Bold leap into retirement

Smudgeismydog

I’ve just run an illustration on moneyhelper;

55 year old
10 year fixed term
£27,000 annual income required with £100,000 capital back at the end

Need a pot of £276,404

HUSKYPAL

snarffie said:

Smudgeismydog said:

snarffie said:

HUSKYPAL said:

Plan is to use about £270-280K of this to buy a fixed term 9 or 10 year annuity -  current 10yr pays £27k/a plus £100k back at the end. 

All sounds fantastic, but I don't understand this..

A fixed-term annuity with a portion of capital returned at the end of the term provides a guaranteed income for a set period, along with a lump sum payment at the end of the term.

At the end of a fixed-term annuity, the income payments stop, and you receive a maturity amount. This maturity amount is the original investment, plus any growth, minus the income already received during the term. You have several options for this maturity amount, including purchasing another annuity (fixed-term or lifetime), taking it as a lump sum, or moving it into drawdown

I understand the principle (I think), but how can £270k fund a 10 year income of £27 p/a and provide £100k at the end?  Or am I reading it wrong (probably )

Hi - Those numbers are correct currently, obviously they can change, depending on what's happening with interest rates. You can run your own numbers at www.moneyhelper.org.uk it's a useful tool - you can play around with the amount used to buy the annuity, the term and what you want back at the end.

HUSKYPAL

Smudgeismydog said:

Hello @HUSKYPAL,
It’s lovely to have you join us.

Sounds like you have a well thought out plan. I agree that the certainty of payments from the DB and annuity will make for a very calm, as you say ‘easy admin’ retirement. The fixed term annuities with a lump sum back at the end of the term are certainly looking very attractive right now, and for a lot of people they would appear to offer a great solution for bridging the gap until State Pension. Clearly rates can change in the interim, but so can investment performance, you’ll just have to re-calculate when you get there.

I guess you are planning to give notice either late 2026, or early 2027 then? I’m glad this thread has helped you work through your plans and realise you can bring your retirement forward by 2 years. 

Hi - If the numbers stack up around August/September next year, I'll likely let them know my plan. It's the kind of company that will appreciate as much notice as possible, and no reason for me to not give it. I have no issues with the company, they treat me well, just had enough of the perpetual work Groundhog day!

Kernowshep

HUSKYPAL said:

I have a £23k/a DB that is already being paid 
Likely SIPP by Nov 25 - £370k - going to take 25% without triggering MPAA to pay off my low interest 5yr mortgage (1.2%!) which expires in Nov 25 (about £90k left to pay).

Leaves about £280k in the SIPP (taxable eventually)

By early 2027 - should have about another £75-85k saved into SIPP 
We will take TFLS from this and use it as a cash buffer in case of unexpected expenses. 

Total taxable balance in SIPP would be £336k-371k depending on when I go.

Plan is to use about £270-280K of this to buy a fixed term 9 or 10 year annuity -  current 10yr pays £27k/a plus £100k back at the end. 

This would give me gross £50k/annum to keep within lower tax band and will be plenty until state pension kicks in at 67, when I also get the £100k back from the annuity. 

You could always consider getting a 10 year fix, and use the £90k between 55 and 65 (or 5 year to 60). Gives more flexibility and you could probably make money on the spread / get more into your/your wife's SIPP. 

Smudgeismydog

Personally I wanted to be mortgage free going into retirement, it’s a psychological weight off your mind. I appreciate as @Kernowshep noted you “could probably make money on the spread”, but like @HUSKYPAL, I value the simplicity and wanted in effect a clean slate to start this next chapter. 

The cash buffer can support the £2,880 contributions, if you want to do that.

MallyGirl

My quote from BUPA for private continuation of the corporate cover was a 'how much' moment! I have claimed for an arthritis consult on my knee in the last year, and it is to cover student daughter too, but £450 per month is insane! Shopping around has already halved that. Me being made redundant didn't count as a life event to get me onto OH's work scheme.
Try not to need it in the last year before you finish if this is something you want to keep in retirement.

Pat38493

HUSKYPAL said:

snarffie said:

Smudgeismydog said:

snarffie said:

HUSKYPAL said:

Plan is to use about £270-280K of this to buy a fixed term 9 or 10 year annuity -  current 10yr pays £27k/a plus £100k back at the end. 

All sounds fantastic, but I don't understand this..

A fixed-term annuity with a portion of capital returned at the end of the term provides a guaranteed income for a set period, along with a lump sum payment at the end of the term.

At the end of a fixed-term annuity, the income payments stop, and you receive a maturity amount. This maturity amount is the original investment, plus any growth, minus the income already received during the term. You have several options for this maturity amount, including purchasing another annuity (fixed-term or lifetime), taking it as a lump sum, or moving it into drawdown

I understand the principle (I think), but how can £270k fund a 10 year income of £27 p/a and provide £100k at the end?  Or am I reading it wrong (probably )

Hi - Those numbers are correct currently, obviously they can change, depending on what's happening with interest rates. You can run your own numbers at www.moneyhelper.org.uk it's a useful tool - you can play around with the amount used to buy the annuity, the term and what you want back at the end.

And keeping in mind that those numbers are not protected against inflation.  For reference inflation over the last 10 years was almost 40%, so the last year payments could be worth significantly less in real terms.

HUSKYPAL

I know it's not inflation linked, but I've tracked our costs over the past 10 years and the majority of what we spend has not increased by anywhere near 40%. The £100k return in 10 years will likely not be needed. Or will fund holidays or a new car. I'm comfortable with the plan, but appreciate there are different ways to handle it, with bigger upside, but also more risk. I'm pretty risk averse at this stage in my retirement planning, but as long as we're comfortable I'll be happy and not stressed. One of the main advantages of being retired! 

cfw1994

MallyGirl said:

My quote from BUPA for private continuation of the corporate cover was a 'how much' moment! I have claimed for an arthritis consult on my knee in the last year, and it is to cover student daughter too, but £450 per month is insane! Shopping around has already halved that. Me being made redundant didn't count as a life event to get me onto OH's work scheme.
Try not to need it in the last year before you finish if this is something you want to keep in retirement.

Indeed….we didn’t bother, & whilst that is always a gamble, so is life….we just do our best to keep healthy, and just as importantly, have fun 😎
Some pals also don’t pay for private cover, & one paid for a knee operation a while back…less than a year’s worth of your cover, I believe.

Congrats on joining us in Team Unemployable 💪
Enjoy the summer ahead 👍

Cobbler_tone

MallyGirl said:

My quote from BUPA for private continuation of the corporate cover was a 'how much' moment! I have claimed for an arthritis consult on my knee in the last year, and it is to cover student daughter too, but £450 per month is insane! Shopping around has already halved that. Me being made redundant didn't count as a life event to get me onto OH's work scheme.
Try not to need it in the last year before you finish if this is something you want to keep in retirement.

Even my corporate cover has rocketed. It is a taxable benefit that has gone from £150 to £250 in 13 months, whilst appreciating the 'real' cost is still modest. Despite using it most years (and 3 back operations - the last one 10 years ago), I have pretty much decided that I will self fund in retirement. My scheme is fully under written for pre-existing conditions and no idea if moving to a scheme post-work will continue to cover anything pre-existing. That would be a real deal breaker if it didn't. I'm expecting £400-500 PM and when you tot that up, if you have cash in the bank it is not the worst decision to self fund. Even in the unfortunate event of needing a £10k+ op...and not wanting to wait. In the past 5 years I have tennis elbow treatment, some blood tests, an MRI and some consultations. I pay for a monthly sports massage myself. It is like any insurance (that isn't the law) I guess and whether you are willing to cover the cost of something if needed.
PHC is pretty worthless in a true emergency where the NHS steps in...e.g. if you have chest pains it will be A&E. I will pay a couple of hundred quid a year for instant GP access, which is definitely money well spent.  
I think the decline in the service (and rising costs) offered by PHC is well documented, namely driven by a currently poor NHS in certain areas.
Anyone taking it out post work definitely needs to check the T&C's to make a balanced decision.
Meanwhile, my £11 a month for my dog is definitely money well spent, have you seen vet bills?!