Pension Plan / Early Retirement

Rhanaroo

I am considering taking early retirement at 57

Currently I am in a well-paid job but I am putting most of my money into my pension and currently only take about 18000 P/A net pay. My wife is working and is looking to finish in three years at 62. We have dogs and a caravan so don’t really do mega expensive holidays and we have no dependents, debt or mortgage.

My wife takes home £25k and our annual outgoings are around 33k PA0. These may increase a bit as I would need to fund a car as I am currently a company car driver plus my wife’s car is getting old.

Financially these are my figures.

£570,000 DC pension invested in Standard Life Multimanager medium risk fund which has grown at 7% net of fees over the last 10 years

£3000 PA DB pension at 65

£40,000 in cash ISAs

£50,000 in a savings account

Full State pension at 67

My wife

£10,000 P DB pension at 65

£8500 PA State pension at 67

£10,000 Nest pension pot which we are going to start to pay more into using her inheritance fund so we get some tax benefits.

£160,000 - £200,00 Inheritance which is just going through probate now. We will get some advice on what to do with this.

House is probably worth £350,000 and we are debt and mortgage free.

My plan is-

1.       Take a wage out of my pension of £16600 PA (which I believe is the most I can get tax free) and top this up with savings if needed for the next 8 years until my DB kicks in (this would equate to a withdrawal rate of 3%ish)

2.       Take out 25% tax free cash in chunks to fund expensive items as and when required.

3.       My wife will work until she is 62 and then use her inheritance / nest pension to fund the three years until her DB starts at 65

Once our pensions all kick in we would have around £30,000 PA before tax with out using the DC pot

Does this seem a sensible plan?

Am I being way over cautious?

Should I be looking at taking more out of the DC pot early doors as I want to deplete it at some point but want to make sure we have enough for the future?

xylophone

£8500 PA State pension at 67

What exactly does your wife's state pension forecast say?

Rhanaroo

££8,575.55 but that was a couple of years ago

triplea35

Personally, I would not put large additional contributions into Nest. They have a 1.8% contribution charge.

Rhanaroo

Might be that we use the inheritance cash to live off but contribute to Nest from my wife's wage if that is the case

Croeso69

triplea35 said:

Personally, I would not put large additional contributions into Nest. They have a 1.8% contribution charge.

I don't think that charge applies to one off (large) contributions, only regular ones.

EDIT: The charge is definitely not applied to transfers in. So open a pension elsewhere and then transfer it into Nest. Bob's your uncle!

triplea35

Croeso69 said:

triplea35 said:

Personally, I would not put large additional contributions into Nest. They have a 1.8% contribution charge.

I don't think that charge applies to one off (large) contributions, only regular ones.

EDIT: The charge is definitely not applied to transfers in. So open a pension elsewhere and then transfer it into Nest. Bob's your uncle!

Yes my understanding is that the only time a contribution charge is not made is for transfers in. I have done that myself.

tacpot12

You can certainly afford to take early retirement. I would say that you wife can also retire now if she wants to. You can afford to have a joint income of at least £40K after tax, and probably a bit more. 

AlanP_2

I would look to maximise what you can get out of your DC pot "tax free" whilst your wife is working.

She can contribute up to what she earns in to a pension, so around £30k by the sounds of it.

Take off whatever she is currently paying in to her Nest scheme through employer (say 5%) leaves £28,500 gross that can be contributed to a pension in her name so £22,800 net contribution giving £5,700 tax relief.

Withdraw the £16,600 as you suggested to get Personal Allowance + TFLS and an additional £38,000 (TFLS = £9,500 with £28,500 taxable at 20% gives £5,700 tax paid).

Pay £22,800 of this in to your wife's pension and you end up tax neutral but at worst your wife will only pay a net 15% when she withdraws from Age 62-67 and probably less in reality if she can offset a full personal allowance against it for a few years.

You would have ~£26,100 (Your £16,660 + £9,500 TFLS)  to live on so may need to top up from your savings.

You will need to work out exact numbers based on Gross Salary, NEST contribution rate, Tax Codes etc. but hopefully you get the idea.

Using the employer's NEST may not be the best option for this, a separate SIPP would be easier to manage / monitor I suspect as monthly / annual contributions will vary a bit over 3 years. Also the added benefit that there is no chance of missing out on tax relief as can happen with an employer's Net Pay pension schemes if paying so much in that no PAYE is due.

Rhanaroo

Well that's it.

Notice in.

Finish end of September. 

ErinGoBrath

Rhanaroo said:

Well that's it.

Notice in.

Finish end of September. 

Well done.