Can I Retire and Would it be Pretty?

LHW99

If the OP retires he will then be limited to £2880 SIPP contribution pa, so should take advantage of maximum possible contribution (plus carry forward) before doing so IMO. Some of the unwrapped / ISA funds could perhaps be used.

Euro_Skank

Thanks for the replies, all.

I only started the SIPP last Sept. This job has no pension, hence why I set up my SIPP.

My NIC is two years from max. contributions.

Re. the £6K pension: 

Transfer value = £6,700 This is the amount we'd send to a new provider if you transferred your pension today.

Value if you die:

£6,700. This is currently how much we'd pay out if you died.

Phoenix72

Euro_Skank said:

Thanks for the replies, all.

I only started the SIPP last Sept. This job has no pension, hence why I set up my SIPP.

My NIC is two years from max. contributions.

Re. the £6K pension: 

Transfer value = £6,700 This is the amount we'd send to a new provider if you transferred your pension today.

Value if you die:

£6,700. This is currently how much we'd pay out if you died.

Why doesn't it come with a pension? It's a legal requirement to offer one.

Either way your no.1 priority should be getting the max you can into a scheme.

Albermarle

This job has no pension,

Can you explain more about the job, as that sounds unusual.

Euro_Skank

Phoenix72 said:

Euro_Skank said:

Thanks for the replies, all.

I only started the SIPP last Sept. This job has no pension, hence why I set up my SIPP.

My NIC is two years from max. contributions.

Re. the £6K pension: 

Transfer value = £6,700 This is the amount we'd send to a new provider if you transferred your pension today.

Value if you die:

£6,700. This is currently how much we'd pay out if you died.

Why doesn't it come with a pension? It's a legal requirement to offer one.

Either way your no.1 priority should be getting the max you can into a scheme.

Thanks, I'm employed via a Middle East company. That's why I set up a SIPP which I currently pay £4K into each month. That's the max I'm talking about. 

Euro_Skank

Albermarle said:

This job has no pension,

Can you explain more about the job, as that sounds unusual.

Yes, it is indeed unusual. We used to operate under UK limited company, now we are under a different scheme as contractors. I prefer the latter arrangement to be honest. 

OldScientist

Euro_Skank said:

Hi, 

Can I retire and would it be pretty? 

I'm 53 years old, single with no kids. I have two paid-off flats. I live in one - and don't plan on moving. I collect £620 per month from the other. An old lady has been in it for ages. I could probably get more for it but I'm reluctant to raise the rent. 

I have no debt.
My investments are:
£55K in a SIPP;
£211K in index funds (in general accounts);
and £190K in ISAs.

 

I have Premium Bonds and some other shares totalling about £15K.  I know - I really ought to diversify into more bonds, but I don't know enough about them.    

I reckon my monthly expenditure needs to be about £2K. This includes average expenses for my rental property for the past five years. 

I'm extremely fortunate that I am currently able to contribute the max to my SIPP. 

So, would it be possible for me to retire anytime soon please? 

T.I.A.

Dealing with your proposed retirement in two parts, pre-state pension and post-state pension

Post state pension
Assuming your DB pension, rental income, and expenditure all rise with inflation (so we can deal with everything in today's money), then once you have your SP and DB pension you will have £12.5k+£6k+£7.5k of income per year, i.e., a total £26k per year. Ignoring tax this comes in just above your expenditure of £24k per year. Investment portfolio withdrawals might boost this a little (if there is any left after the pre state pension period - read on)

Pre state pension
You have £7.5k rental income and therefore need to make up the shortfall of £16.5k per year. This is currently a 14 year period. There are a number of potential approaches

To construct this using an inflation linked gilt ladder would currently cost about £225k (using the calculator a https://lategenxer.streamlit.app/Gilt_Ladder ). This would leave you about £230k in your investment portfolio to cover additional expenditure if and when required.

Alternatively, the historical safe withdrawal rate for a 14 year retirement in the UK (assuming a portfolio consisting of 60% equities and 40% fixed income) is about 5.5% (plus/minus at least 0.5). This would allow an inflation adjusted withdrawal of up to £26k per year - in other words enough to cover the pre state pension period.



I note that this is a rough back of the envelope calculation (e.g., it ignores tax and assumes your DB pension is fully index linked) and definitely needs some further thought. However, on this basis you can probably cover your required expenditure without having to rely too hard on your investment portfolio.

Ocelot

I have a spreadsheet that goes a little like this (amended to approximate your situation) - BOY means 'Beginning of year':

Year	Principal	Return	Int	Add (year not inc int)	Drawdown (boy)	Age (BOY)
2024	450,000	0.05	22,500.00	20,000.00		53
2025	492,500	0.05	24,625.00	10,000.00	40,000.00	54
2026	487,125	0.05	24,356.25	10,000.00	41,000.00	55

Principal is your remaining lump sum, return is a % rate on investment, 'Add' is additions to the principal that year, which may include the year's savings, pension income, rental income, inheritance, side hustle, redundancy, property/asset sales etc. Drawdown is the amount from the principal you spend that year in your retirement.  You can model various scenarios that way. Principal from 2025 is a formula to include Principal from previous year  + Int + Add - Drawdown. Drawdown in this scenario is adjusted by 1k each year to allow for inflation.

Hope this might be of some use.

michaels

OldScientist said:

Euro_Skank said:

Hi, 

Can I retire and would it be pretty? 

I'm 53 years old, single with no kids. I have two paid-off flats. I live in one - and don't plan on moving. I collect £620 per month from the other. An old lady has been in it for ages. I could probably get more for it but I'm reluctant to raise the rent. 

I have no debt.
My investments are:
£55K in a SIPP;
£211K in index funds (in general accounts);
and £190K in ISAs.

 

I have Premium Bonds and some other shares totalling about £15K.  I know - I really ought to diversify into more bonds, but I don't know enough about them.    

I reckon my monthly expenditure needs to be about £2K. This includes average expenses for my rental property for the past five years. 

I'm extremely fortunate that I am currently able to contribute the max to my SIPP. 

So, would it be possible for me to retire anytime soon please? 

T.I.A.

Dealing with your proposed retirement in two parts, pre-state pension and post-state pension

Post state pension
Assuming your DB pension, rental income, and expenditure all rise with inflation (so we can deal with everything in today's money), then once you have your SP and DB pension you will have £12.5k+£6k+£7.5k of income per year, i.e., a total £26k per year. Ignoring tax this comes in just above your expenditure of £24k per year. Investment portfolio withdrawals might boost this a little (if there is any left after the pre state pension period - read on)

Pre state pension
You have £7.5k rental income and therefore need to make up the shortfall of £16.5k per year. This is currently a 14 year period. There are a number of potential approaches

To construct this using an inflation linked gilt ladder would currently cost about £225k (using the calculator a https://lategenxer.streamlit.app/Gilt_Ladder ). This would leave you about £230k in your investment portfolio to cover additional expenditure if and when required.

Alternatively, the historical safe withdrawal rate for a 14 year retirement in the UK (assuming a portfolio consisting of 60% equities and 40% fixed income) is about 5.5% (plus/minus at least 0.5). This would allow an inflation adjusted withdrawal of up to £26k per year - in other words enough to cover the pre state pension period.



I note that this is a rough back of the envelope calculation (e.g., it ignores tax and assumes your DB pension is fully index linked) and definitely needs some further thought. However, on this basis you can probably cover your required expenditure without having to rely too hard on your investment portfolio.

Think the 6k (clarified to 6.7k) is a transfer value not an annual pension, unclear if this is DB or DC pot.

Euro_Skank

OldScientist said:

Euro_Skank said:

Hi, 

Can I retire and would it be pretty? 

I'm 53 years old, single with no kids. I have two paid-off flats. I live in one - and don't plan on moving. I collect £620 per month from the other. An old lady has been in it for ages. I could probably get more for it but I'm reluctant to raise the rent. 

I have no debt.
My investments are:
£55K in a SIPP;
£211K in index funds (in general accounts);
and £190K in ISAs.

 

I have Premium Bonds and some other shares totalling about £15K.  I know - I really ought to diversify into more bonds, but I don't know enough about them.    

I reckon my monthly expenditure needs to be about £2K. This includes average expenses for my rental property for the past five years. 

I'm extremely fortunate that I am currently able to contribute the max to my SIPP. 

So, would it be possible for me to retire anytime soon please? 

T.I.A.

Dealing with your proposed retirement in two parts, pre-state pension and post-state pension

Post state pension
Assuming your DB pension, rental income, and expenditure all rise with inflation (so we can deal with everything in today's money), then once you have your SP and DB pension you will have £12.5k+£6k+£7.5k of income per year, i.e., a total £26k per year. Ignoring tax this comes in just above your expenditure of £24k per year. Investment portfolio withdrawals might boost this a little (if there is any left after the pre state pension period - read on)

Pre state pension
You have £7.5k rental income and therefore need to make up the shortfall of £16.5k per year. This is currently a 14 year period. There are a number of potential approaches

To construct this using an inflation linked gilt ladder would currently cost about £225k (using the calculator a https://lategenxer.streamlit.app/Gilt_Ladder ). This would leave you about £230k in your investment portfolio to cover additional expenditure if and when required.

Alternatively, the historical safe withdrawal rate for a 14 year retirement in the UK (assuming a portfolio consisting of 60% equities and 40% fixed income) is about 5.5% (plus/minus at least 0.5). This would allow an inflation adjusted withdrawal of up to £26k per year - in other words enough to cover the pre state pension period.



I note that this is a rough back of the envelope calculation (e.g., it ignores tax and assumes your DB pension is fully index linked) and definitely needs some further thought. However, on this basis you can probably cover your required expenditure without having to rely too hard on your investment portfolio.

Thanks a lot for those calcs and explanation. I think I'll work on a bit more...at least until my NIC are maxed out. Thankfully I quite enjoy my job.