Advice on Timing

Triumph13

For Sal Sac benefits it's worth keeping on fighting HR. Using a SIPP your £80 becomes £85 when you get it out - a 6.5% gain that can be easily gobbled up by fees and bad rates. With Sal Sac,even below the 40% band, your £68 becomes £85 (more if the employer shares their savings) for a 25% gain. Park your cash in a savings account or ISA until HR get their fingers out.

The reason I didn't even suggest cash inside the pension is that many (most?) schemes seem to give a negative return on cash after fees even before inflation and with 10 years until retirement that would be vicious. If you want cash inside the pension then get it in in the last few years - subject to any worries about needing to retire earlier than expected and during a downturn of course!

shinytop

LateStarter wrote: »

Shinytop, have I understood you right? Can you really just put cash into a pension SIPP, leave it uninvested, AND get the government top-up?

I think others have answered but yes. I've put in cash only for the last 18 months or so into my company scheme via salsac, my stand alone SIPP and Mrs S's stand alone SIPP. HMRC don't care what you do with it as long as it's going into a pension. Yes I might be losing out in possible returns and inflation but at least it's guaranteed.

LateStarter

I agree I shouldn't be looking at cash inside the pension now, but I was planning to save 5k a year, so I can have £70k in 10 years. It seems better to invest the extra 5k into the pension fund - along with the 20k I'm currently putting in (and get the HMRC contribution too). Then, 2 years before retirement, hold all pension contributions as cash, and essentially get 25% HMRC top up on that. That way my cash position would be 62k in the pension, which I could then extract as part of the TFLS. Does that make sense?

I'm starting to see a bit of light here. :idea:

steampowered

I think you need to turn your question around.

Rather than "hoping to retire at 62/63", the question is "when can I afford to retire with the level of income in retirement which I require".

This will depend on what your pension provision looks like.

It is worth putting some numbers into pension calculators, if you haven't done this already.

Over a 9-10 year period it is definitely likely that you'd be better off investing spare money rather than keeping it in cash.

LateStarter

steampowered wrote: »

I think you need to turn your question around.

Rather than "hoping to retire at 62/63", the question is "when can I afford to retire with the level of income in retirement which I require".

This will depend on what your pension provision looks like.

It is worth putting some numbers into pension calculators, if you haven't done this already.

Over a 9-10 year period it is definitely likely that you'd be better off investing spare money rather than keeping it in cash.

Thanks for all the advice and suggestions so far everyone, I really think life would be so much harder without this forum.

Sorry I should probably have been clearer, the 62/63 age is when I think I can afford to retire. It's largely based on a spreadsheet of expenses for the last 2 years, with a 10% buffer and a few very broad assumptions, run through various scenarios. For now I'm using 5% portfolio growth, 3% inflation and 3% drawdown as a baseline. I'll obviously have to do a 'Reality' update at least once a year, but I'm trying not to micro-manage it - it's more about making the correct big decisions now.

FWIW, retirement age is 67, on track for full SP. In 2019 values, the goal is 21k pa during retirement. So I need 5 years of full-funding, and a drawdown of about 12.5 k once SP kicks in. Am I missing anything?

LateStarter

Triumph13 wrote: »

For Sal Sac benefits it's worth keeping on fighting HR. Using a SIPP your £80 becomes £85 when you get it out - a 6.5% gain that can be easily gobbled up by fees and bad rates. With Sal Sac,even below the 40% band, your £68 becomes £85 (more if the employer shares their savings) for a 25% gain. Park your cash in a savings account or ISA until HR get their fingers out.

Well I took up my case with HR/Finance this morning, and was rebuffed completely. "Company policy" does not allow salary sacrifice above 18%, as "corporate want to limit their financial exposure". As the company is now contributing 6% this keeps it below the "group directive" of 25%. Seems the finance people were not incompetent after all - just following orders and not telling me. I did ask why I wasn't told. "Oh it's in the latest addendum to the employee manual".

I assume this is how it is and I have no comeback here, as salary sacrifice is totally at the employer's discretion? I really am getting fed up of work. Ah well, here comes another spreadsheet.

crv1963

LateStarter wrote: »

Well I took up my case with HR/Finance this morning, and was rebuffed completely. "Company policy" does not allow salary sacrifice above 18%, as "corporate want to limit their financial exposure". As the company is now contributing 6% this keeps it below the "group directive" of 25%. Seems the finance people were not incompetent after all - just following orders and not telling me. I did ask why I wasn't told. "Oh it's in the latest addendum to the employee manual".

I assume this is how it is and I have no comeback here, as salary sacrifice is totally at the employer's discretion? I really am getting fed up of work. Ah well, here comes another spreadsheet.

Then you now need to sort an alternative pension to put your additional savings into. At least you'll still get the uplift from taxman, if not the NI savings.

We have two DC pension pots for Mrs CRV- DC pot 1- has been saved for years and will be drawn down on retirement at around 3.5% so hopefully last her lifetime and pot 2 a SIPP which will be drawn down to zero over the 10 years age 57-67 at a rate of 8.5k pa or equal to her expected SP, pot will be exhausted when SP kicks in, but her income will always be at or just below her PA.

pensionpawn

LateStarter wrote: »

Well I took up my case with HR/Finance this morning, and was rebuffed completely. "Company policy" does not allow salary sacrifice above 18%, as "corporate want to limit their financial exposure". As the company is now contributing 6% this keeps it below the "group directive" of 25%. Seems the finance people were not incompetent after all - just following orders and not telling me. I did ask why I wasn't told. "Oh it's in the latest addendum to the employee manual".

I assume this is how it is and I have no comeback here, as salary sacrifice is totally at the employer's discretion? I really am getting fed up of work. Ah well, here comes another spreadsheet.

My wife's company match her contributions to 10%, which is good. However we wanted to contribute more via SS however they said that had to be done via AVC. However I believe from my colleagues that my company will SS down to minimum wage. Makes you wonder why there's no consistency?

pensionpawn

LateStarter wrote: »

Thanks for all the advice and suggestions so far everyone, I really think life would be so much harder without this forum.

Sorry I should probably have been clearer, the 62/63 age is when I think I can afford to retire. It's largely based on a spreadsheet of expenses for the last 2 years, with a 10% buffer and a few very broad assumptions, run through various scenarios. For now I'm using 5% portfolio growth, 3% inflation and 3% drawdown as a baseline. I'll obviously have to do a 'Reality' update at least once a year, but I'm trying not to micro-manage it - it's more about making the correct big decisions now.

FWIW, retirement age is 67, on track for full SP. In 2019 values, the goal is 21k pa during retirement. So I need 5 years of full-funding, and a drawdown of about 12.5 k once SP kicks in. Am I missing anything?

Is your portfolio actually growing at just 5%? Maybe you are being too conservative and 7%-8% reflects actual growth better? Why 3% drawdown? Is this because you want to maintain your pot size? If so, why? If that is not an issue then perhaps you can take out more. Will you end up with a pension which is unnecessarily large (paying sizeable tax on drawdown) and working too long for it. Would you prefer to retire earlier?

Just food for thought...

shinytop

I assume this is how it is and I have no comeback here, as salary sacrifice is totally at the employer's discretion? I really am getting fed up of work. Ah well, here comes another spreadsheet.

My employer limits it to 50%. No idea why though.