I think I am doing okay

worried_jim

I have gotten into the habit of reviewing my pension savings once a year. I am not an expert but I try to keep abreast of my current situation. I am 45 and in full time employment. I have three pension plans, although I only contribute to my current employers scheme.

I have been saving since I was 19 so this represents the last 25 years (all my working life).

I had a private scheme with Winterthur back in the 90’s and it is split into two funds-

AV Rainbow Equity II 1% EP £13,942
AV Rainbow Managed II 0.75% £13,836
Rainbow funds Total £27,779

I can't remember too much about this scheme but it does increase in value every year 3-7% (since 2011 when I started paying attention).

I have a workplace pension through L&G which again is split into two funds

L&G PMC Consensus Index 3 £35,493
L&G PMC Multi-Asset 3 £28,301
Total £63,795 This is up 10.8% (although last year is was -1%)

My final and current scheme is my current workplace pension. I save a total of 18%, 5% from me and 13% from my employer (this is the maximum contribution they will make but I could pay more)

I have this split across three funds-

Mixed investment fund £25,966
Japan Equity Fund £21,994
Emerging Markets Equity Fund £21750
Total £69,711

Last year I contributed (inc employer contributions) £4594 and excluding my payments this was +13.3%. Last year thee total value of these schemes was £142k and its now £161k.

Shall I keep carrying on doing what I am doing? The worst performing is the Japan Equity Fund with growth of just 0.18% is Japan going to come good anytime soon?

I am on track for the full State pension but I don’t think I want to work till I am 65-67. I have 9 years left on the mortgage but currently I could afford to increase the amount I save towards pensions, I do have approx £11k in shares etc (£4k in a S&S ISA).

I was thinking about talking to a IFA but as I think I am happy do I need to?

Linton

Just thinking you are happy is not sufficient. You need to do some maths.....
1) How much income will you + spouse, if there is one, require to live on?
2) Where will that money come from in each year between when you retire and when you die? You can make assumptions on inflation and returns. A spreadsheet will help considerably.
3) Add in some reserves for safety and major one-off expenditures.

If you are not sufficiently numerate to do this you could talk to an IFA.

Your current pension investments look ill-considered to me. Why do you think Japan is a better place to invest in than anywhere else? Why have more in EM than in Europe and the US combined? You would be better advised simply to put the money from both equity funds into the mixed investment fund or perhaps into a global equity fund if the mixed investment fund is too cautious.

Mistermeaner

other more qualified than me will be along regards the specific fund choices; although i think the general wisdom is to get all your pensions into one place and it should be pretty simple to transfer your old schemes into your new

Regards the total amount lets call it £160K @ age 45

Rounding up is you continue to contribute 5K a year and see growth of lets say an optimistic 5percent per annum your pot at the following potential retirement ages would be:

Age 56 = £345K
Age 57 = £367K
Age 58 = £390K
Age 59 = £415K
Age 60 = £441K
Age 61 = £468K
Age 62 = £496K
Age 63 = £526K
Age 64 = £557K
Age 65 = £590K
Age 66 = £624K
Age 67 = £661K

If you were to take 25% of this pot as a lump sum and then extract a ‘suatinable’ draw down income of 3% from the remaining amount this would give you:

Age 56 = £86K lump sum, 8K per annum
Age 57 = £92K lump sum, 8K per annum
Age 58 = £98K lump sum, 9K per annum
Age 59 = £104K lump sum, 9K per annum
Age 60 = £110K lump sum, 10K per annum
Age 61 = £117K lump sum, 11K per annum
Age 62 = £124K lump sum, 11K per annum
Age 63 = £131K lump sum, 12K per annum
Age 64 = £139K lump sum, 13K per annum
Age 65 = £147K lump sum, 13K per annum
Age 66 = £156K lump sum, 14K per annum
Age 67 = £165K lump sum, 15K per annum


How do these numbers feel to you? What are your goals in terms of income and retirement age? - bare in mind 5% growth is perhaps optimistic

I calculate your income to be roughly £25K so in all the above scenarios you will be earning less in retirement than you are today (although you may get full state pension age 67?) – will you be OK with this?


There isn’t really enough info in your post to answer more fully; e.g.:

- Are you married? Is your partner working / do they have a pension?
- Do you have kids? What age?
- Do you have a mortgage? How to long to go? Whats your house worth?
- What other debts do you have?
- Are you expecting any inheritence?
- Hows your health?
- What other savings do you have?


Just my view but I doubt you need an IFA – If you share a bit more info about your status you will get some better advice but I suspect you will be encouraged to save a bit more into your pension, make sure you have a decent amount in ready cash savings (say ~£10K) and to think about how happy you are working and whether you need to think carefully about your expected retirement date

worried_jim

- Are you married? No/just me.
- Do you have kids? No
- Do you have a mortgage? 9 years to go (£50k) £225k current value.
- What other debts do you have? none.
- Are you expecting any inheritence? Well both my parent are alive and well in their mid 70's and I have a sister so potentially half a house but not something I am factoring.
- Hows your health? I'm good but I do have type 2 diabetes which is under control.
- What other savings do you have? Just my share schemes.(£11k).

I am happy at work and I think I am secure, I think £20k per annum would be nice, I would get full state pension @ 67.

Mistermeaner

worried_jim wrote: »

- Are you married? No/just me.
- Do you have kids? No
- Do you have a mortgage? 9 years to go (£50k) £225k current value.
- What other debts do you have? none.
- Are you expecting any inheritence? Well both my parent are alive and well in their mid 70's and I have a sister so potentially half a house but not something I am factoring.
- Hows your health? I'm good but I do have type 2 diabetes which is under control.
- What other savings do you have? Just my share schemes.(£11k).

I am happy at work and I think I am secure, I think £20k per annum would be nice, I would get full state pension @ 67.

looks like you're on track then *if the assumed 5% growth rate after inflation holds - see below as this may be overly optimistic*; without getting overly complex or doing more analysis i would suggest;

- building a cash savings pile of around 10K in santander or similar - maybe sell the shares you mention

- get that mortgage paid off then perhaps increase pension contributions

- stay healthy

good luck!

Albermarle

Rounding up is you continue to contribute 5K a year and see growth of lets say an optimistic 5percent per annum your pot at the following potential retirement ages would be:

Age 56 = £345K
Age 67 = £661K

This is not taking inflation into account . In real terms the £665K would probably be worth more like £450K /£475K .so the tFLS and projected income would be less .

To get real 5% growth your investments have to grow at more like 8% , which is too high .

Mistermeaner

fair point i can re-run numbers with different rate ; what would you suggest?

Albermarle

fair point i can re-run numbers with different rate ; what would you suggest?

2.5% pa is low historically but we seem to be in a long term low inflation environment so could be a good figure to use .

worried_jim

Thank you all! Once the mortgage is paid off I could pay another £6k a year in, I believe I would get tax relief on this too. I am thinking that at some point nearer retirement it may be wise to move them all into one provider as a SIPP.

Albermarle

.

I am thinking that at some point nearer retirement it may be wise to move them all into one provider as a SIPP.

As you approach retirement you need to be in a pension(s) that support flexible retirement income , like drawdown. Older pensions usually do not unless they have been updated.
However a SIPP is not always the best bet and you need to be clear on charges for your current workplace pension for example, as it might be cheaper and easier to manage than a SIPP

worried_jim

Albermarle wrote: »

.
As you approach retirement you need to be in a pension(s) that support flexible retirement income , like drawdown. Older pensions usually do not unless they have been updated.
However a SIPP is not always the best bet and you need to be clear on charges for your current workplace pension for example, as it might be cheaper and easier to manage than a SIPP

Its administered by TowersWatson (I gather they do loads now), I searched for the charges but couldn't find them anywhere, I know there are some as I had an email a few weeks ago with a link to them and I thought when I have time I must have a look and of course I cant find the blooming email now. Friends Life took over Winterthur a few years ago and the Aviva workplace pension is 4 year old plan so I presume that both of these are pretty modern schemes.