Life's swerve ball - need to plan differently!

bostonerimus

Rodders2409 wrote: »

[STRIKE]Bontonerimus[/STRIKE] Bostonerimus...can you advise how you got to £678K as a pension pot by 60yrs?

I started with your total current pension balance of about 282k, added annual contributions of 16.2k and did a compound interest calculation assuming 5% annual return for 10 years....that gets you a pot of about 670k

bostonerimus

Yep, definitely look at the cost of your current pensions, you might find some nasty fees and be able to save some money there.

I also have a paid off rental property which returns around 6% after expenses. In 20 years I've never had an issue with tenants and having an investment that pays 6% and has have 5% annual capital growth for the past 20 years is pretty good. I think you are right to keep it as it's a nice diversifier to your pensions, produces good income and is pretty low risk having no mortgage.

I would be nervous with an initial withdrawal of 5%. Anyway you probably won't need that much when you add in the state pensions. It might be ok if you scale back when the state pensions start, but if you can get away with an initial withdrawal closer to 3% the probability of you running out of money will be close to zero.......assuming you have a well diversified investment portfolio with around 50% equities.

Rodders2409

Thanks.
I'll look into our current pension companies management costs.

The possibility of moving funds into a SIPP to cut out charges, is that a very normal process because it feels like I'd need to get a great deal more involved with what investments are made etc...not that I'm totally opposed to this.

I read about different products / portfolio's being mentioned where there seems to be discussions on the balance of equities and returns etc...something I've basically handed over to the companies and don't get involved with...ever!

michaels

Rodders2409 wrote: »

Ok...here we go!

Michaels....unfortunately my other half won't be able to draw her SP until 66 yrs old.

Bontonerimus ...can you advise how you got to £678K as a pension pot by 60yrs?

I am at approx £255K now and aiming to continue with paying in at least £1167 + £205 (company)...plus the 25% tax , so I'm guessing your figure is derived from this growing year on year to a value such as £678K?...I had thought it would be around £480K - £520K.

Xylophone...yes it's DC and no Safeguards

Kidmugsy...

The Prudential have said that they won't allow any new payments in, but we can move to a different product that could possibly allow it. From what you've mentioned we could transfer to any SIPP (learning the lingo!) and start the process of adding the £2880 to maximise the tax benefit.

We wouldn't need to draw down until I stopped working at 60...unless I miss something as I didn't quite understand this part...

"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".

I've decided that the kids are tall enough so feeding them anymore is probably not required :-)

From what I understood when you are 60 your wife will be 67 and thus already in receipt of her state pension.

The advantage of living off your wife's pension now and putting the eqivalent amount into your pension is that your pension comtribution will be 'grossed up' at your 40% marginal tax rate. Ie draw 4k pa from her pension will incur no tax for her as she has an 11k allowance (but uses 7k of this for rent). You then pay 4k of tour net income into your pension and the revenue adds back the 40% tax you have paid on this so the gross pension contribution is 6650. Net effect 4k from your wifes pension pot, 6650 into yours.

Rodders2409

Michaels....

Rrriiighhht.....I think I get it !

Yes, she would be getting her SP when I'm 60 which is something that I had stupidly ignored in my calculation, but happily it makes it better for us.

When you say..."now"...in
"The advantage of living off your wife's pension now and putting the eqivalent amount into your pension "

What do you mean?

Until now I hadn't understood that I may be able to to get a larger tax benefit being a 40% payer. My pension statements show tax relief at 25% only against my personal payments.

I've been a 40% tax payer for > 15 years, is it possible to get the tax relief credit backdated?

Do I get any tax relief against the companies contributions?

AlanP_2

Are you sure your Tax Code hasn't been adjusted to give you the HR tax relief?

If not you can contact HMRC and get that sorted very quickly.

No idea how far you can backdate the claim.

No relief against employer's contribution - your tax / your contribution.

The employer will be taking pension costs of their profits so will be getting that "tax relief".

Apodemus

Rodders2409 wrote: »

When you say..."now"...in
"The advantage of living off your wife's pension now and putting the eqivalent amount into your pension "

What do you mean?
?

I think you are missing the suggestion that if your wife is already old enough to draw down the Prudential pension, you might be able to free-up more cash to put into your own pension (as well as putting £2880 into a SIPP in her name).

The magic age for accessing private pension pots is 55 at the moment, regardless of State Pension Age.

Rodders2409

OK understood Apodemus....thanks for sticking with me.

AlanP
....how would I recognise if the Tax office is giving me the full 40% tax relief on my pension?
I've looked at my P60 and can't see anything obvious to advise me.

FatherAbraham

Rodders2409 wrote: »

I'm sorry you've had a bad experience though Father Abra...that sounds awful.

Nothing to do with me; it was a quote from an article in the Personal Finance section of the Daily Telegraph.

I think the moral of that story is that owning a lettable property is tremendously undiversified. You are correct to desire diversification in your portfolio, and to want to invest in real estate.

The problem is that direct ownership of real estate is as undiversified as owning an entire small business rather than a portfolio of shares. The outcomes are extreme, the liquidity low.

Warmest regards,
FA

Rodders2409

Thanks FA...
I guess it comes down to risk and return (I'm starting to sound like I know what I'm talking about...weird & wrong!)
Because I know the area well, have lived in the property so know that too, and am quite handy so can manage costs, the only other aspect to consider are dead periods which we've never had over many years renting. And because there's no mortgage on the property I'm not going to worry about losing the place, only a period without income which wouldn't be the end of the world for a short time because I have other incomes available and I can always trim expenditure for a while.

Well that's my assessment and it could be wrong.

Anyone able to advise on this...
I'm still concerned about giving up some tax relief to the tax man as I can see my pension statement only showing basic 25% but I'm a 40% payer....how do I easily find out if I've got my full entitlement?...and if I haven't is it back dateable?