Help with Future Plans

Deedee0605

Hi

Having recently turned 50 (eek!) I am trying to get our finances in order, my husband is 53 and hoping to reduce his hours in the next couple of years before retiring early (probably around 60-62). I plan to work at least to 60, but probably well beyond as my pension isn’t that great.

We are both in the LGPS - husband’s annual pension is currently £8791.95

I have a bit more of a chequered pension history - with some full time work and then very part time work whilst the kids were little. I am now back to 32.5 hours but I only work term time.

I have a deferred Royal Mail Pension worth £3942.39 p/a ( this pays out from 60 but £570 of this is only payable up to state pension age).I also have 2 AVC pots with Zurich and Standard Life worth about £8000 in total.

And my LGPS pension is worth £2085.56.

So I will have £3942.39 from age 60 and then £5457.95 from 67.

We are on track for a full state pension each at 67 ( both have 1 more year of contributions to make)

Neither of us have ever earned a lot of money, currently husband earns around £23000 and I earn £14500- I have worked out a generous (to us!) “number” as a budget from 67 and to be honest with state pension and even just the current pensions we have accrued we will have more than enough coming in.

We have no mortgage or other debts - 2 children - 1 at uni and 1 doing A levels.

Up until recently we had very little in savings and no spare cash, but as we have now paid off the mortgage (and my husband has received an inheritance) we have a little more to work with.

I thought perhaps putting some money into a SIPP for each of us would be a good idea - especially whilst we are both still working. I planned to put £8000 p/a in a SIPP for other half (which with tax relief would increase to £10000) and I was going to contribute £200 per month into one for me, giving me £3000 p/a with tax relief.

I was looking at the Fidelity Multi Asset Allocator Strategic Fund for my husband’s SIPP as it is 60:40 split between bonds and stocks (which I think is fairly cautious considering the money will be needed in 10-12 years). It also seems to invest globally without a particular UK bias. I thought about putting the first 2-3 years investments into there before changing to their Defensive fund for 3-5 years, I will keep some cash available for the first couple of years when we need to start drawing on it (just in case markets are on a bit of a down at that particular point).

I haven’t yet decided about my SIPP - guess I might see what anyone thinks of my choice of the Fidelity Fund first

I have tried to work out the amount we are allowed to put into a SIPP but I have found the calculation for LGPS members totally beyond my abilities. I am certain the amount I am planning to invest will not cause a problem, but if anyone knows different I would be grateful for their expertise.

Thank you for reading this (if you have got this far!!) any input would be very much appreciated as I am not very knowledgeable or confident. I am reading as much as possible and trying to learn though.

Many thanks

Dee

atush

First off, you could up to full time hours to boost your pension.

And both of you should open LGPS AVCs which are small DC pensions- are those the Zurich ones? If not, open some. These will pay you your TFLS w/o reducing your DB pensions.

Opening Sipps or PPs as well is a good idea if you want to retire before scheme age. You can ask HR to help you with the amount paid into your DB pensions so you know how much allowance you have left.

Deedee0605

Thank you for your reply atush.

I do look at job adverts periodically and agree increasing my hours (And working all year round) is a good idea. I really enjoy my job and like the people I work with but there's no chance of changing my hours there.

The AVCs I have are from when I worked at Royal Mail. I ought to look at the funds they are in to be honest as they have just sat there for 20 years.

I will definitely look at the lgps AVCs - I haven't read much on those so that's definitely an area I can improve my knowledge. Can I ask what TFLS stands for? It's not a term I have come across before.

Lots to consider �� I am just worried that I will spend so much time reading and contemplating that I will never actually do anything...

Dee

AnotherJoe

I would put any excess money after savings into SIPPs or similar so that you can get the max boost up on tax and then at age 55 (not far off for hubby) you can take out the 25% tax free giving you an increase in yoir savings to then use that for one off spends later. And by judicious drawdown of the money between stopping working and taking SP and other pensions you may be able to take out most or all of it with no tax meaning you get 25% free.
Example, hubby puts £8k into pension over next two years. Keeps it as cash. It will be bumped up to £10k. Hubby turns 55, takes out 25% tax free. £2k for free thank you.
Then he withdraws the £8k when he stops working and before he takes pensions, thus has no income, so no tax paid. Obviously you can pro rate that £8k up to any number as long as he earns it ,or downrate the amount but given he's so close to 55 why do the latter?
You can do the same.
As for funds, I would say do your own research,that funds come up recently and seems decent enough for a cautious approach but i dont do cautious so am probably best not qualified to comment

Deedee0605

Thanks AnotherJoe.

I think I will need to speak to HR or LGPS to help me work out how much I can put into SIPPs (And the LGPS AVCs). I was keeping the amounts to invest relatively low to avoid exceeding the max allowed. But that's probably not the best strategy ��

Dee

k6chris

Deedee0605 wrote: »

Thanks AnotherJoe.

I think I will need to speak to HR or LGPS to help me work out how much I can put into SIPPs (And the LGPS AVCs). I was keeping the amounts to invest relatively low to avoid exceeding the max allowed. But that's probably not the best strategy ��

Dee

Yes talk to the LGPS about AVCs. The major advantage of LGPS AVC vs a non-LGPS SIPP is that when you retire and draw your LGPS pension, the AVCs and DB pension are included in the 25% TFLS (tax free lump sum) calculation, which means you are likely to get all the AVC money tax free, rather than just 25% with a SIPP. I have explained that really badly, talk to them, they will be able to explain it much better!! Good luck.

Deedee0605

Thanks k6chris- I think you explained it very well!

I will give LGPS a call tomorrow (after reading through things again and making sure I know what I am asking!) I am just a little anxious as I want to get things right. Retirement seems to have suddenly got a lot closer...

Dee

LHW99

k6chris wrote: »

Yes talk to the LGPS about AVCs. The major advantage of LGPS AVC vs a non-LGPS SIPP is that when you retire and draw your LGPS pension, the AVCs and DB pension are included in the 25% TFLS (tax free lump sum) calculation, which means you are likely to get all the AVC money tax free, rather than just 25% with a SIPP. I have explained that really badly, talk to them, they will be able to explain it much better!! Good luck.

Although I think that may tie the AVC's to the pension, whereas in a SIPP you could take the 25% from that earlier than the LGPS, which would be reduced if you took it early.
Neither way is "better", it depends what suits your plans and how much flexibility you want.