Retirement Planning Help

2nd_time_buyer

Rustin said:

2nd_time_buyer: Ideally if health is good in mid 50's (we are both active, typing this from the camper after an 12 mile walk around Hawes, north yorks, feet are killing) then something like  swift select 184 which would be better for wild camping than a Class A or a Coach built but we have to be realistic about living long term and space requirements if its our full time residence. If not then more like a Swift Bessacarr 496.

Van's like the 184 may work with good awning...it will be dependent on how we are in a few years.

We are very active now which is not about body beautiful or joie de vivre, its bloody survival from having a very very sedantry admin heavy mostly desk bound full-time job.

Both look surprisingly livable, with clever use of space, like the drop down bed. Probably not much smaller than some studio flats.

Triumph13

To answer your actual question, the first priority should be for your partner to make pensiotn contributions to just take them out of the 40% tax band.  After that then it's AVCs for you.
For your partner with 40% relief a net £400 translates to £667 in a pension (£400 / 60%).  I believe Teachers' pension AVCs can't leverage the DB element so they'll pay 15% tax when they withdraw that (25% tax free, 75% taxed at 20%) leaving them with £567 cash.  If your partner does have £8k or more that they are paying 40% tax on then you could route the whole £400 a month this way.  The one caveat though is that you won't be able to get the money all out at once which may be an issue with the campervan purchase.  8 years at £8k a year would be £64k with no growth.  They could take £16k of that as a tax free lump sum.  Assuming you retired at the end of the tax year they could also take £32k taxed at 20% = £25,600 in the new tax year without going into the 40% band.  The remaining £16k gross / £12.8k net would have to wait until the following tax year.

Putting the £400 into AVCs for you instead as a 20% tax payer, £400 net becomes £500 in LGPS AVCs and you get to take the whole thing out tax free as long as it (plus any LGPS lump sum) is less than 25% of your total pot (AVCs + lump sum + LGPS pension x 20).
So in summary:
1. If partner has £8k or more taxed at 40% and you can cope with a delay in getting some of the money back out then put it all in a pension for them.
2. If they don't have the full £8k of 40% band or you need all the money at once to buy the camper then put the excess over what goes into partner's pension into LGPS AVCs for you.

Rustin

Great stuff Triumph13 that really helps and clarifies a major part of my financial conundrum. I will now be looking to make that a reality and recommending my partner speaks to the teacher pension advice service as she earns almost exactly 53.5k so we can bring that under 50k with AVC payments of around £300 per month and then a sizeable chunk of the remaining investment pot, around £500 into my AVC. This will leave £400 per month to invest elsewhere. Possibly an investment platform as I've become interested in trying this out after lurking on these boards for years now.

Again I appreciate an emergency fund is a priority but we have very secure jobs, our spend for the last two months has been around £500 per month, so an emergency fund pot will build from the £2100 per month left over after everything, bills, mortgage, AVC's and investment are deducted.

AlanP_2

Rustin said:

Great stuff Triumph13 that really helps and clarifies a major part of my financial conundrum. I will now be looking to make that a reality and recommending my partner speaks to the teacher pension advice service as she earns almost exactly 53.5k so we can bring that under 50k with AVC payments of around £300 per month and then a sizeable chunk of the remaining investment pot, around £500 into my AVC. This will leave £400 per month to invest elsewhere. Possibly an investment platform as I've become interested in trying this out after lurking on these boards for years now.

Again I appreciate an emergency fund is a priority but we have very secure jobs, our spend for the last two months has been around £500 per month, so an emergency fund pot will build from the £2100 per month left over after everything, bills, mortgage, AVC's and investment are deducted.

Your partner may earn £53.5k but as a member of the TPS she is contributing 10.2% towards her DB pension so taxable salary is below HR threshold hence AVCs will benefit from 20% relief not 40%.

Retireinten

I might be missing something in your posts but I'm not clear what income you actually need in retirement and how many years before state retirement age you plan to retire.

From 2028 you will have £26k between you in defined benefit pension, of which your partner will be a taxpayer so your 'household' take home will be closer to £25k.  How does this compare to what you need in terms of annual pension income?

From state pension age you will have a  further £18k+ gross in state pensions (less tax).  Now does this, along with your DBs, cover your outgoings?

Will you both be 57 when you retire? Knowing the when helps to work out the best vehicle to use to save for different periods in your retirement. 

Does your annual retirement income cover all outgoings... so will there be enough to cover that big repair bill for instance. Or is that what the house sale cash is for?  If you want a lump sum to fall back on outside of your house equity and you camper cash pot, then how much feels about right to you given your lifestyle? 

And finally, are you both on track to receive a full state pension?

Lots of questions I know, but actually working out your number and therefore  your savings gap at different stages of retirement will help to inform you how to save over the next 7 years or so.  

Terron

If you buy a property to let out until you want to live in it be sure to research Section 8 Ground 1

Rustin

Retireinten said:

I might be missing something in your posts but I'm not clear what income you actually need in retirement and how many years before state retirement age you plan to retire.

From 2028 you will have £26k between you in defined benefit pension, of which your partner will be a taxpayer so your 'household' take home will be closer to £25k.  How does this compare to what you need in terms of annual pension income?

From state pension age you will have a  further £18k+ gross in state pensions (less tax).  Now does this, along with your DBs, cover your outgoings?

Will you both be 57 when you retire? Knowing the when helps to work out the best vehicle to use to save for different periods in your retirement. 

Does your annual retirement income cover all outgoings... so will there be enough to cover that big repair bill for instance. Or is that what the house sale cash is for?  If you want a lump sum to fall back on outside of your house equity and you camper cash pot, then how much feels about right to you given your lifestyle? 

And finally, are you both on track to receive a full state pension?

Lots of questions I know, but actually working out your number and therefore  your savings gap at different stages of retirement will help to inform you how to save over the next 7 years or so.  

We plan to retire when I'm 57. Roughly 7.5 years away for me and 8 for partner. We will be looking at £400 for AVC, £400 ring fenced for camper and then another £400 savings which can also be added to pension. The combined £1200 will accumulate over 7.5 years. We will be renting out the house or downsizing to release equity and renting out the smaller house.
Both on track for full state pensions having worked full time PAYE for years.

We will also have 2.1k per month free for day to day living after bills.  We barely spend a 1/4 of that at the moment but post lockdown spends will increase.

All being well we will be debt free in October this year and then mortgage free probably a year prior to retirement at 57.

A good scenario would be 3k combined a month from retirement to state pension.

This is an ideal, if circumstances change which we know from experience often happens then plans change possibly working longer or part-time for a bit.

Thanks

drumtochty

Friends had a yacht and they were always going away in the Yacht and bored everyone to death talking about sailing.

They sailed to the Canary Islands, spent a year there living on the boat and sailed back to the UK.  After sailing back to the UK they still went away on the Yacht but a good bit less often. I'm less than convinced you would be away all the time in the camper and would agree you need a base to live in from time to time.

Retireinten

Rustin said:

Retireinten said:

I might be missing something in your posts but I'm not clear what income you actually need in retirement and how many years before state retirement age you plan to retire.

From 2028 you will have £26k between you in defined benefit pension, of which your partner will be a taxpayer so your 'household' take home will be closer to £25k.  How does this compare to what you need in terms of annual pension income?

From state pension age you will have a  further £18k+ gross in state pensions (less tax).  Now does this, along with your DBs, cover your outgoings?

Will you both be 57 when you retire? Knowing the when helps to work out the best vehicle to use to save for different periods in your retirement. 

Does your annual retirement income cover all outgoings... so will there be enough to cover that big repair bill for instance. Or is that what the house sale cash is for?  If you want a lump sum to fall back on outside of your house equity and you camper cash pot, then how much feels about right to you given your lifestyle? 

And finally, are you both on track to receive a full state pension?

Lots of questions I know, but actually working out your number and therefore  your savings gap at different stages of retirement will help to inform you how to save over the next 7 years or so.  

We plan to retire when I'm 57. Roughly 7.5 years away for me and 8 for partner. We will be looking at £400 for AVC, £400 ring fenced for camper and then another £400 savings which can also be added to pension. The combined £1200 will accumulate over 7.5 years. We will be renting out the house or downsizing to release equity and renting out the smaller house.
Both on track for full state pensions having worked full time PAYE for years.

We will also have 2.1k per month free for day to day living after bills.  We barely spend a 1/4 of that at the moment but post lockdown spends will increase.

All being well we will be debt free in October this year and then mortgage free probably a year prior to retirement at 57.

A good scenario would be 3k combined a month from retirement to state pension.

This is an ideal, if circumstances change which we know from experience often happens then plans change possibly working longer or part-time for a bit.

Thanks

So in very simple terms you're sorted once state pensions kick in but between ages 57 and 67 ish and assuming you want £3k net a month you will be short by around £5k per annum. You will need a pot of £55k ish in today's money to cover this period (plus a decent contingency - I love a good contingency ).

The trick is to save this as tax efficiently as possible. AVCs are accessible when you take your pension and completely tax free (up to the value of 25% of 20 x your annual pension plus any automatic lump sum) so definitely a good way to go, even more so if they are salary sacrificed (I will be saving via LGPS AVCs very soon). 

Of the two of you, your partner will be a tax payer at 57 but you will have spare tax allowance of around £4,500 a year. So it makes sense that any additional savings going into a private pension of some sort  make use of this spare allowance. If you can afford it I'd try to do both - save the extra you need into a private pension so you can draw down up to your tax allowance plus 25% tax free lump sum from ages 57-67. This will give you the £3k you're looking for a month.  Also save up to your tax free lump sum amount into AVCs and use this as a lump sum for any large purchases/life experiences, hopefully protecting your house equity from unexpected big spends. 

Your partner won't be a higher rate tax currently  payer as existing pension payments will reduce their income for tax purposes. So not as tax efficient to save in your partners name. 

I would also be nervous about removing myself from the property ladder but that's ultimately your call.