Please help - too many options!

DIYBaldyman

Hi,

Thanks in advance for anyone able to help & apologies if I've missed a sticky instruction, have posted in the wrong place or are just asking the wrong questions.

Basic details - I'm turning 49 next month & have had a sudden realisation that 50 is approaching fast & will soon be followed by 55 & so on until retirement. Although I have pension plans, I don't really have a proper financial plan for retirement as such. I should be mortgage-free by 60 by a combination of part-repaying & down-sizing using our the existing equity to buy our 'retirement' home. My wife is 3 years younger than me & has been in & out of work in between raising our children since 1994 so has a very hit & miss state-pension record & around £4,000 in one current & one old workplace pension, so there won't be a great deal coming in from either private or state pensions on that side.

I have a current Nest Workplace pension with my current employer which stands at £6005 & I'm getting £250 contributed per month (combined employers, employees & tax relief).

I also have 3 old pensions that I'm not contributing to any more;

1 - Legal & General Stakeholder Scheme A2 - current value £10,992;
2 - Scottish Widows - current value £6,161;
3 - Assurant (Originally Guardian Royal Exchange Choices Protected Rights Only Personal Pension Plan) - this was the plan set up when I opted out of SERPS in 1988 to which contributions were made between 1988 & 2006. The latest value is £49,437 (as of 22/10/19). My understanding is that a Protected Rights plan originally meant that I had to use the sum on retirement to provide a joint annuity with my wife, but that more recent rule changes mean that I may be able to move that sum elsewhere (into a SIPP?).

So at present my pension plans total £72,595 & current contributions will add at least £3k per year, so by the time I reach 55 I should have at least £90k (that's not allowing for any further growth) & need to consider the implications of taking a lump-sum at that time.

My main question is what do I do for the best with the old policies to which I'm no longer contributing? Should I move them into my current Nest Workplace scheme? Should I move my Protected Rights sum & if so where is the best place to put it?

I've checked my State Pension forecast online. It is forecast at the full £168.60/week on retirement (19/11/2037) & is currently currently sitting at £136 / week, with 7 years of N.I. contributions still required (including the current tax-year - 2019/2020) to qualify for the full amount. It also shows that I have 3 years listed as 'Year Not full' from a redundancy in 2011 when I was out of work until 2014. I can top-up those 3 years for a total sum of £2,145.00.

Hoping someone can give me some useful advice.

SonOf

So at present my pension plans total £72,595 & current contributions will add at least £3k per year, so by the time I reach 55 I should have at least £90k (that's not allowing for any further growth) & need to consider the implications of taking a lump-sum at that time.

At your age and with such a small pension fund total, I would suggest you completely ignore growth in the calculations. Go by current value and contributions.

Also, considering the small size of your overall retirement funds, is taking any money out at age 55 a sensible thing to do?

My main question is what do I do for the best with the old policies to which I'm no longer contributing? Should I move them into my current Nest Workplace scheme? Should I move my Protected Rights sum & if so where is the best place to put it?

This is just playing around the edges. It won't make significant differences whether you leave them where they are, move them to Nest or another. There may be a small benefit or a disadvantage but in the scheme of things, it's largely a non-issue at this stage. The most important thing is how much you have for retirement.

AlanP_2

I would suggest that you put the question of the old pensions and possibly combining them to one side for now and look at the bigger picture.

Can you look at your overall spending pay any extra into your NEST scheme as £90-100K isn't going to give you a great deal each year between the age of 55 and possible life expectancy into your 90s?

Do you plan to retire at 55 and continue paying mortgage until 60 out of that £90k?

Can you realistically afford to retire at 55?

Have you worked out what income you need (for essentials) and would like in retirement?

Then how can you get there bearing in mind that you will not get State Pension until 2037?

What is your wife's SP situation and can this be improved by paying some voluntary years for her?

Do you have any other savings to live off before SP age?

Get an outline plan in mind then decide on which pots to combine or not.

DIYBaldyman

Can you look at your overall spending pay any extra into your NEST scheme as £90-100K isn't going to give you a great deal each year between the age of 55 and possible life expectancy into your 90s?

Do you plan to retire at 55...

I'm currently contributing the minimum along with my employer (8%), but realistically yes, I could pay extra into my NEST scheme. However, I think I've been misunderstood - I'm not planning or expecting to be able to retire at 55. Like I said in my OP, I don't have a retirement plan. In my head I've always expected to need to work until SP age, I wrote a conservative forecast of what I think I'll have in my 'pot' at age 55 mainly to ask advice about taking a lump-sum at that age. From 55 onwards, providing my salary & contributions remain stable, my 'pot' could realistically grow by around £50k by SP age.

and continue paying mortgage until 60 out of that £90k?

No - I'd keep working & pay the mortgage from salary as I am now. We have estimated (with a few assumptions on housing market & property values) that by 2030 we'll have sufficient equity to downsize & clear our outstanding mortgage.

Can you realistically afford to retire at 55?

Not a chance at the moment!!

AlanP_2

DIYBaldyman wrote: »

I'm currently contributing the minimum along with my employer (8%), but realistically yes, I could pay extra into my NEST scheme. However, I think I've been misunderstood - I'm not planning or expecting to be able to retire at 55. Like I said in my OP, I don't have a retirement plan. In my head I've always expected to need to work until SP age, I wrote a conservative forecast of what I think I'll have in my 'pot' at age 55 mainly to ask advice about taking a lump-sum at that age. From 55 onwards, providing my salary & contributions remain stable, my 'pot' could realistically grow by around £50k by SP age.



No - I'd keep working & pay the mortgage from salary as I am now. We have estimated (with a few assumptions on housing market & property values) that by 2030 we'll have sufficient equity to downsize & clear our outstanding mortgage.



Not a chance at the moment!!

OK that clarifies things a bit more, thanks.

I still think you need to focus on the bigger picture aspects:

How much do you need / want when retired?

What sources will you have as a couple?

What can you do to maximise your retirement income?


Paying more in than the current 8% would be a good starting point.

What is your wife's pension / earnings / SP situation?


Even if she were not working she can contribute £2880 into a personal pension and get tax relief of £720 added to boost her overall pot for example, or pay voluntary NI to build her SP entitlement.

BTW - Most people don't take their 25% tax free lump sum "as soon as they can" as their isn't normally any benefit to be gained by doing so. Why are you thinking of possibly doing that?

DIYBaldyman

How much do you need / want when retired?

To be honest, unless any significant inheritances or a lottery win comes along, it'll be a case of living to our means (ie how much do we have & we'll have to make it work. My SP will give us £728/month) & with an annuity from £150k I would expect to be able to get around £900 to £1000/month, so probably around £20k pa with a small contribution from my wife's side (see below)

What sources will you have as a couple?

Significantly only what I've listed above, plus any additional equity in our house when we decide to sell, but we're not expecting any surplus as we want to sell when we can downsize & clear our mortgage.

What is your wife's pension / earnings / SP situation?

My wife currently works part time & has a workplace pension, but it has only been going for a few years, so not worth a lot at all at the moment. Her SP record isn't looking too pretty either, with only 15 full years out of 30, due to not working all the time from 1994 up until around 2010 whilst raising a family. She doesn't have enough qualifying years left to get it paid up in full before her SP age.

Even if she were not working she can contribute £2880 into a personal pension and get tax relief of £720 added to boost her overall pot for example, or pay voluntary NI to build her SP entitlement.

Thanks, we'll look at both of the above options over the coming weeks / months.

BTW - Most people don't take their 25% tax free lump sum "as soon as they can" as their isn't normally any benefit to be gained by doing so. Why are you thinking of possibly doing that?

I'm not, I just knew that I could & wanted to know if there was any benefit in doing so. After reading your reply I'll leave it where it is unless we really need to dip into it.

Thanks again for all your advice, it's been very useful & given me a few things to think about.

xylophone

Her SP record isn't looking too pretty either, with only 15 full years out of 30, due to not working all the time from 1994 up until around 2010 whilst raising a family. She doesn't have enough qualifying years left to get it paid up in full before her SP age.

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf
could be worth a look.

LHW99

I've checked my State Pension forecast online. It is forecast at the full £168.60/week on retirement (19/11/2037) & is currently currently sitting at £136 / week, with 7 years of N.I. contributions still required (including the current tax-year - 2019/2020) to qualify for the full amount. It also shows that I have 3 years listed as 'Year Not full' from a redundancy in 2011 when I was out of work until 2014. I can top-up those 3 years for a total sum of £2,145.00.

It may not be worth topping up, if you are expecting to be working for the next 6+ years - I guess that would bring you pretty close to maximum anyway. That would let you add that amount as an extra contribution to your current scheme / add to your OH's.

pip895

Looking to maximise your joint income one of the most effective things you can do is look at filling in your wife's NI record to get her up to full state pension - it gives a far better "yield" per pound spent than a SIPP even if you need to pay for full years. Next you need to up the amount being put into your pensions.

I'm surprised your partner has so poor a NI record - did she claim child benefit while she was bringing up the kids? She should have been credited for those years...

Unless you have a very specific need for it then don't take out the tax free lump sum - at least until you are ready to retire and possibly not even then.

AlanP_2

DIYBaldyman wrote: »

My SP will give us £728/month) & with an annuity from £150k I would expect to be able to get around £900 to £1000/month, so probably around £20k pa with a small contribution from my wife's side (see below)

That raises two points in my mind:

1) I'm not trying to rain on your parade but I doubt you would get £11/12K per year from an annuity based on £150k in today's market. Annuity rates are very low, reflecting overall low interest rate world we are currently in.

Google a few providers and see what you could expect. You would need to put in your age and amount as if you were 65/66 to get an accurate number plus whether you want spouse benefits if you pass away, some kind of inflation linking etc.

2) Given point above about low rates they are not as popular as they used to be. Many people switch their pension pot to drawdown and withdraw an amount or a percentage each year from it leaving the rest invested.

Lots of discussion on here about options in that scenario but you are looking at say 3% a year as a reasonably safe withdrawal level that will hopefully last maybe 25/30 years of retirement.


It's good that you looking in to this now and considering your options as you still have some time left to increase your overall retirement situation by looking at some of the suggestions made.

OldMusicGuy

DIYBaldyman wrote: »

... with an annuity from £150k I would expect to be able to get around £900 to £1000/month, so probably around £20k pa with a small contribution from my wife's side (see below)

I think you are somewhat mistaken here. Based on current rates, taking a level annuity at 65, 150K would get you around 7.5K per annum. This would not increase in any way and your wife would be left with nothing when you die. 150K would get around a 4,200 per annum annuity increasing at 3% per annum with 50% going to your wife when you die.