Pls help me to retire early - DC pension - 3 years later

ex-pat_scot

The Scottish Widows series 2 fund is OK I suppose. It's the default fund, into which 85% of its DC funds are invested (from memory). 
As you state you dont know much about investing, then it's not a bad place to start.

One question would be the level of mortgage overpayment. It seems you have high payment on a relatively low mortgage, particularly if this is your "share" and your spouse also pays similar.
If so, are you able to reduce this? 
In your shoes, it would make sense to maximise pension contributions and minimise any overpayment into the mortgage. It is far more tax efficient.

I share your malaise with employer and general working conditions, and a sense of fatality that it remains the "least bad" option open to you.

El_Torro

Regarding the Scottish Widows pension fund, I’m not familiar with their funds but looking at the fact sheet it looks like it has performed more or less how a multi asset fund with 80% equities has performed, with some performance shaved off due to SW’s high charges. 

You’d get slightly better performance by transferring somewhere with lower charges. I wouldn’t worry about it though, especially since your employer probably won’t pay into another pension, so you would have to have two anyway. 

RNV

Thanks ex-pat_scot  (I haven't figured out yet how to answer a particular message).

No, it is a total monthly repayment value (not "my share"). I may not have stated the outstanding value correctly.  DH overpays on top bit by bit but not drastically. We both understand overpaying the mortgage is not the best financial solution, however  cannot easily overcome a mental block of "mortgage free before retire". Have recently talked about interest only next re-mortgage though.

Marcon

RNV said:

Another way of my crazy thinking currently is to save a couple of years of living costs (instead of channelling everything into pension now) and quit before 55.  We, as a family, will save a lot if I'm at home - being time poor we have to outsource a lot.

Sometimes 'crazy' ideas are anything but! Have you actually sat down with a spreadsheet and done the sums? If you have to 'outsource a lot' that is going to be costing you, and possibly quite a lot more than you think.

RNV

Thanks.
No detailed spreadsheet so far. Need to take things seriously, I know. 

The biggest outsourcing for many years has been childcare/wrap around for kids, this year will be about 1k/month.  Won't need it in 2 years when in secondary (but then you don't just leave them at home on their own - no idea what we do yet and how much it will cost). I do salary sacrifice for childcare vouchers, however ended up with lots just sitting on the account as not able to use for what we need.... 

Another big area for improvement is food costs. We don't do takeaways/ready meals but there is lots of topping up going on - I pass convenience Waitrose on the way home so often fruits/veg come from there on top of Tesco once a week. 

The conclusion is, I have known it for a long time now,  our cost of living is much higher with the current 2 x demanding jobs, than it could have been with less paid/less demanding/part time. However, I could not find a golden middle so far. My try of 4 days a week didn't work.  

MaxiRobriguez

RNV said:

I'm trying to achieve £20k drawdown from DC pension, starting from 55 then reducing to whatever is left of it by the time the SP kicks in  - is it too late with only 5 years left (I wish I got wiser earlier)? 

Will that be enough to (continue to) pay off mortgage? Presumably you're not going to clear £120k in five years?

£20k drawdown means you need a pot of around £500k, perhaps slightly more, to generate it. You've got £260k already, another five years of £3.2k monthly contributions is going to give you £450k in today's money if your investments simply keep pace with inflation - so yes, just adding 10% of total gains onto final figure should be fine, looking at about 3% annual real returns - feels abut right, but there is a significant risk of a correction before or shortly after you retire which may impact on your pot total and reduce the amount you can withdraw safely. 

Agree with what others have said - perhaps look at different employment if you hate your job that much, or at least if you're determined to get money into pension then suck it up for five years but consider working for a couple more years in an easier job so that you don't have to access pension immediately and can let returns to a bit more heavy liftng before you do.

Good luck.

RNV

Thanks.

The mortgage end date is currently only 2 month after my 55. The current value must be lower than 120k (I think I got confused with the figure on the last annual statement) 

I  will have to suck it up for a few years and re-assess again.  And will try to optimise our monthly spend in parallel with max pension contributions. 

My main concerns were - a) whether 55 or 57; and b) whether current investment plan with SW needs urgent change. With everybody's help here, I got my answers. Thank you !

RNV

Hello all,

Recovered my 1st post from 3 years ago.  Thought will share some  "the Good, the Bad and the Ugly"  points of my  journey so far  - may help others to navigate theirs....

• age 52 now
• still want to retire early (at 55; if no surprises to currently understood  transitional 55 / 57  status) -  unfortunately, not "to something" but simply from work.   Find it very hard to continue on this trade mill. Although feel a bit more content now than 3 years ago -  accepted have to suck it up for a few years. However, treating it as a pure transactional arrangement - my time and efforts  exchanged for money;  managed to reduce emotional load to a minimum.  

The Good:

• DC pot value hovering just above 500k for the last few days   - first time ever [was 260k 3 years ago].  Not claiming a high performance here but definitely a very high contribution level  (~165k total Sal Sac contribution since that 1st post here) 

The Bad:

• still haven't decided /been brave enough to part move the funds to a different provider to save on fees  - still all with Scottish Widows work place
• still do not have any savings outside of pension (all being chucked in pension as the most tax saving mode); will have to take some 25% TFLS towards 3 year (or so) buffer when eventually decide to retire
• started realising and preparing myself  that  may have to continue OMY as the withdrawal at 3.5-4% SWR will not provide much spare money to enjoy free time

and
The Ugly

• because of the drastic levels of contributions (to catch up while SalSac /high level AA lasts), I didn't have any "fun" money left from my salary .  Managed to survive on a "strict" budget (far from it tbh) for quite a while then my sins eventually won -  not a proud owner of 10k CC balance now. Spent mainly on 2 adventure holidays with children, no regrets - so much memories after that.   Was needed now, not when I'm retired.   All on 0%, planning to balance transfer for another 1 - 1.5 year and re-pay within. 

LHW99

Keep a good eye on that 0% card, and don't miss the deadlines! Does sound as if you've done well with the pension saving.

Apart from the issue of OMY (many of us have gone through that), if you haven't got much savings outside your pension money, that could be an area to tackle. Having enough as an emergency fund to cover at leaset 3-6 months expenses means that if the job disappears, or you retire and find you have to do a bit of part time to make ends meet (could even be stacking shelves at Tesco) you can still keep yourself going while you look for something.

RNV

Thanks for comments.  This Budget may be a turning point for me - if they remove/reduce SalSac or reduce AA, i will start saving in ISA (although at a significantly reduced level if after 40% tax).  For the moment, piling in pension max I can.