FIREside Chats

edinburgher

@Cheery_Daff - I do love a good spreadsheet!

Cheery_Daff

edinburgher said:

@Cheery_Daff - I do love a good spreadsheet!

Me too- and this one has multiple tabs and has overlap with my mortgage overpayment spreadsheet too - that's about as exciting as a Sunday night gets round here!! 😂

Cornish_mum

Cheery to work out a DB equivalent pot value the provider/administrator should be able to give you the life time allowance equivalent value. My provider USS uses the following calculation 20x annual pension plus the lump sum. Hope that helps CM.

Cheery_Daff

Cornish_mum said:

Cheery to work out a DB equivalent pot value the provider/administrator should be able to give you the life time allowance equivalent value. My provider USS uses the following calculation 20x annual pension plus the lump sum. Hope that helps CM.

Thanks, that's helpful 😊

Made my spreadsheet - and then amused myself when I realised I'd made pretty much exactly the same spreadsheet several months ago (just with the columns in a slightly different order) 😮😂😂 Clearly been pondering all this for a while 😂

Suffolk_lass

killerpeaty said:

Is it actually possible to have cyrptocurrency in a pension directly? I thought you couldn't have them directly in one.

Just FYI (because it was mentioned earlier) instead of buying previous years if you are proactive and voluntarily pay class 2 (self employed), it's a lot cheaper to get qualifying years. There was a spate of people suing their accountants for not telling them about this option because it is so much more expensive to buy years retrospectively. Info for your pleasure. 

Yes, that is a very good point. £3.05 (instead of £13.50 a week) on profits under £6,475 - I have advised my cousin to to this (he is a self-employed gardener who was living on his savings). My situation is slightly different with my occupational pension and my volunteering and interests - I still get up at 05.30 to get my admin done before working at my unpaid stuff for much of the day - I do have some thoughts about a market stall later in the year but it will depend on how much prep I do and whether my neighbour wants to join me. And whether I want to do my hygiene cert and register as a food business.

ElmoR

Morning all

Just popping in to say that the 'other' board discussed spreadsheets back in January and there are suggestions for free/not free ones available to use...not sure how to add a link, let me try here...

https://forums.moneysavingexpert.com/discussion/6229495/spreadsheet-to-monitor-pensions/p1 

I've visited the blog of whatapalaver and am going to see if I can wrap my head around it all. The MFW spreadsheet seemed far less complex, and the one needed for this task has gotten the better of me (probably the dyscalculia tripping me up). I'm currently hiding in the under the stairs cupboard, working on plan B, and shall be back round the fireside once ready to air it again...fantastic advice, inspiration, explanations and tips here already - thank you all

@Cheery_Daff - I wasn't sure how they were working out pot values either, thanks for asking that Q!

ElmoR

Suffolk_lass

@becky_rtw and @Cheery_Daff I remember one of my colleagues talking about going early because she wanted to enjoy her retirement with her older husband, and not as his carer, and not to wait until he was no longer fit enough to do the stuff they enjoy. 

Re the impact of part time and childcare on pensions - with occupational (DB pensions) the description of benefits is always presuming you are full time so x% of qualifying years - you need to consider that the number of years you have will be the %age of the week you work -

• so if you drop to 4 days, that is 80% of the working week so you would multiply the number of years you have worked there by 0.8 to work out the amount you earned over the years you were part time - 
• 10 years out of 40 at 4 days a week would therefore be: 
• 30 x1.0 (for the full-time years) + 
• 10 x 0.8 for the four day week years - so 38 out of the 40 duration if that makes sense.

While we are talking DB - when you first join one, many offer the facility to add a previous pot to their scheme, if you do it in the first six months (teachers) or sometimes a year (civil service) and I used to think this was a good idea. With the changes to DB schemes (like the move from final salary to career average) this might well be a bad idea now. If you have a DC pot you were put into by a previous employer it may well be worth asking an advisor about this - the management fees are the other factor with multiple pots versus the lack of flexibility if you have it all in one place.

Regarding lifetime allowances, as others say, you can see the size of the pot with DC. For DB there are two options - ask the scheme managers as suggested, or ask what value they would offer if you took your pension out of their scheme into another pension pot - there were examples of 40 times the benefits being offered (I always presumed this was because the scheme managers were keen to reduce their lifetime of the pensioner liabilities).

When I took mine, I increased my lump sum to a round six figure sum which reduced my income, because my pot value meant I could (ie it was less than 25% of the value) - I wanted to have the extra TFLS because we were relatively cash poor but asset rich. I retired in Feb and two months later the indexation was applied to income. I did not realise that because my best of the last three was the earliest, that this was index-linked for two years - so I got a bigger boost than expected and another several thousand of retro calculated TFLS arrived the following June, restoring income to what it would have been without the extra tax free cash I elected to take.

Busy_Mee

I realised that I haven't answered Ed's original questions. You might need a cup of tea AND a biscuit:

Why am I investing
To give me the opportunity to retire early. There is five years between me and Mr Mee and I wanted to ability to join him in retirement. To you younger folk, it is absolutely worth thinking about any age difference when planning your retirement. 

My original objective was to gather enough in savings to offset our large mortgage, that resulted from building our house. I was therefore very cautious with those savings initially ( put into fixed rate cash ISAs and cycled through regular savers), but I have always been able to beat the mortgage interest rate. Initially I needed to be able to get my hands on the money in case the base lending rate and therefore mortgage interest rates increased, and was reluctant to " gamble " with this money however as time went on and our savings accumulated this became less important. We achieved mortgage neutrality in April 2020. 

I have become slightly braver in over the last couple of years and invested in a Life strategy SIPP with Vanguard, to take advantage of the tax relief ( HR tax payer ). This has so far worked out really well (11% increase). I also have a small S&S ISA with Nutmeg, that didn't do very well at first but has now increased by 9%. 

How much did I need
Enough to cover the mortgage, which in April 2018 was £238,491.35. It now stands at £187,336.19, but we have £215,000 offsetting against it.
We both have decent DB pensions to cover day to day living expenses. We also get a TFLS. Mr Mee took the maximum lump sum so that we could achieve mortgage neutrality and because we felt we needed more of our funding up front whilst we are younger.

My lump sum will be the forever fund cushion, to pay for new cars, holidays and the roof falling in. I originally thought that I might also take the maximum lump sum, but because our situation has become much improved (extra year worked through COVID, and temporary promotion which boasts my final salary), I am debating this. It takes 15 years for the pension to pay back versus taking the lump sum up front. The pension is increasing by RPI each year, so much depends on how much you can achieve in your investments. I am still pondering but will probably go for the middle ground of 50% of the maximum lump sum. 

In total we will have a pot of around £360k, but a mortgage of £187k. My aim will be to continue to chip away at the mortgage until the end of term in 2024 and then pay it off. This will hopefully leave £180-200k in the pot. If we spend c£10k a year of this on holidays etc  it will last us 20 years (I will be 77 and OH will be 81). I doubt we will spend that much as our income increases in 2025 and 2031 respectively when our SRP kick in. 

We like Suffolklass, will have missing years to pay for a full SRP. But will wait until nearer the time to decide how we address that. One of the reasons for me retiring part way through the year this year, was to get another full year of NI in and I am hoping that grandchildren may come along in the intervening period, and we can help with childcare and get the carer credits. 

How am I going to get there
We are incredibly fortunate to have 2 x 40 yr+ DB pensions, so we haven't had to be particularly clever. Our mortgage has been our main issue, but thanks to this site is now resolved.
My "edge" has been rigorously saving, cutting out crap spending, maximising "free" money and sweating the small stuff. No clever investments here I am afraid.
Looking forward I am going to split my pot into fluid savings ( required in the next 5 years). These will sit in the mortgage offset account and probably a Marcus account ( a paltry 0.45% but the best around). 

The longer term money will be in current fixed term ISA 1.8 -2 %, the S&S ISA and the SiPP. As the fixed rate ISAs come to an end I think I will siphon them over to S&S ISAs. I will boost the SIPP again this year up to my £40k limit and maybe continue to invest £2880 a year after that as a non earner.

How long Do I have
17 weeks 

 

Staffordia

South_coast said:

Lovely to see GG popping in, one of my MFW heroes! In fact, I have this screenshot from her diary on my phone as inspiration (hope it's not copywrited 😳)

GG was one of my inspirations as well, that quote is on the money.  I found work increasingly became an irritant, especially as my GF had already retired and I wanted to spend time with her rather than my colleagues.

Cornish_mum

Why

MrCM and I want to retire at 60, given our ages (41 & 40) I think this will mean 8-9 years early on the current trajectory of life expectancy increases. We are both busy people who need to have things to do to be happy  but we have lots of interests outside work that we want to pursue whilst we are fit and healthy.  

Also we especially me, also want to pass money on to the kids, when they are in their 20’s (wedding costs, house deposit, start up business costs etc); education costs are considered separately (as some of you know I have been saving up an Education).  This is important to me as my mums side of the family made huge sacrifices after her Dad died unexpectedly young to make us all financially secure and I want to pass this hard work and security on, if we can.

How much?

I have been quite shy about this (even on the boards) as the numbers are big. For the pass it on fund we are aiming on £250000 per kid to be passed on between 2035-2045. Money will be passed on in appropriate lumps, not in one big amount. For retirement we would like ~25-30k each (plus the state pension).  This means a total pot of equivalent ~£2 million between the two of us (though some of this will be DB), based on a 4% withdrawal rate after the lump sums are taken out.

We plan to keep the equity in our home to cover any carehome fees; 3/4 of my grandparents needed long-term care because of dementia (living into their early 90’s) so we are planning for that. We are considering relocating to a lower cost of living area come retirement and I plan that spare equity will be drip-fed into a passive investment fund (accumulator fund) to be ready for our early 80’s should we need it. Our EF would be kept in cash for emergencies.

How are we going to get there?

We are also both USS and would be HR taxpayers (& lose our CB) if we weren’t making extra pension contributions. We decided to stick with USS for the following reasons, it runs an ethical investment fund which appeals to us and when I looked for similar funds on HGL/Vanguard I struggled to find what we wanted; contributions are by salary sacrifice saving NI on top of tax, fund management fees are paid by our employer and the medium risk profile suits us. It’s easy to manage with admin minimum for MrCM which is very important; as he can’t cope with anything complex.

I do worry whether it’s the best choice and am thinking to hedge our bets with a S&S ISA. I have been thinking of opening one for a while but have been holding off while we decide what do for DS’s secondary school etc. 

Currently I have ~8k in DB pension payable at state retirement age). This increases by £725/year. MrCM has a touch more accumulated because he was promoted earlier than me and has a similar increase per year.  We are now both putting £985/month into AVCs on top on our DB contributions.  My basic calculations suggest that this is about right and it’s what we can afford currently.

How long do I have?

We will be entitled to our full state pension with another 20 years of NI contributions. Although it would be great to have the option to go earlier, this will require us to increase our savings rate which might be possible when we are mortgage free.

All suggestions on how to improve our plans would be most welcome! Especially ideas for ethical investments. I am not keen on BTL, as we are already very exposed to the UK residential property market via our house.  Also my mum did it in the 80&90’s and it was horribly stressful, as she self managed everything alongside a FT job.