Am I there yet?

elsewhereinscotland

Hi

Looking for some advice or comments. I am hoping to retire at 52 (I am now 50) when my DB pension will pay out £14k per year and a lump sum of £50k.  I will sell my main residence for around £275k and move into a property I own outright.  I also own another property outright which I rent out for £7,500 year. 

At the moment I have £125k in savings in the bank (from a recent property sale).

I don’t think I can put any of this into my DB pension as I have maxed out my AVCs.

Should I open a new SIPP and use up any unused annual allowance which could be about £20k per year and start drawdown when I am 55?   Or are there any other options I should be considering?

So, when I am 52 I should have cash pot of £425k, one house rental generating £7.5k per year owned outright (house value about £120k), a house to live in owned outright (value approx. £170k), and a pension generating £14k per year.  When I am 58, my wife will get a pension of £5k per year and of course state pensions when we reach 67.  We have a target of £35k per year for retirement and I wonder if this seems do-able with the figures quoted.

Many thanks for reading my ramblings and my thanks for all the sage advice that is given on this forum. 

Dazed_and_C0nfused

Have you checked (in detail) your State Pension forecasts to see if you will need to make voluntary contributions after stopping work?

Assuming you would like to get the standard £175.20

elsewhereinscotland

Yes I have checked and I will need to make extra contributions I think...my forecast is for £145 and my wifes is for £120 so quite a bit to make up!

AlanP_2

I don’t think I can put any of this into my DB pension as I have maxed out my AVCs.

How do you mean, maxed out? What limit on your contributions has your employer put in place?

elsewhereinscotland

Not sure what % it is but the maximum I can put in my AVC is £550 a month.

Albermarle

elsewhereinscotland said:

Yes I have checked and I will need to make extra contributions I think...my forecast is for £145 and my wifes is for £120 so quite a bit to make up!

This should be your priority before  making SIPP contributions  etc as the return on payment  for buying extra years is very high .

AlanP_2

elsewhereinscotland said:

Not sure what % it is but the maximum I can put in my AVC is £550 a month.

OK, I haven't come across an AVC that restricts what you can contribute before so was a bit suprised.

The Local Gov one used to pre-2014 but I think that restriction has been dropped now even for those opened prior to that.

The other restriction we see mentioned on here is related to Salary Sacrifice and keeping salary above National Minimum Wage.

elsewhereinscotland

Albermarle said:

elsewhereinscotland said:

Yes I have checked and I will need to make extra contributions I think...my forecast is for £145 and my wifes is for £120 so quite a bit to make up!

This should be your priority before  making SIPP contributions  etc as the return on payment  for buying extra years is very high .

Many thanks will do this.

elsewhereinscotland

AlanP_2 said:

elsewhereinscotland said:

Not sure what % it is but the maximum I can put in my AVC is £550 a month.

OK, I haven't come across an AVC that restricts what you can contribute before so was a bit suprised.

The Local Gov one used to pre-2014 but I think that restriction has been dropped now even for those opened prior to that.

The other restriction we see mentioned on here is related to Salary Sacrifice and keeping salary above National Minimum Wage.

I think i can contribute more but it goes into a second avc pot which is seperate to main pension and does not have many fund choices.

Secret2ndAccount

Yes, max out your pension contributions (up to your 40k annual limit, or whatever you earn, whichever is lower) for the couple of years until you retire. You will make 6% on any money that you cycle through the pension this way.

You are probably going form cash to an investment by doing this, so it's possible you could hit a stock market crash and end up worse off in the short term. However, you have too much cash, and should be investing more in the markets. You have 30 years of retirement to look forward to so you need to stay ahead of inflation.

Retireinten

Is the £35k a household income target - I've assumed it is.

What are your wife's plans? Is she retiring also? It sounds like the bulk of your household retirement income may be in your name so not necessarily very tax efficient. You will be a tax payer with your DB alone.  Is the rental property in your name or your wife's name? You want to try to make use of both your tax allowances if possible so worth bearing this in mind when deciding where and who to invest any extra money for. 

In very simple terms from 52 to 57 you will have income of £21.5k from your DB and rental income so you will need to use £81k of your lump sum to get to £35k. From 58 to 67 you will need £5k less per annum due to wife's DB so that's a further £85k from your pot.  Just one full SPA gets you to your £35k target so looks to me like you have are fine with your figures, with income and lumpsum to spare.  You obviously need to tweak all these figures to take into account tax if your figure is £35k net


One thing I couldn't work out was where your £425k came from - I'm probably missing the obvious but £50k + £125k + £275k = £450k. This may be selling fees/small mortgage but thought I'd mention it.