We might have reached our ‘number’. Please critique!

hi, I have a redundancy / retirement opportunity and think this results in us getting to the number. Seems unreal though - can anyone see anything I am forgetting or looks wrong please? I know we really need to see an IFA and will (well, we have actually but he would only opine on funds under him and he has since left the firm and we are still waiting for them to provide a new contact and offer another review).

Anyways here’s the summary of what our position would be if I took this option,

DH - 60
2 GARs in payment, £12k pa. Not increasing with inflation
full SP due at 67 
£190k DC pension pot
£10k PB

me - 50
DB pension £41k pa. Rising with CPI, some capped at 3%, some at 5%
3 years to contribute for full SP at 67, DB pension reduces c. £1500 at that point
ISAs - £104k
bank shares - £25k
PB - £40k
NS&I index linked savings - £15k
TFLS - £175k (this has to be taken at the same time as starting the DB)
severance - £69k (post tax)

So total pension / savings around £628k to draw on top of the pensions in payment.

I project our outgoings to be £80k pa (including things like 5 yearly care replacement) but likely to lower a little in a few years (currently paying Uni support).
We own our house outright, worth around £800k, would like to stay but downsizing is an option.

We are likely to receive inheritances but don’t want to take those into account as they may be needed for care and all sorts.

 I think, roughly, we need to draw £30kpa from that pot for the next few years, reducing when Uni costs stop and DH SP kicks in, though his GARs will have deflated by then so might need to continue at that kind of level.

So, I know we are in a very fortunate position but, are we done, can we forget about working again or would top up jobs be needed? My health is not great so we would really like to travel while we can. 

Thanks in advance.



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Comments

  • NoMore
    NoMore Posts: 1,074 Forumite
    First Post First Anniversary Name Dropper
    Are you retiring now ? And you can take your DB pension at 50 with no reduction (unlikely but not impossible) ? If not then I don't see how you support a 80k p.a. without eating up all your available money until your DB pension  kicks in.


  • Yes, my scheme allows for an immediate, un-reduced DB pension over 50 if leaving on redundancy in return for a reduced severance.
  • Albermarle
    Albermarle Posts: 21,909 Forumite
    First Anniversary First Post Name Dropper
    I project our outgoings to be £80k pa (including things like 5 yearly care replacement) but likely to lower a little in a few years (currently paying Uni support).

    As you will know there have been a lot of similar posts on this forum , but that  expenditure is one of the highest I have seen. As it is after tax, it will gave be an even higher gross figure.
    Normally the figure bandied about for a very comfortable retirement for a couple is £50K.
    If you are paying all Uni fees, including Tuition fees that would explain it, although normally that is not recommended.

    As said above the details of your DB scheme are important, in assessing if you have reached the number, as the very high expenditure means it has to be a big number !
  • AlanP_2
    AlanP_2 Posts: 3,252 Forumite
    Name Dropper First Anniversary First Post
    Must agree that is a very high number for a "normal" style of living in the UK.

    Alright there is no normal I know but most people earning £100k+ before tax would typically be saving / investing a proportion of that not spending it all.

    It would seem to me that a close look at what you are currently spending and a spreadsheet looking ahead to what the income and expenditure profile will be until you are at least both at SP age would be a good exercise.

    Uni costs will drop out for example.

    One big warning sign to me is how imbalanced your retirement incomes will be.

    What would your DHs position be if you passed away first? Would he get enough spouse DB pension to not cause difficulties?

    Obviously with your other assets he isn't going to be anything like destitute but worth looking at.

    Have you considered funneling some of your settlement through a SIPP to minimise tax impact?

    Is your DH adding £3600 gross to a SIPP as he has some spare personal allowance to use up pre SP?


  • I have been very generous in my spending estimates because I want to allow for some big trips in the next few years. I am quite cautious so probably tend to would over estimate.

    We are not paying  tuition fees, only topping up to full maintenance loan so it is £5k py plus a bit. The house running costs I have estimated at £12k py - fuel alone is now £4.5 plus council tax of £3.8k (it’s only 3bed, 1 bath, no mansion!). I’ve also allowed for health insurance for me which is expensive because of pre-existing conditions. As I said, I also allowed for things like car replacement, home improvements every few years, that sort of thing.

    We have had a high income for the last couple of years but deliberately channeled what we didn’t need to pension contributions and paying off the mortgage so are not used to spending our whole salaries. Travel to work costs have also been high and will stop. 

    I am close to LTA (41 x 20 + 175 = £995k) = so didn’t think I had capacity to put severance into a pension. If there is any gap between my final LTA calc, I think I should pay severance into it and draw as part of the TFLS.

    I think DH would be fine if I passed first, he would get 50% spouse pension plus the balance of any savings. 

    He isn’t channeling £3600 into a SIPP, something to look into next tax year (this year was still working part of the tax year). 

    We definitely need to start tracking what we are actually spending. DH not keen though as long as his card still works!
  • Secret2ndAccount
    Secret2ndAccount Posts: 681 Forumite
    First Anniversary First Post Name Dropper
    edited 17 August 2022 at 5:16PM
    It's going to be far from plain sailing. You might make it, but you might have to downsize or cut back on your spending in order for your pot to last. I ran a simple model for you using very middle of the road numbers.

    You run out of money when you are 75 nd DH is 85. That's with no stock market crash, and inflation settling down at 2% and staying there. Real life never runs so smoothly, so you really need to look at some alternatives. Retire now if you want to, but be prepared to make some cutbacks if the next decade isn't as positive as the previous one.
    Edit to add: I don't think I've allowed enough for tax losses in this calculation. You say your outgoings are 80k, not your income. So it's worse than the table...
  • Eww. this gets ugly. I've charged 20% tax on the pensions. Remember part of your pot is taxable too - I haven't allowed for that.


    Now you are out of money before your State Pension kicks in. Maybe find a way to live on 70k/yr, which would prolong the projection by 12 years.

  • Chewbecca
    Chewbecca Posts: 32 Forumite
    First Anniversary Name Dropper First Post
    Ah, thank you so much secret. That’s just the spreadsheet I need & will recreate.

    I thought for a moment my state pension wasn’t included but I think it is deducted directly from the ‘drawdown needed’ pot.

    You have also made me realise 2 things, firstly you I right, I have not accounted for tax on DH’s pension, secondly I need to ensure the TFLS & severance are invested so they make a decent return, otherwise it will be even worse.

    I may cut down on the cruising plans! 

  • Albermarle
    Albermarle Posts: 21,909 Forumite
    First Anniversary First Post Name Dropper
    You have also made me realise 2 things, firstly you I right, I have not accounted for tax on DH’s pension, secondly I need to ensure the TFLS & severance are invested so they hopefully make a decent return, otherwise it will be even worse.
    I have added a word in bold.

    I may cut down on the cruising plans!  Or work longer 

  • You can perhaps pay quite a lot into a SIPP this year, and get 20% added. You will be able to withdraw it at age 57.
    You can pay in your salary, earned since April, plus your severance, less the first 30k. You actually put in 25% less than this, and it gets topped up by the taxman. If you have paid any higher rate tax, you can get out of that too - the taxman will give you back the extra 20% you paid on the top part of the earnings.
    There is an annual limit of 40k paid into all your pensions by you+your employer, but if you haven't burned up all of the last 3 years' 40k, you can use up the unused parts to allow you to go over 40k this year. You need your 'pension input amount': look at your statements to see how much your pension has grown each year. Probably <40k, so you probably have some left over allowance.
    Suppose you pay 48k into the SIPP. Gov't tops it up to 60k. Over 10 years, grows to 100k. Now you take 25% tax free, then draw 7.5k per year for 10 years, keeping yourself as a basic rate taxpayer from 67 to 77, when your SP kicks in. So you are taxed at 15% on the way out, having saved 20%/40% on the way in. Probably worth it for 5k?
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