It's the Final (salary) Countdown - A simple mans blog !!

Mr_Countdown

Firstly thank you for taking the time to click on my thread. I hope it proves to be of interest to you all, and hopefully will be relevant and of useful assistance to some people who are in the same situation as myself.
So who am I?
I’m a (nearly) 52 year old man who got divorced just over a year ago and now live by myself in a nice flat in Nottingham. I have worked for over 32 years in the public sector - for the last 10 years only 4 days a week due to part health reasons and part a lifestyle choice. Almost all the family on my fathers side (he was one of 7 children) have either died at around 70, or ended up in homes with dementia etc which I suspect may be a genetic family thing. I made the decision to go part time at 40 that there was more to life than work and wanted to enjoy life while I was still fit and well.
Now like a lot of people who are in their 50s I’m hoping to retire early (56 or 57) and have been working hard in my spare time to come up with the financial figures to support my aspirations. In my case I feel like I’m part of the majority of people who’ve just have a normal job earning normal money - I take home about £1,650 a month. I’ve no complaints at this as although the public sector don’t pay that well the final salary pension is considered a good one and working flexi time has been really good.

Anyway enough of that so time for me to throw out some numbers in the next part of this blog that hopefully people can comment on and let me know if my plan is a feasible one or just pie in the sky !! I’m fairly thick-skinned so can take criticism and hard truths but as this is my first ever post on here I’m hoping most will take it fairly easy on me !!

Mr_Countdown

So the following figures are based on taking retirement at 56 or 57 and highlight taking my minimum and maximum pension and minimum and maximum lump sum.

Taking pension early at 56 - £11,587 (max pension) and lump sum £27,972 (min)or
£8,947 (min pension) and lump sum £59,649 (max).

Taking pension early at 57 - £12,472 (max pension) and lump sum £28,648 (min) or
£9,553 (min pension) and lump sum £63,684 (max).

Add to that I currently pay £400 a month separately into a Legal & General CSAVCS pension through work which should generate me approx. £30,000 at 56 and £35,000 at 57 (based on 3% growth).
So my plan was to go at either 56 or 57 and bridge the gap between this age and when I get my state pension at 67 by dividing my lump sum by either 10 or 11 (years) and then adding that amount to my work pension to give me a yearly total to see if I can live off that.

So for example going at 57 means £63,684 (lump sum) + £35,000 (L & G pension) divided by 10 (years) = £9,907 + £9,553 (min work pension) = £19,460 (or £1,622 per month)

As mentioned in my previous post I’m not high up the ladder in the civil service and with working 4 days a week only normally take home about £1,650 per month, with £302 of this taken by my current mortgage payments (which will be paid off by 56).
As such in my simplistic mind I would be effectively over £270 net better off per month in retirement.
At this point I haven’t taken into account any interest or gains I could make with my total lump sum (£98,684) by investment or otherwise. (Any advice on making investments on this would be welcome).
I also need to point out that my work lump sum of £63,684 is tax free and from the £35,000 L & G lump sum the first 25% is tax free. From the remaining £26,250 I am allowed to take a lump sum from this every year so if I took £2,625 every year then added to my work pension of £9,553 I still wouldn’t go over the tax threshold which is currently £12,500.

So what do I want in retirement?
I don’t have aspirations to travel the world 9 months of the year to exotic places but I do want to have a few cheap holidays each year within and outside the UK. Part of this would include around a month in a warmer climate over winter. Nothing too posh – Tenerife will do for me !!
Other than that all I want is to live comfortably and not worry that I can’t afford to put the heating on. My current earnings and savings allow me to stay warm in winter and also have quite a few cheapish holidays away.

Finally I would add that the option of having a part time job in ‘retirement’ is a consideration/plan to generate a few extra pounds and also a last resort plan (equity release) is a possibility but not one I really want to do.
Right I’ll stop now before you all fall asleep and really hope the above makes sense but I’m happy to try and answer any points raised. Also as said previously I’m happy to take constructive feedback and advice on board. I’d also like this blog to run for a while so other people can revisit it and see if it helps their own personal situation.
Many thanks.

waveydavey48

Interesting and I hope you get constructive comments from more knowledgeable posters than me. The thought which occurs to me is that you are taking as a given the fact you will definitely get the state pension in 15 years time. Given the demographics I hope you are right but I'd say it's not 100% certain.

Triumph13

One thing that immediately jumps out is that you income drops from 67 on your plan. Full SP plus min pension @ 57 comes to £1,430 a month after tax so a drop of £200 a month - but as this is still over your current income less the mortgage that may not be too much of an issue.
Have you played about with the numbers if you use your DC funds to live off for a year or two to avoid having your pension reduced so much for taking it early?

michaels

The first question is always do you have your state pension forecast?

Another question, does the 400pm into your avc come out of the 1650 so you are actually living on 1250?

cfw1994

Sounds broadly good to me :j

Just watch out for a small amount of potential tax payable: the L&G ~30K AVC should allow you 25% tax-free, with the rest being taxed as income (as your other pension would be treated too, I believe).

I'm not sharp enough this afternoon to figure out the real numbers, but I suspect you may find some of that income being taxed at the basic rate.

Mr_Countdown

michaels wrote: »

The first question is always do you have your state pension forecast?

Another question, does the 400pm into your avc come out of the 1650 so you are actually living on 1250?

Hi and thank you for your reply.


Yes I have done my state pension forecast and as long as I work for the next 4 years I will have made the full NI contributions to get the full state pension of £8,575 per year.


And yes the 400pm comes out of my £1650 salary although I don't pay tax on it so only £320 is actually deducted. It seems a no brainer of a scheme as I can't think of anywhere else I could make 20% on my money.

Mr_Countdown

Triumph13 wrote: »

One thing that immediately jumps out is that you income drops from 67 on your plan. Full SP plus min pension @ 57 comes to £1,430 a month after tax so a drop of £200 a month - but as this is still over your current income less the mortgage that may not be too much of an issue.
Have you played about with the numbers if you use your DC funds to live off for a year or two to avoid having your pension reduced so much for taking it early?

Hi, thanks for the reply.


Yes you are right my income will drop at 67 by that amount but I was banking on not being quite so active with breaks away etc at that time of life and also the fact hopefully I won't have spent every penny I am budgeting for each year. That and the fact my lump sum of £98k may make a bit of money with the right investments.


I have played with the numbers regarding using my L & G pension money to live off for a couple of years but the increase from retiring at 56 or 58 isn't as much as you'd think.
56 is £8730 per year and £58,202 lump sum or
58 is £10,029 per year and £66,858 lump sum.


So £1300 per year more and £8000 lump sum. This seems a lot but I keep reminding myself that I will have had the £8730 amount at 56 for 2 years so £17,460 in my pocket so to speak.
Does that make sense?

Mr_Countdown

cfw1994 wrote: »

Sounds broadly good to me :j

Just watch out for a small amount of potential tax payable: the L&G ~30K AVC should allow you 25% tax-free, with the rest being taxed as income (as your other pension would be treated too, I believe).

I'm not sharp enough this afternoon to figure out the real numbers, but I suspect you may find some of that income being taxed at the basic rate.

Thank you for the reply and also agreeing that in general it sounds good !!


With regard potential tax payable on the L & G pension I've copied a paragraph from my original post where it shows how I hope to avoid paying any....


"I also need to point out that my work lump sum of £63,684 is tax free and from the £35,000 L & G lump sum the first 25% is tax free. From the remaining £26,250 I am allowed to take a lump sum from this every year so if I took £2,625 every year then added to my work pension of £9,553 I still wouldn’t go over the tax threshold which is currently £12,500."


I hope that makes sense?

Ganga

You say you were recently divorced,does your ex not have her eyes on 50% of your pension?

Triumph13

Mr_Countdown wrote: »

56 is £8730 per year and £58,202 lump sum or
58 is £10,029 per year and £66,858 lump sum.

So £1300 per year more and £8000 lump sum. This seems a lot but I keep reminding myself that I will have had the £8730 amount at 56 for 2 years so £17,460 in my pocket so to speak.
Does that make sense?

On those numbers I would definitely be deferring for 2 years if at all possible. The difference between the pension you don't receive and the increase in lump sum is only £8,800. It takes less than 7 years for you to be in profit and then you have an extra £1,300 a year gross for the rest of your life.