Suggestions .... ideas...

sgx2000

Hi All

Laying my finances bare….

I am just an ordinary guy trying to learn as much as I can before retirement

So please be gentle if I say something stupid…lol

I am after suggestions or ideas to either secure my future better or even retire earlier…

I am potentially 4 years from retirement… 

And only just starting trying to work out my retirement options

I am 62

My wife is 45

Son is 17

I own my home

I am Currently working earning £37,000

Company pays into a non-contributory pension £3,200 /yr  (Aviva - Managed fund)

Currently £71,500 in pot

I have a Defined Benefit Pension (old superannuation pension) (paid since I was 60)  £6,500 before tax

I have savings of £46k  (currently earning next to nothing in the bank)…

I am currently saving approx £1,500 per month     Approx £15,000 /yr 

Fairly obviously, I will retire substantially earlier than my wife.

I have worked out my current total annual expenditure to £18,400

At 66

State Pension  £9627

DB Pension     £6500

Total                £16,127

Allowing for my Aviva pension being worth approx £85,000 by them

I am potentially looking at a drawdown of £3,500 /yr and £21,250 Tax free lump

Total  £19,627

Tax £1411

New total  £18,216

Potential Savings at 66  £120,000 -  (Don't know what to do … Possibly in ISA)

Potential draw of £6000 /yr

New Total £24,216

Albermarle

You have not said anything stupid but you are a bit late in the day for thinking about these things  A few comments though..

I have savings of £46k  (currently earning next to nothing in the bank)…
Why not use a savings account earning 1.5% to 2 % ?

Allowing for my Aviva pension being worth approx £85,000 by them.I am potentially looking at a drawdown of £3,500 /yr and £21,250 Tax free lump

There are differing opinions on the subject but most would agree that this withdrawal rate is too hight and there is a significant risk of the pot running out at some point. £85K minus £21K lump sum = £64K . Typically you can safely draw an income of around £2K pa from this .

The obvious solution as to where to put your £1500 a month, is  into this pension and get tax relief, whilst at the same time bolstering its value, along with hopefully some investment growth, If personal contributions are not allowed, then you can very easily open up your own pension on line.

It sounds like in looking at the drawdown and at how much you can take from your savings, you are not taking account of inflation .  £5000 today will only buy £4000 of goods and services in a few years time . So whatever income you decide you need then it has to be increased each year by inflation.

MX5huggy

You should increase you pension contributions either to the work place pension or a SSIP to 100% of your earnings. And live off your savings. The minimum benefit is 6.25%. 

sgx2000

Many Thanks for the reply..

I am hoping that the DB pension and state pension will be somewhere near CPI
So I am only £2k from my current annual spending

I am also hoping that the £85K and savings of £120K savings will at least help me to exceed  my current spending

I will look into adding my savings into my current pension, 
but I am, rightly or wrongly, wary of putting too much into pensions that could disappear given a stock market crash...yes, I know, a little paranoid...lol

MX5huggy

Pensions don’t have to be stock market based,  hold just cash, or a fund that has a risk rating very low that has a history of never blinking in a crash (but growth below inflation. 

MallyGirl

I would look at getting some of those savings into a pension (for the tax relief that brings). You are already at the age where you could get some out again (as a tax free lump sum) if there was a crisis need for some cash.

Thrugelmir

Is there a cap on the annual inflationary increase for your DB scheme? 

Albermarle

but I am, rightly or wrongly, wary of putting too much into pensions that could disappear given a stock market crash...yes, I know, a little paranoid...lol

There is no chance of your money disappearing, although it might go down.

Probably, unless you have ever changed it you will be in the pensions default investment fund. This will be a medium risk fund , so if the stock market went down 40% , the fund might go down 20% . However normally most stock market falls recover within a couple of years . Also as you will be drawing down the pension, you could well be invested in it for 30 years plus.

Instead of the standard default fund you maybe in a 'Lifestyle' fund that derisks as you approach retirement . It is certainly worth investigating how the pension is invested anyway. After that feel free to ask more questions.

Even if you do not add your current savings ( good to have some cash savings anyway ) adding the spare £1500 you generate each month would seem a good idea. 

sgx2000

Lots of good advice here
I know my aviva pension has been moved to pre retirement safer funds....

Earlier reply..... I dont think my DB pension is capped, but I will check it.

And I will either look at adding to my works pension, although the safer funds will obiously produce lower returns...
Or possibly look at the new uk Vangaurd sipps..

Albermarle

sgx2000 said:

Lots of good advice here
I know my aviva pension has been moved to pre retirement safer funds....

Earlier reply..... I dont think my DB pension is capped, but I will check it.

And I will either look at adding to my works pension, although the safer funds will obiously produce lower returns...
Or possibly look at the new uk Vangaurd sipps..

You should be able to move funds /buy new ones with the Aviva pension, if you want to.

sgx2000

Yes I can.... But obviously riskier