Starting to think about retirement planning 13 July at 7:52AM in Pensions, Annuities & Retirement Planning 28 replies 1.2K views

cloud_dog

longway2go said:

cloud_dog said:

longway2go said:

Any thoughts would be greatly appreciated as would be information on any helpful calculators. 
Thank you

You should definitely open LIASs for both of you before 40, so as to allow the option of using them (deposit £1)

At a simplistic financial level, additional monies deposited in to a LISA beats additional money deposited in to a pension for a non tax payer or basic rate tax payer who does not benefit from being paid via Salary Sacrifice.

As you have a buy to let I am going to ignore the benefit a pension offers over a LISA in relation to means tested benefits.

Thank you that's really helpful and good to know I am on the right thought path in relation to LISA.
I have a salary sacrafice scheme but my husband does not, is there a calculator I can use to help work out the LISA or pension contribution you mention above.
Also, excuse my ignorance can you give more information on the means tested benefits please?
Many Thanks 

If you do really benefit from being paid under a Salary Sacrifice scheme (some people confuse it with normal pension tax relief), then you will gain an additional NI savings of 12% on any pension payment.  If your employer is a nice one they may also offer you some of their NI savings.  So, for you, you should definitely use your employers pension to make additional payments and increase your contribution.

Example: usual payment of £100 in a pension costs you £80.  SS payment of £100 in a pension costs you £68 (20% tax relief and 12% NI).

Regarding your OH, then additional payments in to a LISA appears to be the better option (please note LISA penalty free withdrawal age of 60).

Regarding means tested benefits, if you should ever need to claim them, money in a LISA would be included in any calculation, whereas money in a pension is excluded from anyrany calculations before retirement age (I believe it is linked to state retirement age).

Thrugelmir

Your emergency fund seems low given you've both your home and a rental property to maintain. 

LHW99

crv1963 said:

longway2go said:

crv1963 said:

longway2go said:

I have been in the Mortgage Free Wannabe board for about a year and have decided that we need to take a more holistic approach in relation to finances. I am just at the start of this and therefore would appreciate any thoughts or guidance on best calculators etc.  
As I said I have been on the MFW board for about a year and would love to clear that ASAP but have recently realised that this should not be at the expense of everything else. 
Any thoughts would be greatly appreciated as would be information on any helpful calculators. 
Thank you

You're right to look at it in the whole. My view is best chip away at it all gradually than focus on one at the expense of another- it is a marathon not a sprint. I'd suggest-

1) Do open the LISA- these may or may not evolve over time, but a little put by doesn't harm.
2) Definitely get accurate figures for what you have - then you know where you are starting from.
3) Decide- what retirement income you want, and when you want it- then you have an idea of the amount you need to save and over what time frame. Remember not every "pot" of money needs to last a lifetime, some can be ran down to zero as an example Mrs CRV SIPP is planned to finance her/us age 57-67, when her SP takes over/ comes on stream.
4) First look to employer pensions- try to get the maximum free money so look at matching contributions, if you already get as much as they will offer (as not all offer increases above the legal minimum) then look to other free money- either LISA or another pension pot.
5) Discuss with Mr- find out his risk level and yours and plan accordingly.

It may be one or the other of you sorts most things out- Mrs CRV finds the whole pensions/ retirement planning turns her cold and has left me with sorting the detail out all she wants to know is how much and when do I get it at what cost now? I on the other hand have no idea about the household budget- I simply hand over what she says is my equal contribution each payday. We jointly save into our EF. Not for everyone but our system works for us!

Good luck.

Thank you very much for your reply and good luck wishes. Your suggestions are really helpful and will definitely be of use. My OH is not interested in planning tbh, so looks like it will come down to me. 

If that is the case when planning look to try to balance the pots so you have similar incomes in retirement, hopefully depending on your joint income needs reducing or avoiding paying income tax, because we left it late for our planning we will have a big difference in income, I will always pay tax- Mrs CRV from retirement to my demise will pay no tax.

When you look at the "What's Your Number" thread as suggested above take a realistic view of your choices- we (me) worked out three amounts- basic must have to live, comfortable- would like to have sum and luxury- no worries at all sum. Aimed for our luxury sum and have exceeded our basic sum and will probably land in the upper end of the comfortable sum when we hang up or boots and retire!

Also do remember to nominate each other with your various pensions- don't take it as read spouse will automatically get it, they should but it may be another hassle during a difficult time if you need to correspond about it with the pension company doing their due diligence. 

And I would also suggest a quick calculation to work out what each of you would have left if one of you passes before the other (quite likely). DC pension pots can pass between spouses, DB ones usually have provision for a spouse, but the level can vary. As you are still fairly young, that could include checking whether you have sufficient term or other life insurances on both lives.

crv1963

Just another thought- you may well best benefit from reducing the mortgage over-payments to increase pensions savings. Then use all or part of the TFLS to clear the mortgage. Slightly different for us as my taking my DB Pension doesn't prevent me still saving into a DC pension so we used part of my TFLS to finish the mortgage, it is all about doing what feels right for you. We did always overpay the mortgage simply rounded up to the nearest whole figure.

Also don't forget to take the SP into account in your plans- it will be a significant proportion of your income, depending on your number.

A couple of links I've found- Google is your friend here! --
https://www.standardlife.co.uk/c1/pensions-and-retirement/saving-for-retirement/pension-calculator.page
https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/overview-of-options-for-cashing-in-your-pension/pension-calculator-how-much-money-youll-have-a1jxm4d809k8

RetSol

longway2go said:

justme111 said:

So your combined take home pay is about 37 k ?
How much of it you spending or saving ? Which of those expenses will be still there when you stop working ? So you will arrive at your "number"( see the thread with this name on here) and check whether you are on track for it..

Thank you for your reply. Our combined income is around 44k plus rental income(after mortgage payment) of 4200.  We currently have spend about 2700 pm (which includes a mortgage OP of 115 and the mortgage for the BTL.  In retirement this would be reduced by 930 pm. In retirement we plan to still have the BTL income.
I will take a look at the thread you have suggested. 
Thank you :-) 

Apologies if I have missed something in this thread but it is not clear to me what your housing situation is.  You have a BTL property which is mortgaged.  What about the property you live in? 

cfw1994

RetSol said:

longway2go said:

justme111 said:

So your combined take home pay is about 37 k ?
How much of it you spending or saving ? Which of those expenses will be still there when you stop working ? So you will arrive at your "number"( see the thread with this name on here) and check whether you are on track for it..

Thank you for your reply. Our combined income is around 44k plus rental income(after mortgage payment) of 4200.  We currently have spend about 2700 pm (which includes a mortgage OP of 115 and the mortgage for the BTL.  In retirement this would be reduced by 930 pm. In retirement we plan to still have the BTL income.
I will take a look at the thread you have suggested. 
Thank you :-) 

Apologies if I have missed something in this thread but it is not clear to me what your housing situation is.  You have a BTL property which is mortgaged.  What about the property you live in? 

I was wondering this.   If you already own a property (either of you), then the LISA would only be something you could pay in until you are 50, and then only *access* when you are 60 - for long term saving with a little more flexibility, I would have thought  a pension would generally be a better choice.
If you are using the LISA to pay for your first home, then crack on!
Pensions are typically the best way to save long-term - yes, a LISA gets the government money added (& as said above, be sure to NOT chose a cash LISA if you want long term growth), but you have already paid tax on that, whereas a pension has tax benefits on the way in.

Retireinten

I rarely post and I've had a user name change recently (could not log into the new site with my old details) but I'm a committed lurker and have been for years. My main financial focus is retirement planning nowadays, but I originally joined as a mortgage free wannabe... though in time I came to realise that it wasn't just about mortgage freedom for me but financial freedom. 

I have a partner that is perfectly willing to cooperate with my retirement plans as long as I never utter the words 'in today's money' in his presence. He wants to retire at 55 without doing any of the thinking to get himself there... but this works in my favour as I'm in control! 

When I joined this forum the best first step I took (outside of collating all our existing pension savings information) was to work out what I wanted my retirement income to be and the age I wanted to retire.  The number thread was fantastic help, it's already been recommended but I thought I'd include the link:

https://forums.moneysavingexpert.com/discussion/2146737/pensions-planning-the-number/

Once I'd decided how much I needed and ideally when I wanted to retire, I could work out the gaps in our pension savings. I haven't gone down the basics, comfortable and luxury routes - but I would say I'm aiming for upper comfortable for us as a couple. 

I started seriously thinking about retirement planning at the age of 40 (5 years ago) and at that point I didn't really know what we had saved,  what retirement income I wanted and whether it was even remotely feasible to retire at 55.  Now I have a basic spreadsheet of our various pension income streams from age 55 - 80. I know which of those income streams are 'in the bag' so already guaranteed and I don't need to pay in anything else, which ones are on track and which income streams are my savings gaps. 

I would second doing this as tax efficiently as possible also. My husband will probably always fall just under or bang on the tax allowance threshold (designed this way) whereas I will definitely pay tax from the age of 60.  You have 2 x personal allowances and its important you make use of them. 

enthusiasticsaver

longway2go said:

justme111 said:

So your combined take home pay is about 37 k ?
How much of it you spending or saving ? Which of those expenses will be still there when you stop working ? So you will arrive at your "number"( see the thread with this name on here) and check whether you are on track for it..

Thank you for your reply. Our combined income is around 44k plus rental income(after mortgage payment) of 4200.  We currently have spend about 2700 pm (which includes a mortgage OP of 115 and the mortgage for the BTL.  In retirement this would be reduced by 930 pm. In retirement we plan to still have the BTL income.
I will take a look at the thread you have suggested. 
Thank you :-) 

If you take your current requirements less the £930 reduction and the BTL income then it looks like you will need around £1500 a month income or £18000 a year.  You should make sure you update this number regularly as things change or you may decide you will need more than you think.  You are on average salaries now though and seem to be doing ok so it does not look like you are massive over spenders.

Opening a LISA for you both is a good idea but obviously you only have just over 10 years to pay into it and cannot access it until 60.  If you intend to retire early you may want to consider stocks and shares isas too. Definitely make sure you are maximising your employers pension contributions.  I would also prioritise that over your mortgage overpayments given mortgage rates are low and you are almost in your 40s and do not have large pensions.  I would agree that keeping the pensions balanced is a good idea so you both get roughly the same.  We focused on my husbands pension given he was a higher earner as I was part time for much of my working life and I wish now we had also focused on mine more. Have a good look at the pension terms and where it is invested so you have more  knowledge of where and how much you are investing. 

longway2go

Albermarle said:

Your pension provision is rather low , considering you are both approaching 40 and one of you ( maybe both ) are only making minimum contributions ( + employer contributions). On the other hand your salaries are not high, so we have to be realistic.
So increase pension contributions or open LISA's , they both will help for later in life. If you open a LISA, you should consider a Stocks and shares one as over a 20 year time scale it should produce significantly better returns than a Cash Lisa. All the info needed to make a decision is here.
https://www.moneysavingexpert.com/savings/lifetime-isas/
If the mortgage is on a low interest rate , and you both have reasonably secure jobs , then consider only making minimum payments to free up funds for LISA/pension.

Thank you :-) 

longway2go

cloud_dog said:

longway2go said:

cloud_dog said:

longway2go said:

Any thoughts would be greatly appreciated as would be information on any helpful calculators. 
Thank you

You should definitely open LIASs for both of you before 40, so as to allow the option of using them (deposit £1)

At a simplistic financial level, additional monies deposited in to a LISA beats additional money deposited in to a pension for a non tax payer or basic rate tax payer who does not benefit from being paid via Salary Sacrifice.

As you have a buy to let I am going to ignore the benefit a pension offers over a LISA in relation to means tested benefits.

Thank you that's really helpful and good to know I am on the right thought path in relation to LISA.
I have a salary sacrafice scheme but my husband does not, is there a calculator I can use to help work out the LISA or pension contribution you mention above.
Also, excuse my ignorance can you give more information on the means tested benefits please?
Many Thanks 

If you do really benefit from being paid under a Salary Sacrifice scheme (some people confuse it with normal pension tax relief), then you will gain an additional NI savings of 12% on any pension payment.  If your employer is a nice one they may also offer you some of their NI savings.  So, for you, you should definitely use your employers pension to make additional payments and increase your contribution.

Example: usual payment of £100 in a pension costs you £80.  SS payment of £100 in a pension costs you £68 (20% tax relief and 12% NI).

Regarding your OH, then additional payments in to a LISA appears to be the better option (please note LISA penalty free withdrawal age of 60).

Regarding means tested benefits, if you should ever need to claim them, money in a LISA would be included in any calculation, whereas money in a pension is excluded from anyrany calculations before retirement age (I believe it is linked to state retirement age).

Thank you for all your help