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My Early Retirement Plan - Your Thoughts
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If they do change the rules to allow transfer out of some of his DC funds, then that's best of all as you can then use up all his PA between retirement and DBs with sal sac funds turning £100 into £184.48 and also avoiding LTA by crystallising it early, but if that option doesn't transpire then the priorities are pension for him to fill the gap years, then sal sac to use full LTA, then pension for you to cover your gap years. You can afford to wait a couple of years to see if the option does become available as you still have plenty of time to switch funds to other pensions and amass enough to cover those personal allowances.
Thank you, your suggestions have given me some food for thought. It will probably be worthwhile to continue paying the maximum £40,000 into his DC pension for this tax year and the next.
After this, if his pension scheme stays as it is (which is more than likely) then I will consider diverting £12,000 of the £40,000 per annum into a SIPP for my husband. I am already paying £12,000 (£15,000 gross) into my SIPP each year. That added to the £6000 that goes into DH's S&S ISA should help us build up a sizable pot to cover from 57-65. At 65 his employer's DB pension kicks in and we can also access his DC pot.0 -
enthusiasticsaver wrote: »I have an LPA for my mum but we haven’t yet done ours. I suppose we think that not yet being 60 it is not an issue yet which is mad. Thanks for reminding me and I will put that on my list too.
Happy to help
enthusiasticsaver wrote: »Why not join the early retirement wannabe thread?
I may take you up on that offer as I have lurked on the thread for years and it has been a real inspiration. However, I have never felt knowledgeable enough to contribute, although I am learning now. I will probably be like Marine Life and procrastinate when the time comes to retire. I'm one of those people that sometimes enjoys the journey more than the destination.0 -
Thrugelmir wrote: »What are the total annual contributions to the DC pension scheme?
The annual allowance of £40k is irrespective of source, i.e. employee or employer. Exceeding the limit will incur an annual allowance charge. Likewise no tax relief is granted on the excess contributions.
£40K includes all contributions - employee and employer's. I keep a close eye on the contributions to make sure that they don't sneak over the annual allowance.0 -
Thinking about this further, the one option probably makes most sense of all for DH is to keep using the sal sac, but then on retirement simply exercising his statutory partial transfer rights to transfer out all the DC funds to a SIPP, leaving the DB behind.
By doing this he loses the ability to leverage the DB for TFLS which (assuming the old final salary DB is included in the arrangement, has to be taken at same as CAE scheme and gets some increase for being taken late) means he's leaving about £60k of possible TFLS on the table. That seems like a crazy thing to do, but the real cost of that is just the 20% tax he'd now pay on withdrawing that £60k over the course of a few years ie £12k. If he keeps contributing £40k pa for another 7 years, then that £12k cost is almost certainly going to be way less than the LTA charge he would pay for leaving his works DC funds invested for an extra 8 years after retirement.0 -
Thinking about this further, the one option probably makes most sense of all for DH is to keep using the sal sac, but then on retirement simply exercising his statutory partial transfer rights to transfer out all the DC funds to a SIPP, leaving the DB behind.
By doing this he loses the ability to leverage the DB for TFLS which (assuming the old final salary DB is included in the arrangement, has to be taken at same as CAE scheme and gets some increase for being taken late) means he's leaving about £60k of possible TFLS on the table. That seems like a crazy thing to do, but the real cost of that is just the 20% tax he'd now pay on withdrawing that £60k over the course of a few years ie £12k. If he keeps contributing £40k pa for another 7 years, then that £12k cost is almost certainly going to be way less than the LTA charge he would pay for leaving his works DC funds invested for an extra 8 years after retirement.
Another option that is well worth considering. We will not be taking any TFLS from DB pensions unless it is mandatory to do so.0 -
One year on, my husband and I are now both 50 and celebrating did impact on our ability to save, but we are back on the wagon now _party_My husband and I both hit the big 5-0 in 2018 and with retirement not feeling as far away as it once did, we want to make sure that we can retire before the age of 67. Over the last few years we have been tidying up our finances and looking to maximise tax efficiency, but this has been done in isolation without a coherent plan.
I wasn’t really sure where to start, but having lurked for years and read my fair share of threads, I thought it best to summarise where we currently are financially.
Our finances as at January 2018
Me: Full-time PAYE £38K (Local Government)
Husband: Full-time PAYE £75K + £20K bonus & £6K car allowance (Private Sector)
PROPERTY
Home: Worth approx £800K – No Mortgage
Zoopla estimate was £917K but I am not sure how accurate this figure is and do not want to over-estimate, property was purchased over 14 years ago and we have not kept an eye on local property prices. We will move to a smaller place in the next 5-10 years, just depends on when the kids (19-23 years) can afford to leave home. Oldest is working but the younger two are currently at university, we are supplementing their student loans. We are not really expecting to free up any cash from the move, if we don’t spend it all on the new property, we will gift what is left to the children for house deposits.
DEBTS Credit cards balances cleared every month (and earning a bit of cashback too)
SAVINGS
Both: 2 x Cash ISA – £24K each, fixed at 2.51% to November 2020
£21K in various high interest current accounts and regular savers
Husband: S&S ISA current value £30K, paying in £500 a month
OTHER ASSETS
In addition to our everyday cars, my husband has a classic car which is insured for £40K. It is the love of his life and will probably be with us for another 15 years.
Jewellery (approximately £15K, can be sold in the future as I don’t wear it)
PENSIONS
Me: LGPS Career Average £2250 pa (accruing at £700+ pa - NRA 67)
SIPP £34500, paying in £1000 per month
Deferred Pensions
LGPS Final Salary £5100 pa (NRA 65)
PCSPS Final Salary £2000 pa (NRA 60)
Husband: Employer’s DC £213K, contributing £40K pa via salary sacrifice
Deferred Pensions
Employer’s Career Avg £8350 pa (NRA 65)
Employer’s Final Salary £2500 pa (NRA 60)
Old DB Scheme 1 £5000 pa (NRA 60)
Old DB Scheme 2 £3000 pa (NRA 60)
State Pension: I have obtained forecasts for us both and we will receive the full state pension each if we work for a further 5 and 6 years respectively. We will have 35 years of NI contributions in the next couple of years, but we may as well wipe out the COPE to maximise our state pension.
TO DO Make wills – I know we should have done this ages ago, but my fear is that it is going to be complicated so I keep putting it off. Worried we will start having to think about trusts etc. and I don’t like anything that I don’t understand.
We will be in really good shape financially from the age of 67. At present we cannot touch my husband’s DC pot without taking his employer’s DB pensions, which will be subject to an actuarial reduction if taken before 65. His employer is currently reviewing the rules of the scheme, but the decision could be more than a year off.
My SIPP and his S&S ISA are the beginnings of our provision from 57-67. Minimally we will need £2K a month. Should we just carry on as we are or am I missing something? As you may have guessed my husband is all for early retirement, but not interested enough to do anything about it. He is much happier leaving it all to me so he can tinker with his car.
Sorry for the long post, it will be really interesting to have your thoughts and suggestions.
Like everyone else, our investments have taken a bit of a hit over the past year and its anybody’s guess what the next five years will deliver in returns. Although there are no plans to scale back investment in the next couple of years, it does makes sense to ensure that we will not have to crystallise any loses if markets remain low or there is a sudden downturn.
I want to hold at least 5 years worth of cash when we take early retirement at around 57. I really like the sound of OldMusicGuy’s “bucket” strategy and I will look to adapt this over time to suit our circumstances and my basic knowledge. Our DB pensions start kicking in from 60 and this gives us a guaranteed income which makes my job much easier.
Our finances as at January 2019
Me: Full-time PAYE £39K (Local Government)
Husband: Full-time PAYE £79.5K + £24K bonus & £6.5K car allowance (Private Sector)
PROPERTY
Home: Worth approx £800K – No Mortgage
The Zoopla estimate was £917K last year, now down to £886K. I know these figures are just a very rough guide as the house will really only be worth what a buyer is prepared to pay for it.
As we are planning to downsize in the next 5-10 years we have been refurbishing and redecorating for the last couple of years; 2 bathrooms, 3 reception rooms and 2 bedrooms have been completed with 2 bedrooms, the kitchen, downstairs cloakroom and hallway left to go.
Oldest child is working and moved out a few months ago to rent (party) with friends. He has already warned us that he will be back at some stage so that he can add to the house deposit he has managed to save. The younger two are still at university and we are supplementing their student loans.
DEBTS Credit cards balances cleared every month (and earning a bit of cashback)
SAVINGS
Both: 2 x Cash ISA – £25K each, fixed at 2.51% to November 2020
£17.5K in various high interest current accounts and regular savers
Husband: S&S ISA current value £34K, paying in £500 a month (moved to a cheaper platform)
OTHER ASSETS
My husband had just swapped his gas-guzzler for something more economical when a car reversed into my banger. It was an economic write-off so we ended up adding a few grand to the payout and upgrading my car, this should see me through the next five years or so.
My husband’s classic car was insured for £40K, but as a birthday present to himself it has been restored (all I will say is that it wasn’t cheap). The car will be revalued in a couple of months when it comes out of storage and it should have appreciated in value.
Jewellery approximately £22K (it has been valued & vast majority is now in a safe deposit box)
PENSIONS
Me: LGPS Career Average £3,047 pa (accruing at £795+ pa - NRA 67)
SIPP £47,264, paying in £1,000 per month
Deferred Pensions
LGPS Final Salary £5,188 pa (NRA 65)
PCSPS Final Salary £2,254 pa (NRA 60)
Husband: Employer’s DC £252.5K, contributing £40K pa via salary sacrifice
My Husband’s employer is still reviewing their scheme so at present we cannot touch the DC pot without taking his employer’s DB pensions. Will also keep an eye on LTA and look to move the DC pot to a SIPP if this rule is still in place or, in later years, divert some of his pension contributions to a SIPP and keep them in cash.
Deferred Pensions
Employer’s Career Avg £8,777 pa (NRA 65)
Employer’s Final Salary £2,595 pa (NRA 60)
Old DB Scheme 1 £5,000 pa (NRA 60) – 2017 value
Old DB Scheme 2 £3,000 pa (NRA 60) – 2017 value
State Pension: Updated forecasts based on NI contributions to April 2018.
Me: 34 years of full NI contributions, further 5 years required for full pension due to COPE
Husband: 35 years of full NI contributions, further 6 years required for full pension due to COPE
TO DO LIST FROM 2018
Make wills – Made mirror wills, we will inherit from each other upon the first death and then everything will pass to our children upon the second death. We will revisit these wills upon retirement as we will have a better idea of our circumstances.
Lasting Power of Attorney for both finance & health and care and Advance decisions (living wills) - I have done some research, but we both feel a bit too young and unsure of what we would like to do to commit ourselves at this stage. We have however discussed our wishes and this will stay on the to do list.0 -
we want to make sure that we can retire before the age of 67.
PENSIONS
Me: LGPS Career Average £2250 pa (accruing at £700+ pa - NRA 67)
SIPP £34500, paying in £1000 per month
Deferred Pensions
LGPS Final Salary £5100 pa (NRA 65)
PCSPS Final Salary £2000 pa (NRA 60)
Husband: Employer’s DC £213K, contributing £40K pa via salary sacrifice
Deferred Pensions
Employer’s Career Avg £8350 pa (NRA 65)
Employer’s Final Salary £2500 pa (NRA 60)
Old DB Scheme 1 £5000 pa (NRA 60)
Old DB Scheme 2 £3000 pa (NRA 60)
As we are planning to downsize in the next 5-10 years we have been refurbishing and redecorating for the last couple of years; 2 bathrooms, 3 reception rooms and 2 bedrooms have been completed with 2 bedrooms, the kitchen, downstairs cloakroom and hallway left to go.
In reverse order:
(i) Your redecorating might, I suppose, placate the angry gods of the property market, but I always doubt the wisdom of spending good money on decor that the new owners might hate and replace anyway. If you are doing it for your own pleasure that's quite different.
(ii) Suppose you make a provisional plan to retire at 60. Will you both be able to use your Personal Allowances to full advantage by use of your pensions? If not, I'd pursue that line of action as a priority.
(iiii) If not 60, will 65 be easily accomplished?
(iv) When you reach 55 it might be worthwhile to transfer ISA money into your pensions if that helps you use your full annual allowances.Free the dunston one next time too.0 -
(i) Your redecorating might, I suppose, placate the angry gods of the property market, but I always doubt the wisdom of spending good money on decor that the new owners might hate and replace anyway. If you are doing it for your own pleasure that's quite different.
I disagree with this.
Most buyers (incl my OH) have no imagination and if they walk into a home decorated 20 years ago or more that is going to put them off buying our house. The point is to get it sold at the price it is worth, not marked down as a redo.
Sure it might not be to a buyers taste, but if at least decent it could convince them to buy. So I am doing as the above poster, and redoing my house starting with 20 yr old basic standard bathrooms (all we could afford when we buitl it) and moving on to hardwood flooring then redecorating bedrooms and finally kitchen.0 -
In reverse order:
(i) Your redecorating might, I suppose, placate the angry gods of the property market, but I always doubt the wisdom of spending good money on decor that the new owners might hate and replace anyway. If you are doing it for your own pleasure that's quite different.
We renovated the house when we moved in 15 years ago, we compromised on our kitchen the first time round as we basically ran out of money. The kitchen and bathrooms certainly started to look their age in recent years and this is/will be the most expensive part of the refurb. The rest is just a lick of paint, wallpaper and new carpeting for the bedrooms and stairs, we managed to afford the hardwood floors the first time around.I disagree with this.
Most buyers (incl my OH) have no imagination and if they walk into a home decorated 20 years ago or more that is going to put them off buying our house. The point is to get it sold at the price it is worth, not marked down as a redo.
Sure it might not be to a buyers taste, but if at least decent it could convince them to buy. So I am doing as the above poster, and redoing my house starting with 20 yr old basic standard bathrooms (all we could afford when we buitl it) and moving on to hardwood flooring then redecorating bedrooms and finally kitchen.
We will have a number of years to enjoy our updated home before we sell up. It is a lot of money for most buyers, so hopefully the house will also be more attractive if there is less work to be done. Our last home sold for the full asking price to the first viewer, I don't think we will be so lucky next time, but as Atush says I want what the house is worth.
I don't understand this bit, could you explain further?(ii) Suppose you make a provisional plan to retire at 60. Will you both be able to use your Personal Allowances to full advantage by use of your pensions? If not, I'd pursue that line of action as a priority.
(iiii) If not 60, will 65 be easily accomplished?0 -
The suggestion is you may wish to divert monies to one or the the others pension fund to allow each of you to take a pension of £12,500 a year at 2019/2020 rates to maximise the tax efficiency of both of your zero rate taxable pensions.
Or you may wish to move some basic rate from on to another if that works in this case but that may not work.0
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