Trying to figure out if retirement at 60 is possible

Will_Do

I'm currently 52 and am trying to figure out if retiring at 60(ish) is going to be remotely possible.

Current basic gross salary is £58k

33 full years of NI contributions to date so expect full state pension at 67.

Small DB pension from BT, payable from age 60, that was forecast to pay £2k pa when I left back in 1995.

Current DC pot of £240k

Contributing 25% (£14,500) into DC pension (between EE & ER) but considering increasing that to 30% in April.

Savings: not much. I have £20k in an employee share scheme. I also get roughly £10k pa in free shares (just qualified for that last year) which I won't be touching so assume that will accumulate to £90k+- (taxable) by the time I'm 60.

Target income: £2.5k net PCM (£30k pa) at today's value. That would have me happy as larry but I could reduce to £2k per month if I had to in order to give up work.

I've been playing around with Excel but whilst there are not that many variables (inflation, salary increases, DC pension performance) they obviously make a massive difference depending on how optimistically or pessimistically I set them.

Can anyone help make sense of the above? Do I have any chance of being able to retire at 60? What percentages would you recommend for the various variables when trying to forecast?

p00hsticks

Will_Do wrote: »

33 full years of NI contributions to date so expect full state pension at 67.

Have you confirmed this via state pension forecast ? Although you should be add another 7 or 8 years to that before you stop working at 60, as you've been contracted out for a period you may find that under the transitional rules you need even more to get the new maximum (my personal number is 42).


https://www.gov.uk/check-state-pension

Spreadsheetman

What is the current forecast of the BT DB pension? That projection from 1995 could be a lot more now.

Will_Do

p00hsticks wrote: »

Have you confirmed this via state pension forecast ? Although you should be add another 7 or 8 years to that before you stop working at 60, as you've been contracted out for a period you may find that under the transitional rules you need even more to get the new maximum (my personal number is 42).



Yes, i checked on the HMRC pension website. 33 full years to 2017/18. Hadn't thought about impact of contracting out but just checked and it says COPE is £19.86 per week.

Linton

From a quick calculation £30K doesnt seem on to me.....

Assume
Required income £30K
£3K from BT pension
£9K State pension
No inflation
No investment return until aged 67
No tax

Income required from pension/savings
60-66: £30K-£4K=£26K, X7=£190K
67...: £30K-£4K-£9K=£17K

Total assets:
At 60: £240K+8*£14500+£90K=£446K
At 67: £446K-£190K=£256K

So you need £17K/year to be generated from £256K assets - this is unrealistic.

If we reduce the expenditure to £24K we get...

Income required from pension/savings
60-66: £24K-£4K=£20K, X7=£140K
67...: £24K-£4K-£9K=£11K

Total assets:
At 60: £240K+7*£14500+£90K=£430K
At 67: £446K-£140K=£306K


So you need £11K/year to be generated from £306K assets - this is possibly OK but then the assumptions were crude. It could be worthwhile doing a similar calculation up to age 67 with a bit more detail - eg continue to use current prices but assume an additional investment return of say 1%-2%. Also you need to allow for tax,


I think the end result would be still too tight for comfort so I would suggest you plan to work for an extra year or 2 - this will increase your pot a bit and more importantly significantly reduce you drawdown in the pre-SP years.

Will_Do

Spreadsheetman wrote: »

What is the current forecast of the BT DB pension? That projection from 1995 could be a lot more now.

I don't know, to my shame I tried to register on the BT pension website to see if I could check that but it wanted information I don't have. I've kept them up to date with my address and get annual trustee reports but nothing in the way of a forecast. I'll need to write to them I guess.

squirrelpie

As well as checking your state pension, it would be worth checking how much the BT pension will pay.


As far as inflation goes, I would ignore it and price everything as though it didn't exist. Hopefully savings, salary, costs etc will all go up at roughly the same rate and balance out. Hopefully that's a conservative estimate.


Your free shares - do you mean you will now get £10k each year?


I'd think you might be able to retire on £2k per month at 60. Pushing it to £2.5k might require some extra saving and/or luck. It depends how flexible you can be (or are prepared to be) about your usable income each year both before and after retirement.


edit: my post crossed with Linton's, so they are two independent views.

atush

I agree, contact BT and find out the current projections for your DB pension and gt a state pension forecast.

Then I agree you A- need to ramp up DC contributions. Take yourself out of HRT and boost that pot.

B- you need to get some cash savings going. I'd be looking to get up to min of 30K by retirement. Start off small with regular savers.

p00hsticks

Will_Do wrote: »

Yes, i checked on the HMRC pension website. 33 full years to 2017/18. Hadn't thought about impact of contracting out but just checked and it says COPE is £19.86 per week.

Sorry, I didn't mean confirming how many years you currently had, I meant checking how many more years you need to get to the maximum £164.55.

Don't assume it's necessarily 35, as that's only for people who didn;t accumulate any years under the new rules.

xylophone

You are a Section C member?

When you left BT, were you given a statement of deferred benefits on leaving showing

pre 88 GMP

post 88 GMP

Excess?

https://www.btpensions.net/assets/uploads/documents/001389_BT_MemberBookletC_20.11.17_V2.0CF-14.35-no-vc.pdf Page 17


"If you leave BT before Normal Pension Age, you will be entitled to a deferred pension and lump sum payable at your Normal Pension Age. It will be calculated on the following basis:

Benefits built up before 1 April 2009


Pensionable Service/60 x Final Pensionable Service at DOLS = Annual Pension

These benefits will be held in the Scheme and cost of living increases will be added to your deferred pension and lump sum over the period to retirement. The increases on any benefit in excess of your Guaranteed Minimum Pension (GMP) will be linked to the Revaluation Order published by the government (currently based on the Consumer Prices Index),
up to 5% a year compound. The GMP will also be increased, as required by the contracting out laws – these currently require the GMP to be increased in deferment broadly in line with the increase in national average earnings."

justme111

in the calculation that he kindly provided Linton did not seem to account for any investment growth above inflation in the 8 years before 60 and after.
He did calculate the withdrawal from the age of 67 as if you wanted to leave capital untouched - you would not live forever so you may as well use your capital. I would say you seem to be on track - of course as years pass you will get progressively fewer unknowns so it will be easier to plan.
I am not sure what CPI was every year from 1995, I have plugged in 2.5%/year for 18 years into a compound interest calculator and got £4500 now. On another hand I am not sure whether Linton has accounted for tax in his calculations as you wanted your sums net.
I concur that it would be great if you removed yourself from HRT band if you have not already by additional pension contributions.