Pensions saving strategy - recent inheritance to invest

What_time_is_it

My partner and I are both 47 and hope to retire at 55. We each have a DB pension which is claimable from age 55 (protected) with an approximate 50% reduction. We also each contribute monthly to an additional DC workplace pension. We have no children and are both in full-time work and contributing to our pension schemes. We will each have 30-35 years of full NI contributions at age 55. We have paid off our mortgage and have no other debt.

Current pensions:

Me - DB = c.£10k pa (at 100% value at NPA), increasing by c.£650 plus inflation each working year, AND £135k in a DC pot
Partner - DB = c.£5k pa (at 100% value at NPA), increasing by c.£350 plus inflation each working year, AND £25k in a DC pot

We have around £500k to potentially invest. At the moment this is in savings accounts and ISAs. 
Any advice on how we should approach this?

I think we would like an annual combined income before tax of around £30k a year in retirement. Is this possible at 55?

Thanks!

El_Torro

Your £500k will last 16 years if you spend £30k a year. So if you retire at 55 you have enough money to keep you going until you get your state pension and DB pensions. This doesn't take into account inflation or investment returns but it shows that your target to retire at 55 looks realistic. 

To make your money last longer I would take full advantage of Stocks & Shares ISAs. This is £40k per year taken care of. It's probably worth you both opening SIPPs. You can't access them until you're 57/58 so don't rely on pensions solely, that's where the ISAs kick in. 

Since you are planning to retire in 8 years I wouldn't just shove it all into global trackers. I would put at least some of the money in less volatile investments, or even cash. As always some of your money should be in cash in an emergency fund to cover unplanned eventualities.

dunstonh

We also each contribute monthly to an additional DC workplace pension. 

Does that have a protected age?

We have around £500k to potentially invest. At the moment this is in savings accounts and ISAs. 
Any advice on how we should approach this?

Possibly a mixture of pension, S&S ISA and offshore bond with a small bit in GIA with annual CGT allowance used.

Too little info to say really.

Albermarle

We have around £500k to potentially invest. At the moment this is in savings accounts and ISAs. 
Any advice on how we should approach this?

The question that comes to mind, is that why now suddenly?

You currently have half a Million Pounds in safe savings accounts, and safe Cash ISA's ( is that correct?).

You are now talking about investing it all. That is quite a change !

Some people are naturally cautious and prefer to stick mainly with savings, despite the inflation risk. Others like to invest in stock market related investments and ride out the volatility, as historically they have produced better returns.

A more typical/middle of the road type approach is to have a mixture of savings, pensions and other medium risk type investments.

eskbanker

Albermarle said:

We have around £500k to potentially invest. At the moment this is in savings accounts and ISAs. 
Any advice on how we should approach this?

The question that comes to mind, is that why now suddenly?

The answer being in the thread title!

What_time_is_it

Thanks for the responses guys.
Answers to questions - Yes, the DC elements of our current pensions are also available to claim at a "protected" age of 55. For now anyway! And, the reason we are now thinking about it that we have recently sold an inherited property. The money is in savings and cash ISA while we think things through. Our pensions seem like a good options for investing in, but as someone pointed out, it does make sense to have a balance between different things.
Would a SIPP be a good option? Any recommendations?

Albermarle

What_time_is_it said:

Thanks for the responses guys.
Answers to questions - Yes, the DC elements of our current pensions are also available to claim at a "protected" age of 55. For now anyway! And, the reason we are now thinking about it that we have recently sold an inherited property. The money is in savings and cash ISA while we think things through. Our pensions seem like a good options for investing in, but as someone pointed out, it does make sense to have a balance between different things.
Would a SIPP be a good option? Any recommendations?

A DC pension is a good way to invest for retirement, due to the tax relief. However you can not add more to a pension than you earn, and there are annual limits as well. So you can not just plonk £100k in one.
A SIPP is just a type of DC pension, with more choice of investments. Depending on your investing experience something simpler might be better.
At the end of the day what matters is how the money is invested within the pension, the actual pension provider is only of secondary importance.
With such a large amount of money have you considered talking to an IFA?

Albermarle

eskbanker said:

Albermarle said:

We have around £500k to potentially invest. At the moment this is in savings accounts and ISAs. 
Any advice on how we should approach this?

The question that comes to mind, is that why now suddenly?

The answer being in the thread title!

Oops. Senior Moment  !

Linton

What_time_is_it said:

My partner and I are both 47 and hope to retire at 55. We each have a DB pension which is claimable from age 55 (protected) with an approximate 50% reduction. We also each contribute monthly to an additional DC workplace pension. We have no children and are both in full-time work and contributing to our pension schemes. We will each have 30-35 years of full NI contributions at age 55. We have paid off our mortgage and have no other debt.

Current pensions:

Me - DB = c.£10k pa (at 100% value at NPA), increasing by c.£650 plus inflation each working year, AND £135k in a DC pot
Partner - DB = c.£5k pa (at 100% value at NPA), increasing by c.£350 plus inflation each working year, AND £25k in a DC pot

We have around £500k to potentially invest. At the moment this is in savings accounts and ISAs. 
Any advice on how we should approach this?

I think we would like an annual combined income before tax of around £30k a year in retirement. Is this possible at 55?

Thanks!

In deciding where to keep your lump sum a key factor is when you will want to access it - the "when" may be a series of future dates spread over an extended time period.

Money you need in the next small number of years should be held in or close to cash.  Very long term periods  during which inflation could become a major concern would be more sensibly covered by higher risk equity (share funds).

The safest but not necessarily the most lucerative nor the most flexible option could be an annuity. On the other hand since you already have your desired income after SPA from SP and DB pensions you will just need £30K/year for ages 55-67 which is well below your £500K pot.

For a fee an IFA would be able to provide you with an investment proposal configured to meet your specific needs.

What_time_is_it

Linton said:

What_time_is_it said:

My partner and I are both 47 and hope to retire at 55. We each have a DB pension which is claimable from age 55 (protected) with an approximate 50% reduction. We also each contribute monthly to an additional DC workplace pension. We have no children and are both in full-time work and contributing to our pension schemes. We will each have 30-35 years of full NI contributions at age 55. We have paid off our mortgage and have no other debt.

Current pensions:

Me - DB = c.£10k pa (at 100% value at NPA), increasing by c.£650 plus inflation each working year, AND £135k in a DC pot
Partner - DB = c.£5k pa (at 100% value at NPA), increasing by c.£350 plus inflation each working year, AND £25k in a DC pot

We have around £500k to potentially invest. At the moment this is in savings accounts and ISAs. 
Any advice on how we should approach this?

I think we would like an annual combined income before tax of around £30k a year in retirement. Is this possible at 55?

Thanks!

In deciding where to keep your lump sum a key factor is when you will want to access it - the "when" may be a series of future dates spread over an extended time period.

Money you need in the next small number of years should be held in or close to cash.  Very long term periods  during which inflation could become a major concern would be more sensibly covered by higher risk equity (share funds).

The safest but not necessarily the most lucerative nor the most flexible option could be an annuity. On the other hand since you already have your desired income after SPA from SP and DB pensions you will just need £30K/year for ages 55-67 which is well below your £500K pot.

For a fee an IFA would be able to provide you with an investment proposal configured to meet your specific needs.

Thanks. I think we will need the £30k a year for 15 years, maybe more. I don't think that the state pension will be available to me until at least age 70 and it could well be means tested or reduced by then too. 

Drawdown of funds does seem like our best option, and I like the idea of mixing between equity investments and cash savings for a while at least.

xylophone

Have you both checked your state pension forecasts?

What is shown at "estimate based on your NI contributions to 5/4/23"?

https://www.gov.uk/check-state-pension