Future planning at 31

atush

No, i meant you pay 40% tax on everything over the threshold, which means you are paying 40% tax on 1500 quid (as you are pying in 3500/pa into yrou pension). Which you dont need to be.

by all means, put the rest against the mtg.

Albermarle

My wife works for the NHS so has a DB scheme of some sort, I really need to get hold of some details of her scheme though as I currently have no idea what she is forecast. How would it work if she left the NHS in the future? I have only had DC scheme's so it's been easy to transfer them to next employer... I know that's not the same with DB schemes.

If you leave an employer with a DB scheme , then you can not take the pension with you. It stays where it is and you become a 'deferred pensioner' of that scheme. You get a statement when you leave telling you what annual pension entitlement you have built up to that point . This figure is for when you retire on the Normal Retirement date ( usually 60 or 65) and there will probably be some inflation linking between when you retire and the Normal retirement date .I am not familiar with the details of the NHS scheme but this is generally how DB schemes work.

dai_bach

atush wrote: »

No, i meant you pay 40% tax on everything over the threshold, which means you are paying 40% tax on 1500 quid (as you are pying in 3500/pa into yrou pension). Which you dont need to be.

by all means, put the rest against the mtg.

Thanks.

Apologies if I am being dense here.. isn't the threshold for 40% tax £46,350 this year? Which would mean my £3,500 contribution would pretty much take me under this already?

atush

Yes it is, sorry used last years. So you have 2850 you are paying 40% tax on, so that is what youcshould aim to add to pension ( approx 237.5 per month)

Terron

dai_bach wrote: »

In my pessimistic mind I have worked on the assumption that the state pension won't be around when I get there so working out worst case scenario I suppose.

In what circumstances do you imagine a government commiting electoral suicide by abolishing the state pension?

FatherAbraham

dai_bach wrote: »

My wife works for the NHS so has a DB scheme of some sort, I really need to get hold of some details of her scheme though as I currently have no idea what she is forecast. How would it work if she left the NHS in the future?

If you are married to someone who has a defined-benefit pension arrangement, then you are indirectly a beneficiary of that scheme. You should receive benefits were she to die, for example - a survivor's pension.

Thus, you have more than just DC pensions - you also indirectly have a DB pension.

In particular, you have the right to contact the pension administrator directly, if your wife is unwilling or uninterested in providing you with details of the benefits you have accrued.

More details: http://www.thepensionsregulator.gov.uk/trustees/db-providing-information-to-members.aspx#s15237

dai_bach

Terron wrote: »

In what circumstances do you imagine a government commiting electoral suicide by abolishing the state pension?

Well if it is there I will have a nice bit of extra cash to play with :beer:

dai_bach

FatherAbraham wrote: »

If you are married to someone who has a defined-benefit pension arrangement, then you are indirectly a beneficiary of that scheme. You should receive benefits were she to die, for example - a survivor's pension.

Thus, you have more than just DC pensions - you also indirectly have a DB pension.

In particular, you have the right to contact the pension administrator directly, if your wife is unwilling or uninterested in providing you with details of the benefits you have accrued.

More details: http://www.thepensionsregulator.gov.uk/trustees/db-providing-information-to-members.aspx#s15237

Thanks for that, good to know. The wife is interested, she has just misplaced her log in information at the moment so she is in the process of finding it/resetting passwords etc.

crv1963

dai_bach wrote: »

I will have a good read!

My wife works for the NHS so has a DB scheme of some sort, I really need to get hold of some details of her scheme though as I currently have no idea what she is forecast. How would it work if she left the NHS in the future? I have only had DC scheme's so it's been easy to transfer them to next employer... I know that's not the same with DB schemes.

It certainly is a balancing act... I just wanted to make sure I wasn't missing any easy/big wins, which is why I want to take advantage of the 40% allowance and compounding as early as I can!

The DB scheme your wife has is the NHS 2015 scheme now with possibly something in the 2008 which means your wife is earning a career average benefit, which accrues a pot every year which is uplifted every year- sorry I'm not very knowledgeable about the details of the scheme. I do know she can make a percentage increase in contributions so she can retire a few years before SPA. She wont I don't think get a TFLS.


If she leaves she becomes a deferred member, it still gets its' annual uplift, there is no individual "real pot of money" just a promise to pay at a later date so it can't be transferred into anything but a "club" ie public sector scheme. This is because todays contribution pays todays retired scheme members- a bit like NI doesn't get put into a separate pot but is used like all taxation to pay the ongoing government expenditure- of which pensions is part.


I'd get your nearly 3k pa into a pension while the 40% relief is there, maybe use the rest to build your emergency pot and mortgage over payment until you move into your next house then review?


There will be some form of SP when you retire no party could win an election with a proposal to abolish it. There will be changes and tinkering but it will still exist.


Good luck!

enthusiasticsaver

Well done on looking at this at the relatively young age of 31. I agree with most of the other posters that using more than one approach to reach your desired objective is sensible.

Also a million pound in a pension will give you a higher than £25k annual income so that is a little pessimistic. Also you will get state pensions presumably. The NHS pension scheme is very good even the new CARE so she should look to maximise her contributions by doing AVCs and you should contribute enough into your pension to maximise employers contribution, keep you at BR tax level and secure child benefit should you decide to have children by keeping your net income below £50k.

Overpaying your mortgage as well would be sensible to get you into a lower LTV band and as you intend moving to a bigger property in a few years time. Bear in mind there are usually penalties for any overpayments over 10%. You will find it difficult to get 3.85% on savings although some regular savers and high interest current accounts pay this but only on limited amounts.

Building a cash emergency fund using regular savers and high rate current accounts is a sensible move. 4-6 months essential spending should cover this.

Alongside building a cash emergency fund, overpaying pensions and mortgages you might also look at stocks and shares isas which are tax advantageous and give you scope for funding early retirement if that is something you are interested in. They are more flexible than pensions in that you can draw on them before age 55 or could leave your pensions untouched so they are not reduced for taking them early.

When we were making long term financial plans in our 20s and 30s we used a combination of those approaches but made a couple of mistakes. We overpaid our mortgage so this was repaid just before our children started university. We overpaid my husbands pension as a HR taxpayer but did not significantly overpay into my LGPS pension. I regret that now. We built up cash savings in a mix of fixed term bonds, high interest current accounts and regular savers. On reflection we should have moved into investing in stocks and shares isas earlier than we did. We really only focussed on those after our mortgage was repaid and our children had left university. Our high relatively liquid cash savings would have secured better returns by being invested and limited the value being eroded by inflation. We had around five years of desired income in cash with the intention of using it for early retirement. Investing that earlier would have given us better returns although of course there are no guarantees that would have happened.