Early retirement planning & IFA/FA

Langtang

Is your Private Pension going to pay £6400 per year for the rest of your life and will this figure rise with inflation? How is it going to do this? (This is unusual for a private pension.) 

I shouldn’t think so, although I don’t know for sure. The pot is only c£159k, so probably not. 

Is your OH's Private Pension going to pay £864 per year for the rest of their life and will this figure rise with inflation?

Again, I shouldn’t think so as it started as a low cost pension in ‘87, and has not been added to since the 90’s when she joined the NHS.

Is the Workplace pension transfer value £29K?

Is the Workplace pension really only paying £275 per year? 

Yes, and yes  I’ve only had it since 2015

Which NHS Pension section is your OH in? (1995/2008/2015)

Is the NHS Pension figure reduced for early retirement if they retire at 60, or is this figure the maximum she can draw?

1995, but she skipped the 2008 offer and goes onto 2015 scheme this month. I don’t think it is reduced for 60, I think that is the figure my wife put in  

Langtang

Just to add a little to the cryptic note regarding issues with the Wills and therefore not knowing the final outcome of the estate total, I posted this in another thread a while back:

” FIL passed away recently. 
MIL passed away later the same week. 
Both Wills had 30 day survival clauses in them (Scotland). 
MIL was in care home last 2 years.
FIL transferred most assets (except house, bonds & 2 years care home fees) from MIL to himself (POA) when she went in to care home, leaving enough to pay fees.
Investment bonds, with both lives insured, payable upon death of 2nd name.

Question: As MIL passed away last (albeit by a short time), will the bond payout(s) form part of her estate, or will they be within the FIL's estate?”

2 bonds where FIL was the owner/holder, 2 where MIL was and one jointly held. We are not entirely sure where the money from these bonds will end up, hence the apprehension as to the final figure. 

Langtang

pjcox2005 said:

I think you need to work out how much you spend (or want to spend) to live your life.
Exactly. We do not know how much we want to spend. We know how much we do spend just now. It’ll need a long, hard think. 

Personally looks like you’ll have getting close to £1 million of assets (think IHT bill will be lower than you expect) excluding your home with no plans to leave it behind so that would be £25k at year for 40 yrs (very simplistic). Add on £14k a year from 60, which ups to £32k a year from state pension age.

I have posted a note on why the issue with the final figure. We have done the basic sums, such as dividing the total by 360, taking what we earn now over a period! Interesting stuff.   

I’m not a financial advisor so learn from here and have a chat to an independent advisor to work out the best way to maintain the pot, secure it (eg in case a bank collapses) and grow but it looks like you just need to be sensible.

we are pretty sensible, not lavish. I’m a geek, so like gadgets. My wife likes shoes (who’s doesn’t!)

I think your biggest issue as you seem frugal now with no lavish expenditure may be how to spend it,

A beautiful puzzle to have...

...

Langtang

kangoora said:

With these sorts of assets and you 'not having a clue' about investments I think you would almost certainly benefit from an IFA (you definitely want an INDEPENDENT Financial Advisor) - certainly check back here before signing up to an IFA firm for opinions on proposed charges.
 

Just a couple of things on the will thing, please make sure the executors are getting 'paid' for their efforts on your will (if not a solicitor) and I'd advise you not to leave monies to a charity as a residual beneficiary (leave them a specific amount). I've seen a few posts on the funeral/probate forums about charities being absolute a****s when it comes to getting their 'dues' from a will if they are residual beneficiaries.  

We are most definitely going to seek advice from an IFA, but the suggestions here will be a great springboard into that meeting. 

My wife and our solicitor are the executors. Noted on the charities thing (it was a plan to leave a small sum)

Langtang

tacpot12 said:

With the amount you will have available to invest, you don't need to take a lot of risk to get the return you need to have an happy retirement, but you need to take some risk to ensure that the investments match inflation. Bear in mind that if you are investing in a large mutual fund offered by a mainstream financial service provider in the UK, even if they say the fund is "high risk", it is really quite moderately risky compared to investing in Russia, Bitcoin, Art or Whiskey.  

Interesting. Thank you for that. Whenever I hear risk, particularly high risk, I always think the worst. 

Langtang

Thrugelmir said:

Langtang said:

I read somewhere on a recent thread about someone with a £750k pension pot being told that it may only last him 15 years, so maybe we cannot afford to retire early! 

Hence the point about jam today or jam tomorrow. To provide a degree of perspective. Assuming no inflation , no growth and the sum being taxable. That sum would allow a daily spend of £115 per day over 15 years. Hardly a sum to provide a luxury lifestyle. 

Thank for the perspective. I guess luxury comes in all shapes and sizes. Luxury for me would be a heated steering wheel, but I understand your point, and appreciate your time and knowledge (I’ve read and absorbed lots of your replies on other threads)

Langtang

semiplural said:

Langtang said:

They say you should aim for two thirds of your total annual income as a pension, so can we afford to retire and take our pensions early?

I would not put much store by generalisations like 2/3rd of your annual income, it really is up to you as an individual, so I would echo others who suggest your first step should be to work out what income you want in retirement.

I was a bit confused at your income being 24-32k - that is quite a large variation!

Very roughly I guess your combined take home pay (after tax, NI & pension contributions) is somewhere between about 35k & 42k?

Just to get a sighting shot of how this would look, if the pluses and minuses balance out and your target net income is 42k:

...although you might want to leave a buffer to ensure you get quality later life care if you need it.

 This is just some random guy on the internet reviewing some numbers though and you should trust an IFA who will look at your personal circumstances far more than me!

One thing though I would really suggest that you double check - are you sure that if you retire early you will both qualify for the full state pension?

It is relatively easy to check here : https://www.gov.uk/check-state-pension and it is relatively inexpensive to buy extra years if you have a shortfall.

Thank you for your reply, it’s appreciated.

 My wages fluctuate because of overtime. Sometimes I work or, sometimes I don’t or it isn’t available. 

We tend to work off £1400 each per month to see us through. Anything above that is seen as money to be shared and used for “whatever” by us, collectively or individually. 

Care home fees are something that we have thought about, particularly since my wife's mother spent her last 20 months in one. 

We have both checked the link you posted. Assuming the information there is correct, then we do indeed qualify for the full pension. 

You may be a random guy, but you help, suggestions and input are very much appreciated 

Langtang

snookered1 said:

My initial thought on this, Is it might be an idea for you both consider maxing your pension's through a SIPP until retirement  in circa 3 years, initially from savings, as you appear to have the space to add cash here and take out tax free,  even if you do absolutely nothing with it and leave it in cash in the SIPP, if managed right on the way out should see it with a 25% increase from what it is now, the other aspects I think are a little more complex and need more thought.

Thanks for your comments. 

When you say maxing your pensions, what do you mean by maxing?

 I understand what a SIPP is, and can see the advantage of filling it with cash and then taking 25% each year tax free. It can’t be that simple though, can it?

Albermarle

 I understand what a SIPP is, and can see the advantage of filling it with cash and then taking 25% each year tax free. It can’t be that simple though, can it?

In simple terms this is how pensions work .

Earn £100, pay 20 % tax and you get £80 in your take home pay . Add £80 to pension and provider adds £20 tax relief.

If you take the £100 out of the pension - 25% is tax free and 75% taxable at 20% = £85 . So overall you gain £5 or 6.25%

If you are a 40% taxpayer now then the benefit is much more and/or if you do not pay tax when you take it .

Regarding expenditure in retirement this might be interesting.https://www.lboro.ac.uk/media-centre/press-releases/2019/october/retirement-living-standards/

Langtang

Albermarle said:

 I understand what a SIPP is, and can see the advantage of filling it with cash and then taking 25% each year tax free. It can’t be that simple though, can it?

In simple terms this is how pensions work .

Earn £100, pay 20 % tax and you get £80 in your take home pay . Add £80 to pension and provider adds £20 tax relief.

If you take the £100 out of the pension - 25% is tax free and 75% taxable at 20% = £85 . So overall you gain £5 or 6.25%

Regarding expenditure in retirement this might be interesting 

Thanks very much for replying. The link you provided is great, I feel I have a task over the next week figuring out how much we spend and on what (“those shoes? I’ve had them for ages...”)

Let me get this right, If I took my personal pensions every month, I would be taxed 20% on 75% of it, but if I cashed in both pensions and put them in a SIPP along with some cash, I could remove a similar amount each month tax free?

Would the £20 relief apply if I transferred in both amounts from my personal pensions? That seems too good to be true. 

EDIT. I’ve just read an article on the basics of SIPPs, this explains both my questions above.