My Pension strategy - please blow holes in it!

foreversummer

Hi All

Following on from the very good discussion and comments received on this board and over on Savings and Investments, I have now prepared hubby's and mine pension/investment strategy. Would you learned folk be kind enough to look through it and PICK HOLES AND BLOW IT APART as you see fit as I really need to learn.

Objective: Hubby 60, me 54 - to make the most of our current pensions and provide a pot of money to dip into to supplement our state pensions when we retire (and keep us under the personal tax threshold) - him at 66 and me 67.

Him: Ex-Allied Dunbar pension plan current value £24500 and invested in the Zurich Managed AP 3/4 fund. Making no further contributions.

Me: A SIPP with HL, started last year, current value £3200 and invested in the Vanguard LS 60 fund. Currently adding £150 a month net to it but also making lump sum payments as and when possible. Also, Nest pension to take advantage of free money, minimum contribution by employer.

This is what I am thinking:

1. Withdraw his 25% tax free via UFLMPS and pay that into my pension to take advantage of tax relief.

2. Leave the remainder of hubby's pension in Zurich Managed AP fund for the time-being. This comprises 70% equities (roughly equities 30% UK, 15% European, 12% US, 10% Asia Pacific, 10% property, the rest fixed interest).

3. Work on growing my pension into the Vanguard LS 60 (equities 26% US, 15% UK, 7% European, 5% Global Emerging Markets, 5% Japanese, the rest Gilts and Fixed Interest).

I think that looks pretty well diversified?

In five years we will be mortgage free and will have a cash buffer of £18000. We plan to use this to withdraw from if the markets are down. We have a rather large house and it may be advantageous to downsize later but I don't want to rely on that at present.

We are realistic, these are not huge sums of money to have acquired at our time of life, but if we could drawdown £1500 a year that would work for us.

Go on, tear me apart, I can take it!! Lol

Foreversummer (novice)

IanSt

If the target really is just the £1500 a year, then from a quick look it's looking good whilst there's the two of you and hence two state pensions.

However what happens when there's just the one, will that £1500 drawdown still be enough? I'd suggest that the surviving partner is going to need a bigger drawdown then that, in which case you're likely to be light on the sums needed.

happyandcontented

If your husband intends to work till he is 66 why is he making no further contributions to a pension?

foreversummer

happyandcontented wrote: »

If your husband intends to work till he is 66 why is he making no further contributions to a pension?

Thank you for replying.

The old Allied-Dunbar pension is notoriously expensive when paying into it so we stopped contributing.

We thought it might be better to start a pension for me and concentrate on that. So basically we put what we can into mine rather than his.

happyandcontented

Does he not have one from his current employer? Obviously, the employer contribution is also free money for him, so even if he had the basic amount taken out as Sal Sac it would be worth doing as well as contributing to yours.

foreversummer

happyandcontented wrote: »

Does he not have one from his current employer? Obviously, the employer contribution is also free money for him, so even if he had the basic amount taken out as Sal Sac it would be worth doing as well as contributing to yours.

No he is self-employed.

atush

i agree, we need to understand more about your husbands pension provisions.

Given you both have a PA you really need to both be contributing between now and retirement.

Although you are behind him, if you keep contributing you will be wrking more years.

24.5K for him really isnt very big. Have you found out if AD will let him keep the 75% in a drawdown? Some dont offer DD.

What are the costs for him to move his pension elsewhere?

atush

foreversummer wrote: »

No he is self-employed.

OK so he should have a PP or Sipp to contribute to (and maybe even to take a transfer of his old AD pension).

I do understand you are playing catchup but you are younger.

kidmugsy

foreversummer wrote: »

1. Withdraw his 25% tax free via UFLMPS and pay that into my pension to take advantage of tax relief.

Looks a good idea to me. But is there any rush? I suppose you at least get the 25% while it is still tax-free. You could always wait to see whether a Chancellor increases the tax rebate for 20% tax payers.

Let me conjecture: suppose a Chancellor announces one December that from April everyone will get 25% tax rebate but that no new money will get the 25% tax-free lump sum. Will you be in a position to take the 25% in March and then reinvest it in April? It's a long shot I agree.

foreversummer wrote: »

We have a rather large house and it may be advantageous to downsize later but I don't want to rely on that at present.

I'm a sceptic about downsizing - it seems awfully expensive. Of course if you plan to move somewhere else in the country, that's different. But if you are broadly happy with where you are it might be better long term to expect to use equity release rather than pay the cost of downsizing. Or, why not take a lodger and use the Rent a Room allowance? In fact consider that now.

One last thing: the mortgage. Is it cheap? Could you extend it while you are still both working? Would it be possible to divert money from paying the mortgage to contributing to pensions?

foreversummer

atush wrote: »

i agree, we need to understand more about your husbands pension provisions.

Given you both have a PA you really need to both be contributing between now and retirement.

Although you are behind him, if you keep contributing you will be wrking more years.

Yes, I will continue working until age 67.

atush wrote: »

24.5K for him really isnt very big. Have you found out if AD will let him keep the 75% in a drawdown? Some dont offer DD.

I've become confused again, I thought everyone could take 25% lump sum and leave the rest untouched, but you are quite right it looks as if this isn't an option with Zurich.

atush wrote: »

What are the costs for him to move his pension elsewhere?

His SRA is 60, so he there are no exit penalties should he move it to a SIPP, although I believe the charges of the paid up Allied-Dunbar pension are lower.

foreversummer

kidmugsy wrote: »

Looks a good idea to me. But is there any rush? I suppose you at least get the 25% while it is still tax-free. You could always wait to see whether a Chancellor increases the tax rebate for 20% tax payers.

Let me conjecture: suppose a Chancellor announces one December that from April everyone will get 25% tax rebate but that no new money will get the 25% tax-free lump sum. Will you be in a position to take the 25% in March and then reinvest it in April? It's a long shot I agree.

Might be worth waiting to see I guess. Just realised taking a 25% lump sum from his Allied-Dunbar is not an option, not unless we buy an annuity which ain't going to happen.

kidmugsy wrote: »

I'm a sceptic about downsizing - it seems awfully expensive. Of course if you plan to move somewhere else in the country, that's different. But if you are broadly happy with where you are it might be better long term to expect to use equity release rather than pay the cost of downsizing. Or, why not take a lodger and use the Rent a Room allowance? In fact consider that now.

Still got two kids at home! One working full-time and contributing something but trying to save to buy a property for we are doing our best to help, the other at Uni so we are supporting him.