A Paupers Pension Tale (Not many nuts to dig up)

barnstar2077

hostertlady said:

I love reading this thread about pensions, i just wish i could understand the jargon.. me and hubby are useless and we don't have a plan (yet).. i can tell you where every single penny is right now, bank accounts, Isa's, building society, pension pot, insurance policies etc...
But its where to start!
but i will continue to read these posts and  hopefully  things will sink in and we decide which financial advisor we need to speak to......

Start with how much money you are going to need a month/year in retirement.  As you have no doubt seen by reading these forums, that varies a lot, and can also change a lot in retirement.

Then see at what age your assets will cover your outgoings.  How would that be structured, do you have a final salary/DB(Defined Benefits) pensions, or are you both DC? (Direct Contributions.)
   With a DC pot you have an amount of money that is yours to use as you see fit (although you may still have to pay some tax, depending on any other income), with a DB scheme you will get a fixed amount, often inflation linked, that is based on years of service.  A DB pension will give you greater peace of mind in later life, but a DC pot can let you take more out earlier on (until State Pension age for instance, when you could reduce the money you take from your DC pots.) 

Also, give some thought about what the other person will do when one of you passes.

hostertlady

barnstar2077 said:

hostertlady said:

I love reading this thread about pensions, i just wish i could understand the jargon.. me and hubby are useless and we don't have a plan (yet).. i can tell you where every single penny is right now, bank accounts, Isa's, building society, pension pot, insurance policies etc...
But its where to start!
but i will continue to read these posts and  hopefully  things will sink in and we decide which financial advisor we need to speak to......

Start with how much money you are going to need a month/year in retirement.  As you have no doubt seen by reading these forums, that varies a lot, and can also change a lot in retirement.

Then see at what age your assets will cover your outgoings.  How would that be structured, do you have a final salary/DB(Defined Benefits) pensions, or are you both DC? (Direct Contributions.)
   With a DC pot you have an amount of money that is yours to use as you see fit (although you may still have to pay some tax, depending on any other income), with a DB scheme you will get a fixed amount, often inflation linked, that is based on years of service.  A DB pension will give you greater peace of mind in later life, but a DC pot can let you take more out earlier on (until State Pension age for instance, when you could reduce the money you take from your DC pots.) 

Also, give some thought about what the other person will do when one of you passes.

thanks for this, i used to have a scottish widows private pension which i cashed in a few years ago which is sitting in an ISA... i will get my state pension in 12 months time..
we just need to tackle hubbys pension and hopefully wed like him to retire at 63,, in 2 years time.. but he is in a final salary pension which hes been told not to touch until he officially retires..
the transfer value is rubbish..
he does have a stakeholder pension which we can touch if he does retire earlier..
but all this drawdown, DB, etc jargon i cannot get my head around

barnstar2077

hostertlady said:

barnstar2077 said:

hostertlady said:

I love reading this thread about pensions, i just wish i could understand the jargon.. me and hubby are useless and we don't have a plan (yet).. i can tell you where every single penny is right now, bank accounts, Isa's, building society, pension pot, insurance policies etc...
But its where to start!
but i will continue to read these posts and  hopefully  things will sink in and we decide which financial advisor we need to speak to......

Start with how much money you are going to need a month/year in retirement.  As you have no doubt seen by reading these forums, that varies a lot, and can also change a lot in retirement.

Then see at what age your assets will cover your outgoings.  How would that be structured, do you have a final salary/DB(Defined Benefits) pensions, or are you both DC? (Direct Contributions.)
   With a DC pot you have an amount of money that is yours to use as you see fit (although you may still have to pay some tax, depending on any other income), with a DB scheme you will get a fixed amount, often inflation linked, that is based on years of service.  A DB pension will give you greater peace of mind in later life, but a DC pot can let you take more out earlier on (until State Pension age for instance, when you could reduce the money you take from your DC pots.) 

Also, give some thought about what the other person will do when one of you passes.

thanks for this, i used to have a scottish widows private pension which i cashed in a few years ago which is sitting in an ISA... i will get my state pension in 12 months time..
we just need to tackle hubbys pension and hopefully wed like him to retire at 63,, in 2 years time.. but he is in a final salary pension which hes been told not to touch until he officially retires..
the transfer value is rubbish..
he does have a stakeholder pension which we can touch if he does retire earlier..
but all this drawdown, DB, etc jargon i cannot get my head around

Have you asked what your husbands final salary pension would be if he did take it early?

At what age can he start to take the pension without any kind of penalty?

Drawdown is how people can take money out of a DC pension if not buying an annuity.  Effectively turning it into a bank account (albeit one that may incur income tax.)  With a DC pension you also have the option of taking 25% tax free initially, or adding 25% tax free onto regular withdrawals.  And as I said before, you can take a lot out of a DC pension early on, to front load your retirement, to get to state pension age, or simply because you feel that you would get the most out of the money when you are younger etc.

A final salary pension is a DB scheme, because you are exchanging a monthly amount from your paycheque for a guaranteed amount per year in retirement.  There isn't a pot as such (at least not one that you see), so it has some drawbacks, but also has the benefit of a more stable, reliable income in retirement. 

barnstar2077

A stakeholder pension is a DC pension.  So, in theory, he could use all of the stakeholder pension to get him to his DB and then state pension.  He will have a personal allowance of £12,570 each year, he won't pay tax on money taken from his stakeholder pension until he goes over that threshold, assuming that he retires at the end of the financial year and doesn't have any other income (except from ISAs, savings accounts etc.)  He could also take 25% of the money out of the pension tax free every year anyway.  If you wait and take everything later then you will definitely pay tax, but will have a financially more stable retirement, all be it a shorter one.  Only you can know if time is more important to you than money.

Even if you will eventually talk to an Independent Financial Advisor, I think you would benefit greatly from coming up with at least a rough plan yourself first.  You may even find that you don't need an IFA, however, googling and chatting on forums is not as reliable as consulting a professional! :  )  It really just comes down to your confidence levels and whether there are other questions about your finances that an IFA may be able to help you with.  Even if you didn't have them take over for an annual fee, I'm sure that even some one off advice would be valuable to most people. 

Albermarle

hostertlady said:

barnstar2077 said:

hostertlady said:

I love reading this thread about pensions, i just wish i could understand the jargon.. me and hubby are useless and we don't have a plan (yet).. i can tell you where every single penny is right now, bank accounts, Isa's, building society, pension pot, insurance policies etc...
But its where to start!
but i will continue to read these posts and  hopefully  things will sink in and we decide which financial advisor we need to speak to......

Start with how much money you are going to need a month/year in retirement.  As you have no doubt seen by reading these forums, that varies a lot, and can also change a lot in retirement.

Then see at what age your assets will cover your outgoings.  How would that be structured, do you have a final salary/DB(Defined Benefits) pensions, or are you both DC? (Direct Contributions.)
   With a DC pot you have an amount of money that is yours to use as you see fit (although you may still have to pay some tax, depending on any other income), with a DB scheme you will get a fixed amount, often inflation linked, that is based on years of service.  A DB pension will give you greater peace of mind in later life, but a DC pot can let you take more out earlier on (until State Pension age for instance, when you could reduce the money you take from your DC pots.) 

Also, give some thought about what the other person will do when one of you passes.

thanks for this, i used to have a scottish widows private pension which i cashed in a few years ago which is sitting in an ISA... i will get my state pension in 12 months time..
we just need to tackle hubbys pension and hopefully wed like him to retire at 63,, in 2 years time.. but he is in a final salary pension which hes been told not to touch until he officially retires..
the transfer value is rubbish..
he does have a stakeholder pension which we can touch if he does retire earlier..
but all this drawdown, DB, etc jargon i cannot get my head around

Try reading through this slowly.
Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)
Then these and then make a free appointment for a chat with PensionWise.
Pension basics | Help with pension basics | MoneyHelper
Taking your pension | Help with taking your pension | MoneyHelper

hostertlady

Thanks for your help,, ive printed out your help and will look into the links with hubby and hopefully move forward with getting him to retire earlier,,

barnstar2077

As it is the end of the financial year I have updated my spreadsheet with the latest numbers from my ISA and pensions (It is pretty sad how much I have been looking forward to doing so tbh! :  )

This time last year saw me posting very low returns for my efforts, and along with my fears about inflation, I upped my contributions to a total of £8.5k this year, including my companies generous payments of 10% into my works pension (Up from my contributions of just over £6k the previous year.)

This year I did very well, with my combined ISA and pensions increasing from £156k to £204k!  A very nice uplift of 30%, or £48k.

In reality of course it is likely to settle somewhere in-between the two numbers in the coming months as the current high inevitably dips, but it is very welcome at the moment!

I recently re-mortgaged, and have done my best to reduce several bills throughout the year to try and keep my personal inflation at bay.

Every year that goes by makes my predictions for what I will have available to me at 55 more accurate, so I have increased my desired target at 55 to £330k (I am currently aged 47.)  I am still earning less than £20k, which puts my numbers into context, and is why I still feel justified posting in the paupers thread! :  )

I'm still using the Vanguard platform and their FTSE Global All Cap index fund for my ISA and SIPP (and the closest match to it that I can find within my works pension.)

My partner has shown signs of wanting to be better with money recently and has even asked me to help her with her budget.  This is a real relief for me, as I do worry that we are not always on the same page when it comes to finances.

So all in all the future is looking pretty good at the moment (famous last words I know! :  )

I do hope the year has been kind to my fellow paupers too?

Rattusnorvegicus

Good job Barnstar. My pot doubled in the last 2 years, so all is going well here.

Its nice seeing other income poors getting ahead in life.

I'm quite chill until the end of the decade, but i do see another cyclical crash in the mid to late 2030s which will need navigating before retirement (or someone could just take the -40% hit).

But other than that its a great time to be investing since 2009.

barnstar2077

I have started my own thread, continuing my annual updates (for anyone who may be interested :  )

High risk, high reward: A pauper's dream of early retirement. — MoneySavingExpert Forum