FIREside Chats

savingholmes

I'm still looking at ways to increase my financial independence but having just taken on a big mortgage on my own at 51 - I feel I would be lucky to shave a few years off normal retirement age and still clear the mortgage. My pensions are mostly DB so fine from that perspective. If I can transfer one of them then it opens up significant possibilities for early retirement - if I can't - then I may need to downsize at some point or change my mortgage type or even extend it to allow for earlier retirement. I think I would prefer to be part time rather than fully retire any time soon - however in my experience a lot of part timers just do a F/T job in less hours and less pay so I am wary of that. The only other solution I can think of is to look at different ways to increase my income.

I reckon I will need £21K to live on when I retire if my mortgage is gone. My DB pensions together are worth circa £13-14K at retirement and I'm only 3.5 years away from accruing full state pension - so if the mortgage was gone I've already accrued enough to live on post retirement. It goes up by about £900 p.a. added to my pension each year... so my current break even point on taking the risk of pension reduction is around age 64 if I can clear my mortgage by then. Currently it's due to be age 73.5 that the mortgage is gone... (insert blue haired shrieking emoji). If I stayed in my current organisation right up to age 67 - I should be able to afford my current mortgage even in retirement I think - due to the lack of NI (or significantly reduced NI).

gallygirl

Interesting to read everyone's updates. It's a long slog when you're relying on S&S ISA's and pensions as the milestones are large and stretched out.

As well as a SIPP I used BTL's for my 'pension' and the plan was always to retire when the mortgages were paid off (or fully offset). With different rental payment dates plus payday and little dribs and drabs from eBay etc there was always something going on to update spreadsheets for and the amounts involved were more manageable (e.g. "if I can find another 32 pounds it will knock a month off mortgage x" or "I only need 51 pounds to drop below the next thousand pounds/increase % paid off etc). It was addictive and kept me interested. Maybe you could run little side challenges to raise 100/500/1000 to add to an ISA etc - "do I really want that coffee or get myself 3% closer to target?" etc?

Coming up for 7 years since I took the plunge at 53 and a half. Never regretted it, never been bored and the SIPP is worth the same now as it was 5 and a half years ago when I turned 55, even though I took 25% tax free. About to blow 10k on a holiday to Antarctica (hopefully, if it isn't cancelled). You won't lie on your deathbed and wish you'd worked for longer.

savingholmes

Thanks for your update @gallygirl irl - hope you get to Antarctica sounds immense.

CCW007

Have read the first five pages which give a fantastic view of how different people's situations can be.  Still trying to work out my strategy/goals and hoping that joining in here will help me to formulate my plans.

I've got £2k of debt (started at £32k) to be debt neutral, then I need to take my S&S ISA out of the equation as that is part of my FIRE fund but have included it towards debt neutral cost as I was focussed on having the liquidity to pay off CC debt if necessary.  £2k should be done by end of January, hoping for real debt neutral by end of Q1 2022.

To clear the debt I reduced my mortgage OPs from £505 to £5 (had to keep it as a round number and the fact I am still OPing has helped me mentally).  My intention is to reinstate the OP by start of Q2 as my mortgage is almost £260k, fixed for another 6 years and I would like to clear a large chunk of it before we need to remortgage.

I have been paying into a personal pension since 20 but it has performed really badly in recent years (actually losing money in consecutive years despite paying £50 a month in) plus a DC from a job I left in 2012 which was doing okay but not exactly outstanding. 

I suffered from paralysis by analysis for several years thinking I had to do something "perfect" but then I realised anything I did was likely to be better than doing nothing and losing money so I opened a Vanguard SIPP in March 2021 and transferred all the pots in.  It has performed really well so far and I am so glad to have made the move now.  It may not be the best in terms of fees and as I learn more I may choose to move to another product but it's great to be able to track performance every day instead of waiting for a yearly statement.

(I did bite the bullet and consult with an IFA but was distinctly underwhelmed by him, even more so when the follow up letter included a typo which increased his proposed fees from £1,100 to £11,000!)

I have been paying £100 into my SIPP for the last few months - current pot is £162k.

I have a DB with work currently worth just over £5k PA.  By my reckoning, if I work to 57 (I'm currently 44) but don't take it until 67 (SPA) it should be worth £17k.  I have also just started paying AVCs of £50 a month (set it about June time, had no confirmation from Pru about it then they suddenly started taking payments in October with no warning!)

I also have a S&S ISA with Vanguard with just over £5k in which I pay £200 a month into.  

Paying into the SIPP and ISA have been eye opening for me - until a couple of years ago my focus was all on OPing the mortgage with a vague plan to increase pension contributions after the mortgage was gone but I understand I need to diversify and that pension payments now almost certainly are a wiser move than focussing on the mortgage.

None of the above takes into account OH's arrangements - we need to sit down and review his pensions.  He is a HRT payer but does pay a hefty lump in via salary sacrifice and has DC pots from previous jobs.  Early in the new year the plan is to sit down with him and review his pension pots.

Sorry for the long post, it really helps jut to write it all down!

savingholmes

@CCW007 Sounds like you made a smart move when you transferred your pension. I'd like to hear about your S&S ISA too - as I am considering having one outside my pension - given the govt mess with pensions regularly. I already have good pensions.

CCW007

The S&S ISA is with Vanguard in LifeStrategy80. 

I wouldn't have a clue where to start otherwise (I tried researching it and got myself really confused) and the Vanguard LS seemed to be recommended for smaller contributions so it seemed like an easy option and is doing well so far! 

Like you say, it's about spreading the risk if the government change the rules on pensions and it's accessible in an emergency, unlike the SIPP.

Suffolk_lass

CCW007 said:

The S&S ISA is with Vanguard in LifeStrategy80. 

I wouldn't have a clue where to start otherwise (I tried researching it and got myself really confused) and the Vanguard LS seemed to be recommended for smaller contributions so it seemed like an easy option and is doing well so far! 

Like you say, it's about spreading the risk if the government change the rules on pensions and it's accessible in an emergency, unlike the SIPP.

I think you said you are 44 currently @CCW007 so 80% investment in shares is not unreasonable. If others (eg @savingholmes) are looking to do something similar, the advice we received is to gradually reduce your risk exposure as you get closer to when you want to take your pension (or spend some money!) so the number after the lifestrategy logically reduces. DH has the VLS40 (so 60% in bonds or gilts rather than equities and only 40% in shares). It is so that even if the market plunges (as it did in the noughties), you don't lose so much you cannot still realise your plans. They do target retirement funds too if you know when you might want to draw down from your pot

CCW007

Absolutely, that's the reason I chose the 80 at this stage @Suffolk_lass and I'll review in future.  I didn't mean it to be a recommendation of the 80 fund specifically so thank you for the explanation.

My SIPP is mostly in the target retirement fund based on my target retirement date as again it seemed the simplest solution for me but I did split a small amount between the LS 60/80/100 just out of interest to see how they perform.  

savingholmes

Suffolk_lass said:

CCW007 said:

The S&S ISA is with Vanguard in LifeStrategy80. 

Like you say, it's about spreading the risk if the government change the rules on pensions and it's accessible in an emergency, unlike the SIPP.

If others (eg @savingholmes) are looking to do something similar, the advice we received is to gradually reduce your risk exposure as you get closer to when you want to take your pension (or spend some money!) so the number after the lifestrategy logically reduces. DH has the VLS40 (so 60% in bonds or gilts rather than equities and only 40% in shares). It is so that even if the market plunges (as it did in the noughties), you don't lose so much you cannot still realise your plans. They do target retirement funds too if you know when you might want to draw down from your pot

I understand the logic of this - however because I have DB pensions I feel I already have the 'bond' equivalent in the bag so am looking for growth... still in a risk managed way but not so cautious that I barely cover inflation...

powerspowers

AVC snapshot for the end of the year
start date - feb 2019
contributions £1650
plan value £2022 as of 29/12/21
22 years to go 🤨 

I helped my mum with some pension bits yesterday, she’s on track with her financial goals which was pleasantly surprising as she didn’t know the log in details and had stopped receiving paper statements. Got a few pots to ring up and get details for as a next step. I was shocked at the difference between the db and dc pensions and hadn’t realised how low auto enroll is! There will be a lot of people on low incomes who feel they are doing the right thing (often struggling to do so) who will be disappointed when their pot is next to nothing.