Should i see financial advisor?

Gaz012012

Hey.

First post on this board so sorry if you have heard similar but would appreciate any advice.

Bit of background first.

Age -47
Current salary - 60k, plus potential 8k bonus. Salary increases have been good last 5 years hence disparity in pension pot below v salary.
Current value of pension - £110k
I pay in 9% 
Employer pays in 9% (all matching contributions used). Auto enrollment. 
Mortgage paid off in 10 years
Using Which Pension calculator estimates funds at £318k at 60. Drawdown for 20 years estimated at £26k for 20 years at 6% growth 
On The salary Calculator- suggests I am paying £2.3k tax on higher tax bracket
Not overly bothered about leaving any of my pension to others

Like most people I would like to retire as soon as I can - latest ideally is 60.

I am currently invested in the default strategy. Trying to determine if I should see an Advisor to understand this is the best option for me (Generally speaking are they for the average person?). Generally been happy to take increased risks financially.


Potentially taking the £26k until I hit 67 for the state pension and then reducing. We of course never know how long we will live but not the most fit person so want to get the most I can whilst alive.

Any thoughts on above? Would see a Financial Advisor be worth it?

Brie

Is there an advisor available through work?  Maybe someone associated with the pension scheme. 

Otherwise see if anyone can recommend an IFA (not an FA) so you can get some independent advice.  Can't imagine any will be interested in you as a regular client until you are much closer to retirement because your money is going into a company scheme to ensure you capture that 9% from the employer.  But you should be able to get a one hour free session and there's always the possibility that they could do a further session with suggestions for a one off fee.  No idea how much but once you've met someone you should have an idea if you think they know what they are talking about.

Gaz012012

Brie said:

Is there an advisor available through work?  Maybe someone associated with the pension scheme. 

Otherwise see if anyone can recommend an IFA (not an FA) so you can get some independent advice.  Can't imagine any will be interested in you as a regular client until you are much closer to retirement because your money is going into a company scheme to ensure you capture that 9% from the employer.  But you should be able to get a one hour free session and there's always the possibility that they could do a further session with suggestions for a one off fee.  No idea how much but once you've met someone you should have an idea if you think they know what they are talking about.

Thanks for your reply - appreciated.  I've sent a few messages to some IFAs. Do the figures seem appropriate I have quoted? All - anyone any suggestions further?

Dazed_and_C0nfused

Contributing more when it will seemingly attract higher rate relief is usually a good idea financially.

Even more so if the employer will match additional contributions.

Cus

Work out how much money you need per year when you retire.  Multiply that by 25. When you get to that number in savings then retire.
You'll find a huge amount of opinion and detail on this forum, but it basically comes down to the above at the simplest level imo.

El_Torro

An IFA is generally a good idea if you’ve got loads of cash that you don’t know what to do with. If most / all of your spare cash is in your pension I don’t think an IFA will be able to help you much.

The default fund generally has a relatively high percentage of bonds. There should be a more adventurous option which, while more volatile, should generate a better return for you in the long run. You may want to reduce the volatility when you are closer to retirement but since you are 13 years away you have some time. Remember that when you retire you won’t spend all of the investments in one go (unless you buy an annuity).

Using an IFA to help choose one of your workplace funds is not going to help you much I think. Will be expensive, if they agree to do it even.

I also think that 6% growth per year for your pension when you hit retirement is too optimistic. Remember that you have to take inflation into account. £26k in 20 years will be worth a lot less than it is today. On the face of it a £318k pension pot for a retiring 60 year old sounds too low, assuming you don’t hold any other investments or sources of income. 

Secret2ndAccount

Gaz012012 said:

Using Which Pension calculator estimates funds at £318k at 60. Drawdown for 20 years estimated at £26k for 20 years at 6% growth 

This part of your plan is very unlikely to work.
1.  You have assumed a constant 26k withdrawal with no increases for inflation. By the end of 20 years you would need maybe 50k to buy the same stuff that you were buying with 26k at the beginning.
2.   6% growth is possible, but far from guaranteed
3.  Even if you do average 6% growth, it won't be 6.0% every year. There will likely be +30% years and -30% years. If a -30% year happens to come along in year 1 or year 2 of your plan, the pot will be all gone before the +30% year has a chance to come along. It's called Sequence of Return Risk.

Your State Pension age will be 68 not 67.
If you withdraw 26k for 8 years you might have 200-225k left in your pot. This would give you a sustainable annual payout of about 7k to top up your State Pension.

If you target an income of 25k, rising with inflation, say 10k for SP, then you need 15k per year, plus 10k for 8 years. You need about 1/2million for the 15k, plus say 80k for the 8 years. You should target a pot of 600k minimum.

Increase your pension contributions to the point where you pay no 40% tax. So about 18k/yr from you by the looks of it. Once the mortgage is paid off, put the extra money into the pension too.

That still doesn't quite add up in my view. At age 60 you can decide to keep working, downsize (either your house or your income aspirations), or maybe your investments have worked well, and you can retire.