Where do I start with retirement planning?

Durban

Thick_n_Thin said:

Durban said:

How about something like this?

By trying to pay off your mortgage early, and then investing, you are wasting valuable growth, compounding and tax relief.

Your mortgage , I can see , is around £60,000 ish.  You have an inheritance of £120,000 coming.

What about getting the lowest interest rate offset mortgage you can get and extend the term to the maximum you are allowed, even up to age 75 if you could. You can always reduce the term later.

 Put £60,000 of the inheritance in the offset account. You'll be paying peanuts to your mortgage as it is offset and the term is long and it will be basically interest free.

You have the security of knowing that the mortgage is always covered by the £60,000 off set 

Then , plough what you were paying on the mortgage plus your overpayments  into your pensions. Get the 20% tax relief and hopefully some growth.

Although you may not be able to retire at 55 , you could possibly go part time.

I will research this option further when my mortgage rate ends next year, although the thought of not paying my mortgage off until I was 75 makes me uneasy, don’t know if my OH would be onboard with this! I think I will do some research though, thank you! 

No , I understand.  When I suggested a similar thing to my OH he was horrified and didn't want to do it.
There is a lot to be said psychologically for having the mortgage paid off even though it probably isn't the best thing financially to do.

ffacoffipawb

Deleted_User said:

ffacoffipawb said:

Deleted_User said:

I thought 49 year olds have a retirement age of 57 now.

A 49 year old would be 55 in 2026. The minimum age doesnt go up to 57 til 2027 (though, technically, no official legislation has passed for this increase).

I just re-checked as my wife is 49, the state pension age comes out at 67 using the HMRC calculator (and assuming the 67 minus 10 years = 57)
Unless I am doing something really stupid (like forget her age/DoB)
https://www.gov.uk/state-pension-age/y/age/1971-03-06/female

The only stupid thing is not remembering that the minimum pension age remains at 55 until 2027. State pension age is now 65 10/12 (ish) so the 10 year rule has stopped applying (until 2027).

Thick_n_Thin

ffacoffipawb said:

Deleted_User said:

ffacoffipawb said:

Deleted_User said:

I thought 49 year olds have a retirement age of 57 now.

A 49 year old would be 55 in 2026. The minimum age doesnt go up to 57 til 2027 (though, technically, no official legislation has passed for this increase).

I just re-checked as my wife is 49, the state pension age comes out at 67 using the HMRC calculator (and assuming the 67 minus 10 years = 57)
Unless I am doing something really stupid (like forget her age/DoB)
https://www.gov.uk/state-pension-age/y/age/1971-03-06/female

The only stupid thing is not remembering that the minimum pension age remains at 55 until 2027. State pension age is now 65 10/12 (ish) so the 10 year rule has stopped applying (until 2027).

Regarding the above, does this mean there needs to be a gap of 10 years between drawing company pension and state pension? I thought you could take from company pensions from 55? 

Not that this will make any difference to me now, with my pie in the sky plans ☹️

ffacoffipawb

Thick_n_Thin said:

ffacoffipawb said:

Deleted_User said:

ffacoffipawb said:

Deleted_User said:

I thought 49 year olds have a retirement age of 57 now.

A 49 year old would be 55 in 2026. The minimum age doesnt go up to 57 til 2027 (though, technically, no official legislation has passed for this increase).

I just re-checked as my wife is 49, the state pension age comes out at 67 using the HMRC calculator (and assuming the 67 minus 10 years = 57)
Unless I am doing something really stupid (like forget her age/DoB)
https://www.gov.uk/state-pension-age/y/age/1971-03-06/female

The only stupid thing is not remembering that the minimum pension age remains at 55 until 2027. State pension age is now 65 10/12 (ish) so the 10 year rule has stopped applying (until 2027).

Regarding the above, does this mean there needs to be a gap of 10 years between drawing company pension and state pension? I thought you could take from company pensions from 55? 

Not that this will make any difference to me now, with my pie in the sky plans ☹️

You can currently draw from 55, rising to 57 in 2027 (April 6th I think).

Some schemes may have a lower protected age, eg 50, but it is quite rare. Depends on scheme rules.

ratechaser

Durban said:

Thick_n_Thin said:

Durban said:

How about something like this?

By trying to pay off your mortgage early, and then investing, you are wasting valuable growth, compounding and tax relief.

Your mortgage , I can see , is around £60,000 ish.  You have an inheritance of £120,000 coming.

What about getting the lowest interest rate offset mortgage you can get and extend the term to the maximum you are allowed, even up to age 75 if you could. You can always reduce the term later.

 Put £60,000 of the inheritance in the offset account. You'll be paying peanuts to your mortgage as it is offset and the term is long and it will be basically interest free.

You have the security of knowing that the mortgage is always covered by the £60,000 off set 

Then , plough what you were paying on the mortgage plus your overpayments  into your pensions. Get the 20% tax relief and hopefully some growth.

Although you may not be able to retire at 55 , you could possibly go part time.

I will research this option further when my mortgage rate ends next year, although the thought of not paying my mortgage off until I was 75 makes me uneasy, don’t know if my OH would be onboard with this! I think I will do some research though, thank you! 

No , I understand.  When I suggested a similar thing to my OH he was horrified and didn't want to do it.
There is a lot to be said psychologically for having the mortgage paid off even though it probably isn't the best thing financially to do.

This... looking back 15 years, Mrs RC and I would have been (likely) a good 6 figures better off if we had not paid off the mortgage (which by the way was pegged at base rate +0.5% for term), but instead maxed out our pensions.

But the psychology of 'owning every brick in our home' won out, especially in the wake of the 2008 financial crisis. And it's hard to put a price on the feeling of security that can bring. So I have no regrets 

Plus it's a flexible offset mortgage, so we have a very cheap lending facility available for the next 10 years, should there be any major emergencies...

wjr4

I’m glad you’ve come to this forum for a reality check. It’s a lot better that you realise this now rather than in 10 years! 

hugheskevi

ffacoffipawb said:

You can currently draw from 55, rising to 57 in 2027 (April 6th I think).

Latest position as I understand it is below.

Under the Coalition govt back in July 2014, HM Treasury announced in a response to a consultation that minimum pension age would be linked to state pension age minus 10 years. It was stated that the change would be legislated for at a later date, which still has not happened.

The consultation response stated that the change would apply from when the State Pension age reached 67 in 2028 (which will be 6th March 2028). However, the lack of legislation means many details are left unanswered. The key outstanding questions are:

• Does the current government (which being a Conservative majority is a completely different government to that which made the decision to increase minimum pension age) intend to enact the policy change announced in the Coalition consultation response? As well as being a completely different government there are now many different priorities.

• If the change is legislated for, will the shorter time to the change taking effect mean the implementation date is put back to give people adequate notice to change their plans?

• Will the increase be a cliff-edge in 2028, or will the increase be tapered in, for example, starting in 2024, aligning with state pension age minus 10 at age 56 in 2026 and then tracking the state pension age increase to 67 between 2026-2028. In the original consultation in March 2014 it was stated "The transition to this age [57] will need to begin before 2028 and the government will provide further detail on this in its summary of responses to this consultation" However, there was no mention of this in the consultation response.

• Will protection be given (as it was for some pension scheme members when minimum pension age last increased in 2010) for those with existing pension arrangements at a particular date (eg July 2014, after which anyone starting a pension could reasonably expect a minimum pension age of 57+)?
• If protection is offered, would it cover everyone with a pension at the relevant date or just those with particular characteristics, for example, it could include only those who had an ‘unqualified’ right to take the pension benefits before the age of 57 – in other words no one else needs to agree to the individual’s request, eg, Trustees or employer, as was the case when the age last changed in 2010. Would contract-based schemes be included in any protection, or would it only be trust-based schemes?

crv1963

Thick_n_Thin said:

Durban said:

How about something like this?

By trying to pay off your mortgage early, and then investing, you are wasting valuable growth, compounding and tax relief.

Your mortgage , I can see , is around £60,000 ish.  You have an inheritance of £120,000 coming.

What about getting the lowest interest rate offset mortgage you can get and extend the term to the maximum you are allowed, even up to age 75 if you could. You can always reduce the term later.

 Put £60,000 of the inheritance in the offset account. You'll be paying peanuts to your mortgage as it is offset and the term is long and it will be basically interest free.

You have the security of knowing that the mortgage is always covered by the £60,000 off set 

Then , plough what you were paying on the mortgage plus your overpayments  into your pensions. Get the 20% tax relief and hopefully some growth.

Although you may not be able to retire at 55 , you could possibly go part time.

I will research this option further when my mortgage rate ends next year, although the thought of not paying my mortgage off until I was 75 makes me uneasy, don’t know if my OH would be onboard with this! I think I will do some research though, thank you! 

Therein lies the strength and weakness of the planning for retirement- the OH having views and opinions! It really is a joint effort, and trying to reduce tax paid in retirement as a couple along with ensuring the survivor after first death has enough to live on can complicate matters more.

In our case we used part of my TFLS to pay off the remaining mortgage, I know financially it was not the best move but as Durban said further up the thread the psychological effect of security is also valuable. I took the view we're in this together and a Happy Wife equals a Happy Life!

I think set your joint goal, find out what each sees as the priority, and work backwards- we identified what we had saved/ could expect on retirement, then what level of income we want- a basic level, a comfortable level and a luxury level. Then worked through what pot pays what and when and planned to fill the gaps. Breaking it down to particular "pots" helped us in the planning stage- we are still working and saving to reach our goals. We are saving what we were paying for the mortgage into a pot that will be for major purchases when we retire- from end June as we have only just paid it off.

I found once I got into considering everything and identified different income sources/ pots that we could plan. The whole thing turns Mrs CRV cold, so apart from a few lines in the sand- House paid off and Both retire together, I have free reign although to her annoyance I do tell her updates!

Good Luck.

Edit- like you I experienced a real eye-opener about what figures were needed, got over my surprise and asked lots of questions and had others critique my plans and made modifications, our goal is me retire before 60 (probably the month before!) and Mrs CRV at age 57.

Terron

Paying down the mortgage until what is left is 25% of your pension pot might be the way to go. Then you can relax knowing that you will be able to pay it off using the Tax Free Lump Sum.

Thick_n_Thin

I have made contact with my payroll department to start the process of increasing my contribution and also to find out the max employer contribution, with the way things are currently (me being on 20% pay reduction and OH on furlough) I will aim for another 1% increase. Depending on when (or if!! ) my salary is reinstated I will increase further. When my car lease ends I will have £400 extra a month to save into the pensions.
i know the general feedback has been to stop overpayments to the mortgage and it does sound like the right course to take however I can’t wait to be rid of the monthly payment as that in its self would be financial freedom. I think I will look into putting more into the pension along side my overpayment, I think I hadn’t really had my retirement lightbulb moment until recently and belive it or not I thought we would be ok!