Am I on the right lines regarding my pension planning

3card

I am looking for advice as to whether I am on the correct path with regards to my retirement planning.

I am 61 next month and last year I was made redundant and I have been looking for another position but obviously my age is going against me

I have a private pension pot of approx £310K which is invested with Standard Life with a moderate risk which I am happy with the advice and returns I am getting with this pension

This pension is made up of an older pension of approx £250K and I transferred my last company pension of approx £60K to the same scheme but these are identified separately for reasons as below.

By keeping my 'pots' separately I still have the 25% tax free option from my £60K pot for future.

My £1000 per month will be coming out of the 'pot' that is already in drawdown

About 4 years ago I started to plan for my target retirement of 65 by taking 25% tax free of my personal pension to purchase a rental property so my pension was put into drawdown even though I was drawing any funds from it

Around this time my wife left her employment and used her 25% tax free payment from her pension to purchase another property for rental purposes.

The properties are all in my wifes name for tax purposes because she didnt plan of working again

Here is my plan with figures.

Our rental income is approx £1445 per month and also my wife receives £377 per month in way of a small pension from her workplace and I am planning to take £1000 per month from my pension from next month solely because it will top up the income to something more comfortable and it keeps me under the tax threshold.

This would give us a monthly income of £2800 less any tax my wife would need to pay against her self assessment when filed

I have checked my state retirement forecast which tells me it is £175 per week and I cant increase that and this is due in April 2026. Am I correct this increases each year by a minimum of £2.5% each hear? If so this will mean my state pension with me just over £200 per week in 2026.

My wife state pension forecast is approx £135 but I havent checked this for maybe 12 months

We do have a very small mortgage of £19K which is an offset mortgage and is 100% offset and I aim to leave this as it is so I have the automatic facility for borrowing money against that for any emergencies but I really cant see this happening as we have approx £40-50K savings for this reason

My question is, can anyone see anything obvious I have missed as to why this plan shouldn't work? Anyone got any tips I need to look more closely at?

TIA for any feedback

AlanP_2

When you say "redundant last year" do you mean after April 2020? If it was then you could contribute your full taxable salary in to your pension and get the tax uplift - needs to be done before end of tax year.

You and your wife can contribute £3600 gross in to pensions when you have no earned income (pensions & BTL income do not count). £2880 net so a 6.25% return if you pay 20% tax on way out or 25% if you don't. Can do this until Age 75. Could do it for your wife this tax year?

Check her SP as she may be able to pay for missing years and get closer to the £175 forecast you have. Approx £780 a year cost for apprtox £5 per week pension increase so recoups cost in just under 4 years.

3card

AlanP_2 said:

When you say "redundant last year" do you mean after April 2020? If it was then you could contribute your full taxable salary in to your pension and get the tax uplift - needs to be done before end of tax year.

You and your wife can contribute £3600 gross in to pensions when you have no earned income (pensions & BTL income do not count). £2880 net so a 6.25% return if you pay 20% tax on way out or 25% if you don't. Can do this until Age 75. Could do it for your wife this tax year?

Check her SP as she may be able to pay for missing years and get closer to the £175 forecast you have. Approx £780 a year cost for apprtox £5 per week pension increase so recoups cost in just under 4 years.

Thanks Alan

Yes i was made redundant in June 2020 so that is an option.
I forgot to say that i am also eligible for a tax rebate of approx £3k from next month so that's another little extra

Linton

You figures look OK. 

Annual SP  increases have been the maximum of inflation, increase in average wage and 2.5% (known as the triple lock) for more than 10 years.  However it is difficult to see how this can be sustained into the distant future so I suggest you plan on it just matching inflation. 

Have you enough slack to cover periods when the BTLs dont generate income?
You should check (or your wife should check) whether there is an opportunity for her paying voluntary NI to cover any gap when she reaches State Pension Age.
Does your planned income match your  income when working minus expenses that dont apply in retirement?

stephenadarglas

You say your age is against you.  Isn't that illegal? 

Thrugelmir

Is that rental income after all costs, provision for contingencies , void periods etc etc?  Gross income can look good on paper , financial reality over an extended period of time maybe somewhat different. Once the numbers are crunched fully. 

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Linton said:

You figures look OK. 

Annual SP  increases have been the maximum of inflation, increase in average wage and 2.5% (known as the triple lock) for more than 10 years.  However it is difficult to see how this can be sustained into the distant future so I suggest you plan on it just matching inflation. 

Have you enough slack to cover periods when the BTLs dont generate income?
You should check (or your wife should check) whether there is an opportunity for her paying voluntary NI to cover any gap when she reaches State Pension Age.
Does your planned income match your  income when working minus expenses that dont apply in retirement?

Thanks
I see any increases in the SP as a bonus if im honest
We have been lucky in that we have had minimum voids regarding the rentals but i appreciate its still quite early days being as its only been 4 years but my figures are based on the current gross figure coming in at present
I did speak with my wife accountant last week with regards to paying voluntary class 2 NI as self employed but its was pointed out that the HMRC wouldn't accept the BTL's as a self employed business so she would have to pay class 3 and as the accountant pointed out it needs to be looked at closely as it may not add anything to her state pension
As to whether the figures meet my income when working then no they dont but on paper it looks comfortable for us. We are not expecting to have 4 or 5 holidays abroad every year and change our cars on a regular basis. My income from my last job was close to £40K but most of the jobs i have been applying for have been part time because i had decided i didnt want to work full time anymore

3card

Thrugelmir said:

Is that rental income after all costs, provision for contingencies , void periods etc etc?  Gross income can look good on paper , financial reality over an extended period of time maybe somewhat different. Once the numbers are crunched fully. 

Thanks
As i have just typed above the figures dont include for any voids etc and in the last 4 years we have been lucky in that respects (although i appreciate historical performance is not guaranteed) 

3card

stephenadarglas said:

You say your age is against you.  Isn't that illegal? 

Yes it is but age can easily worked out on a CV and who can prove that you havent been selected because of your age? 

Linton

3card said:

Linton said:

You figures look OK. 

Annual SP  increases have been the maximum of inflation, increase in average wage and 2.5% (known as the triple lock) for more than 10 years.  However it is difficult to see how this can be sustained into the distant future so I suggest you plan on it just matching inflation. 

Have you enough slack to cover periods when the BTLs dont generate income?
You should check (or your wife should check) whether there is an opportunity for her paying voluntary NI to cover any gap when she reaches State Pension Age.
Does your planned income match your  income when working minus expenses that dont apply in retirement?

Thanks
I see any increases in the SP as a bonus if im honest
We have been lucky in that we have had minimum voids regarding the rentals but i appreciate its still quite early days being as its only been 4 years but my figures are based on the current gross figure coming in at present
I did speak with my wife accountant last week with regards to paying voluntary class 2 NI as self employed but its was pointed out that the HMRC wouldn't accept the BTL's as a self employed business so she would have to pay class 3 and as the accountant pointed out it needs to be looked at closely as it may not add anything to her state pension
As to whether the figures meet my income when working then no they dont but on paper it looks comfortable for us. We are not expecting to have 4 or 5 holidays abroad every year and change our cars on a regular basis. My income from my last job was close to £40K but most of the jobs i have been applying for have been part time because i had decided i didnt want to work full time anymore

Even paying Class 3 Voluntary NI is an unbelievably good deal.  It will cost about £800 for a year but in return the extra State Pension she would earn would pay off that cost in 3-4 years.  So dont rule it out.

Yes it can be complicated to work out whether buying pre-2016 NI years will do any good.  But there may be a worthwhile opportunity between retiring and reaching SP age.  Your wife can find out the exact situation from the Future Pension Centre:  https://www.gov.uk/future-pension-centre

xylophone

My wife state pension forecast is approx £135 but I havent checked this for maybe 12 months

What exactly does her state pension forecast say?

https://www.gov.uk/check-state-pension