of the 40% tax relief while it's still available.

(iii) The point is to increase your pension pot ASAP so that you could even conceivably retire at 55, depending on your wife's health.

P.S. Put the children on short commons if necessary. But note that you can borrow far more cheaply by taking a mortgage loan than your children can by taking govt loans.

michaels

Depending whether you think the kids will gain employment that will ever pay off the govt borrowings as otherwise you are just funding them with money that will be written off anyway.