Pension Plan Progress

Cala456

Hey all,

just wondering if you had any suggestions or points for me to think about.

Currently 42, roughly looking to get c£40k per annum between myself and wife and we are on track for this so mainly looking for suggestions of how to improve from here. Or any considerations or aspects I’ve not thought about.

Numbers below do not include any state pension and do not factor tax.

we have 2 children 5 + 7 years old. Current salary permits alternative saving for university, albeit not started which may elongate retirement plans from 55 or necessitate some p/t work. It would be good to understand any assumptions others have made or any steps I should start to take noon this area.

Me 

• assuming stop work @55 but I most likely will work longer. Use S&S isa to fund 55 to 60. Then access AVC / final salary pension taking TFLS from my AVC to top up.
• no mortgage by 53

Final salary pension (this was capped based on my salary some time ago with all reductions built in from 60) = Now £18.5k pa /  @55 £28k pa / @60 £32k pa

AVC (assuming 5% pa increase plus current contributions) = now £95k / @55 270k / 60 £350k

S&S ISA (assuming 5% inc plus current contributions) = now £30k / @55 £200k / 60 £0 (drawn to fund 55 to 60)

wife 

• Currently in contract work so assumes inflationary increase only without work from 2025 which is unlikely given age
• Assumes savings with no further contributions and 2% increase per year
• Reductions built into pension

db pension = now = £5.5k pa / @55 £11k pa / 60 £13.5k pa

savings = now =£15k / @55 £37k / 60 £41k

NedS

You still have quite a way to go in terms of age, and no doubt your plans will evolve over time (they always do!), but you look in good shape and making great progress towards your goals.

One thing I would do is focus on your wife's pension provision to ensure she can at the very least fully utilise her tax free allowance. She seems to be a fair way off that presently, so may be worth focusing on her contributions now, and maybe building up a SIPP for her that she can draw down on during the post-retirement gap period prior to State pensions and DB pensions kicking in.

You haven't mentioned your state pensions - have you both had online predictions and are you on course to obtain a full state pension by the time you plan to stop work? If not, how many years short will you be and you should budget to make voluntary NI contributions to make up any shortfall.

Audaxer

Working it out roughly in my head, it looks like you and your wife's DB pensions will get you just over £40k pa after tax at 60. That is in today's money but the DB pensions will have increased with inflation by the time you are 60. One thing to bear in mind is if your DB increases are capped at a maximum percentage, the increases might not keep up with inflation. 

Your S&S ISA should cover you from 55 to 60. However with inflation, I would think you will need more than £40k per year by that time, so your target in today's money for the S&S ISA should be more than £200k in my opinion. If you work past 55, you may not need that much more.

After you reach State Pension age, you should be more than okay, but worth while keeping a check on your online State Pension forecasts to make sure you are on target to get the maximum amount - currently £185.15 per week.

Albermarle

we have 2 children 5 + 7 years old. Current salary permits alternative saving for university, albeit not started which may elongate retirement plans from 55 or necessitate some p/t work. It would be good to understand any assumptions others have made or any steps I should start to take noon this area.

Under the current rules ( which may change and are changing ) it is usually recommended for the student to take the largest student loan possible. This is because there is a good chance that it will never have to be paid back, not in full anyway. So usually some top up funding from parents is all that is needed, although this can be around £5Kpa.

Also do not forget a lot can happen/change between these ages and 18, adolescence for one. There is no guarantee they will go to Uni, even if that is your wish.

Cala456

NedS said:

You still have quite a way to go in terms of age, and no doubt your plans will evolve over time (they always do!), but you look in good shape and making great progress towards your goals.

One thing I would do is focus on your wife's pension provision to ensure she can at the very least fully utilise her tax free allowance. She seems to be a fair way off that presently, so may be worth focusing on her contributions now, and maybe building up a SIPP for her that she can draw down on during the post-retirement gap period prior to State pensions and DB pensions kicking in.

You haven't mentioned your state pensions - have you both had online predictions and are you on course to obtain a full state pension by the time you plan to stop work? If not, how many years short will you be and you should budget to make voluntary NI contributions to make up any shortfall.

Thanks for taking the time to respond.

It's a good point re my wife's pension  she has been part time for a while to help with childcare but agree some focus required there.  Especially will help to mitigatepotential LTA impacts for myself.  

Cala456

Audaxer said:

Working it out roughly in my head, it looks like you and your wife's DB pensions will get you just over £40k pa after tax at 60. That is in today's money but the DB pensions will have increased with inflation by the time you are 60. One thing to bear in mind is if your DB increases are capped at a maximum percentage, the increases might not keep up with inflation. 

Your S&S ISA should cover you from 55 to 60. However with inflation, I would think you will need more than £40k per year by that time, so your target in today's money for the S&S ISA should be more than £200k in my opinion. If you work past 55, you may not need that much more.

After you reach State Pension age, you should be more than okay, but worth while keeping a check on your online State Pension forecasts to make sure you are on target to get the maximum amount - currently £185.15 per week.

Thanks for the input.  Yes I got a state pension forecast and we are both on track for full allowance so that's good. 

Re additional in my S&S ISA,  good point.  I may work for longer but I have some other savings and bonus opportunities to siphon that way over time so should be able to factor that in.  

Cala456

Albermarle said:

we have 2 children 5 + 7 years old. Current salary permits alternative saving for university, albeit not started which may elongate retirement plans from 55 or necessitate some p/t work. It would be good to understand any assumptions others have made or any steps I should start to take noon this area.

Under the current rules ( which may change and are changing ) it is usually recommended for the student to take the largest student loan possible. This is because there is a good chance that it will never have to be paid back, not in full anyway. So usually some top up funding from parents is all that is needed, although this can be around £5Kpa.

Also do not forget a lot can happen/change between these ages and 18, adolescence for one. There is no guarantee they will go to Uni, even if that is your wish.

Thanks,  yes no guarantees that they will want to progress to university but feel like it's best to plan incase they do.  I'll have a look at how to build in an approach to factor the £5k pa, appreciate the steer. 

NedS

Cala456 said:

NedS said:

You still have quite a way to go in terms of age, and no doubt your plans will evolve over time (they always do!), but you look in good shape and making great progress towards your goals.

One thing I would do is focus on your wife's pension provision to ensure she can at the very least fully utilise her tax free allowance. She seems to be a fair way off that presently, so may be worth focusing on her contributions now, and maybe building up a SIPP for her that she can draw down on during the post-retirement gap period prior to State pensions and DB pensions kicking in.

You haven't mentioned your state pensions - have you both had online predictions and are you on course to obtain a full state pension by the time you plan to stop work? If not, how many years short will you be and you should budget to make voluntary NI contributions to make up any shortfall.

Thanks for taking the time to respond.

It's a good point re my wife's pension  she has been part time for a while to help with childcare but agree some focus required there.  Especially will help to mitigatepotential LTA impacts for myself.  

Yes, if she is not working, or earning below £3600 gross, she can contribute up to £3600 gross per year, or otherwise she can contribute as much as she earns. If she then also stops working in her 50's, she can draw down on any Sipp at £16760 per year (of which 25% is tax free) to utilise her tax free allowance, so that is a no brainer, especially if you are limited in what you can contribute due to Annual Allowance or the LTA.

2nd_time_buyer

Cala456 said:

Wife 

• Currently in contract work so assumes inflationary increase only without work from 2025 which is unlikely given age
• Assumes savings with no further contributions and 2% increase per year
• Reductions built into pension

db pension = now = £5.5k pa / @55 £11k pa / 60 £13.5k pa

savings = now =£15k / @55 £37k / 60 £41k

I am probably being a bit dense but if you are assuming your wife does not work from 2025 how does her db pension increase so much?

Cala456

2nd_time_buyer said:

Cala456 said:

Wife 

• Currently in contract work so assumes inflationary increase only without work from 2025 which is unlikely given age
• Assumes savings with no further contributions and 2% increase per year
• Reductions built into pension

db pension = now = £5.5k pa / @55 £11k pa / 60 £13.5k pa

savings = now =£15k / @55 £37k / 60 £41k

I am probably being a bit dense but if you are assuming your wife does not work from 2025 how does her db pension increase so much?

Sure, no problem it's a combination of inflation increases to current pensions and a fairly good pension offering as part of current contract.  

2nd_time_buyer

Thanks, that makes sense I think

It is more normal to forecast in today's money i.e. with increases relative to inflation.

In my case, I assume 0% return above inflation.