Pension Advice/Evaluation

Nicosy

If you're thinking of consolidating then you could take a look at pensionbee as they specialise in consolidation. Their main selling point is that they make things as easy as possible, including having only 7 funds to choose from (though the flip side is seeing this as too basic!).

Pretty simple to use and their documentation is well laid out. Unless you’re keen on dealing with archaic and slooow paper based workflows!

Albermarle

If you're thinking of consolidating then you could take a look at pensionbee as they specialise in consolidation

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The OP has an active Aviva pension with her employer . Normally employers will only pay into their own associated scheme, so would not be a very good idea to move it !
Usually the easiest option is to transfer into the current workplace pension unless there is a some good reason not to.

Whiterose23

Albermarle wrote: »

.
The OP has an active Aviva pension with her employer . Normally employers will only pay into their own associated scheme, so would not be a very good idea to move it !
Usually the easiest option is to transfer into the current workplace pension unless there is a some good reason not to.

My thoughts were to move the small L&G amount into Aviva. Not sure what the benefits would be other than it would be easier to manage in one place.

jamesd

The sooner you pay off your mortgage the worse you make your financial situation, assuming normal mortgage interest rate. This is because every Pound off the mortgage is costing you 1.0625 off the mortgage at 55 or older plus the effect of investment growth above the mortgage interest rate. The 6.25% gain assumes basic rate tax paying in and taking out.

Mortgage over payment calculators are normally hopelessly biased due to not showing you the alternatives to overpaying.

While you could take tax free money to overpay at 55 that's a bad idea because it costs you 13 years of growth.

I'll cover interest only first.

A more efficient way is to gradually shift money to bonds or gradually take tax free lump sum money to overpay starting five years from the end. Five years is to protect against big drops just before a planned total repayment.

If just tax free lump sum money won't pay it off you'll need - for maximum efficiency - to withdraw taxable money within the basic rate tax band to do it. Since taking the taxable money cuts you pension contribution allowance to 4k a year the best time to take the taxable money is when no longer working. That may involve remortgaging to an end date a few years after you stop working.

You probably have a repayment mortgage so if you don't extend the term there will come a time when the remaining mortgage balance is less than the available tax free lump sum. That's a possible time to clear it.

My own investments are around nine times my mortgage and my available tax free lump sums much more than it but I've no plans to repay sooner than I must. I know I can do it whenever I want and that's enough for me.

Whiterose23

jamesd wrote: »

The sooner you pay off your mortgage the worse you make your financial situation, assuming normal mortgage interest rate. This is because every Pound off the mortgage is costing you 1.0625 off the mortgage at 55 or older plus the effect of investment growth above the mortgage interest rate. The 6.25% gain assumes basic rate tax paying in and taking out.

Mortgage over payment calculators are normally hopelessly biased due to not showing you the alternatives to overpaying.

While you could take tax free money to overpay at 55 that's a bad idea because it costs you 13 years of growth.

I'll cover interest only first.

A more efficient way is to gradually shift money to bonds or gradually take tax free lump sum money to overpay starting five years from the end. Five years is to protect against big drops just before a planned total repayment.

If just tax free lump sum money won't pay it off you'll need - for maximum efficiency - to withdraw taxable money within the basic rate tax band to do it. Since taking the taxable money cuts you pension contribution allowance to 4k a year the best time to take the taxable money is when no longer working. That may involve remortgaging to an end date a few years after you stop working.

You probably have a repayment mortgage so if you don't extend the term there will come a time when the remaining mortgage balance is less than the available tax free lump sum. That's a possible time to clear it.

My own investments are around nine times my mortgage and my available tax free lump sums much more than it but I've no plans to repay sooner than I must. I know I can do it whenever I want and that's enough for me.

This is all really interesting, although I'm not clear on the first paragraph about financial situation being made worse when mortgage paid off ..?

I have largely focused on clearing down the mortgage as the security of owning my home appeals for obvious reasons, but it makes complete sense to invest spare money elsewhere, let it build up and keep the mortgage going. I think I need to educate myself on how to invest/SIPPS etc.

Whiterose23

jeepjunkie wrote: »

If it were me i'd be...

Build emergency fund.
Consider consolidating L&G DC pot into Aviva.
Are you getting max employer conts?
Is the mortgage in two parts? I ask in case there is a much smaller part that you could possibly target as a sideline?
We both have SIPPs that we used for consolidating old pensions and also very useful as a bucket for all interest, stoozing profits, bonuses, cashback. Basically free cash harvested from wherever. The tax relief uplift/growth really helps.
Do you have a target retirement age or drop to PT etc?
Can you earn more money, that's what I've concentrated on over the last year and makes a huge difference?

Hi, my mortgage is just a straightforward repayment and I'm paying 1.89% interest on a 2-year fixed deal at the moment.
I would love to be able to retire as soon as I can, or at least work part time when I can. Re earning more money, I do bits and pieces on eBay as well as my full time job, but as I work 40 hours it doesn't leave much time (or energy!) for much else. Both my children are still at school so life is hectic.
I guess my focus will be on saving as much as I can and building up my current pension pot.

Alexland

Albermarle wrote: »

Normally employers will only pay into their own associated scheme, so would not be a very good idea to move it !

On larger pensions there can be material cost reductions possible by partially transfering lump sums out of a workplace pension if the scheme rules allow. If you leave some value behind the workplace pension remains open for future matched contributions.

Alex

jamesd

Whiterose23 wrote: »

I'm not clear on the first paragraph about financial situation being made worse when mortgage paid off ..?

£1 overpaid now is £1.0625 plus or minus investment results that's not available to do it later.

Whiterose23

jamesd wrote: »

£1 overpaid now is £1.0625 plus or minus investment results that's not available to do it later.

Thank you, yes I understand. Makes perfect sense!

jamesd

Whiterose23 wrote: »

I would love to be able to retire as soon as I can, or at least work part time when I can.

The general plan for that is to stop overpaying and put the overpayment money into a pension. Then retire once you've accumulated enough to pay off the mortgage and live as you want.

Say you wait until you have 94k of tax free lump sum available. You could pay off the mortgage with that. That would leave 282k. That's enough to pay £9k a year fixed with annual increases or £14.1k variable usually increasing with inflation. Both for life at the likely age you get there. But you'd want to take more until the DB pensions then state pension start, then drop, no problem.

Your normal mortgage payments mean that the 94k is dropping steadily so yo won't need 94k+282k.

If you get to the point where you can pay off the mortgage but not provide the income you want, you just wait a bit longer. Each extra year helps a lot because:

1. one less year of life that you need to provide for
2. one less year to bridge drawing at a high rate between retiring and the DB and state pensions starting
3. one more year paying in
4. one more year of growth