Mid-life musings

marathonic

Bumblingbee said:

I gave the pension provider a call today who confirmed on the other pension the platform fees are 0.17% on my balance up to £25.5k (rounded for ease) and 0% there after. Therefore it looks like I'll need to do regular transfers from the one I actively pay into into the one with lower fees 

That's a crazy low fee. Not sure how they can run a platform with fees capped at £42.50 per annum. Well done if accurate.

cfw1994

Bumblingbee said:

I've started this thread for me to try to gain a bit of clarity on what I am aiming for pension wise and whether we're heading in the right direction. I'm not sure my thread fully fits here as I / we really are working towards being mortgage free, financially independent, being prepared for retirement and hopefully pulling back on work at some point. 

So if you don't mind thoughts that aren't fully thought through please join me, and please share your views and thoughts along the way

Current situation - Both late 30s with two young children 3 and under, we've previously been mortgage free prior to buying our current home and have done significant work on it which is now finished. We intend to become mortgage free again in hopefully the next 6 or so years, but really keen to focus on what I/ we need to do to have enough to retire so we can either go part time or not care too much about our jobs and what happens to them. 

So starting with the pensions, we have 

Me: 2 x current pensions £209,000 (L&g) and £57,500 (Aegon), and expect to have c£75,000 which I will be adding to this in the next few months, so lets assume that happens. Total £341,500

Current contributions £18,620 p.a salary sacrifice inclusive of employer contribution, and cannot be increased so any additional payments have to be made direct

Husband: £172,000 (L&G) contribution 10% of salary plus employer contributions - don't have further info to hand at this stage. 

Total pension pot combined = £513,500

Now I need to work out how much we need every year.. will post that separately

Have to say you appear to be doing very well for your young age - well done 👍

Those funds have still more “time in the market” to grow, and assuming you continue to contribute, I would expect the pot to be very solid by the time you can access it.  

Of course none of us know if/how the rules on access might change over the coming decades (or even month 😉)

I would not desperately focus on clearing the mortgage: sure, maybe overpay a little, but I assume you may live there some time, & the mortgage is cheap money compared with what any investments should gain you.  I would suggest many who focus on that perhaps wish they had focussed more on the longer term pension & savings gains available elsewhere 🤷‍♂️

I would perhaps add some spare to ISA funds (in stocks & shares, not cash) # that can be the money that could help bridge any gaps to help with early retirement.   I imagine you will have access to your pensions no younger than 57 (& maybe a bit later🤷‍♂️), so having a useful pot that could give you the money to stop earlier might be useful.
Also useful to have access to funds for things for the offspring - expensive little creatures 🤣👍

Bumblingbee

marathonic said:

Bumblingbee said:

I gave the pension provider a call today who confirmed on the other pension the platform fees are 0.17% on my balance up to £25.5k (rounded for ease) and 0% there after. Therefore it looks like I'll need to do regular transfers from the one I actively pay into into the one with lower fees 

That's a crazy low fee. Not sure how they can run a platform with fees capped at £42.50 per annum. Well done if accurate.

Yes, I agree. It is definitely accurate as I spent a long time on the phone with someone who was trying to find the details for me and the fees add up accordingly. I have now got a copy of the paperwork, but oddly it doesn't say it's capped at the £25.5k but the transactions support that it is. My previous employer is a big company and focused on staff benefits so I know they negotiated - we didn't pay any platform fees whilst employed by them, so perhaps that is why?

I now think I need to regularly transfer from the SIPP back into this one as I'm happy with my fund choice so it means less active management from me and lower fees. On the paperwork the fees are covered under the header 'Insured Arrangement' However the paperwork says the following under the title 'self invested arrangement'. Does self invested arrangement mean a SIPP / where you pick outside of the standard funds offered? Or would I be subject to a charge of £200 for any adhoc payments in? Grateful to anyone who can help clarify! 

Bumblingbee

Have to say you appear to be doing very well for your young age - well done 👍

Those funds have still more “time in the market” to grow, and assuming you continue to contribute, I would expect the pot to be very solid by the time you can access it.  

Of course none of us know if/how the rules on access might change over the coming decades (or even month 😉)

I would not desperately focus on clearing the mortgage: sure, maybe overpay a little, but I assume you may live there some time, & the mortgage is cheap money compared with what any investments should gain you.  I would suggest many who focus on that perhaps wish they had focussed more on the longer term pension & savings gains available elsewhere 🤷‍♂️

I would perhaps add some spare to ISA funds (in stocks & shares, not cash) # that can be the money that could help bridge any gaps to help with early retirement.   I imagine you will have access to your pensions no younger than 57 (& maybe a bit later🤷‍♂️), so having a useful pot that could give you the money to stop earlier might be useful.
Also useful to have access to funds for things for the offspring - expensive little creatures 🤣👍

Yes our funds have plenty of time to grow with the market, but I'm assuming we won't be contributing at the same level for the entire time. I don't want to work this hard forever 🤣 so we're trying to get them to a position where they will just tick over, and we'll have a comfortable retirement.

The ship has sailed on the mortgage really, we'll have cleared it in the next 3-4 months. I know that we could have gained more in investments but due to the point above I just want to live a financially secure life where I work to live and not live to work. As you highlight now though its time to focus on the mid term and build some wealth and hopefully set up our children's financial futures, so I'm thinking specifically S&S ISA's and LISAs for us, SIPPs for the children and topping up their S&S JISAs which I make very small contributions to currently. I will be pretty much maxed out on my pension contributions once I top up my pension, my husband will have some allowance spare but I think for now we maybe look to the mid term. We won't be able to access pensions until 58 as it stands. 

These thoughts as you say are subject to the budget 😬

cfw1994

Bear in mind a LISA can only be paid in to the age of 50, & then cannot be accessed until 60, so whilst the Gov uplift is nice, you may prefer money you can access sooner.
Your call though!

Juno_Moneta

Apologies if I missed it amongst all the replies - but you did say on page 1 under Expenditure “What have I missed?” - so just checking inflation isn’t being overlooked. I expect you feel your pension pot will grow enough to cover this too on top of any natural growth. But just to flag using one of the many online calculators :

“Thus, after performing these calculations, we find that something costing £100 today would cost approximately £181.14 in 30 years if there is an average annual inflation rate of 2%.”

So for example your Council Tax of £227 a month now (an expense notorious for above inflation increases per year) could be £411+ a month in 30 years. 

And one more observation (and the MSE crowd who like to moan about any speculation can just go and read something else while we enjoy our adult conversation) you mention earlier that you ‘think it's unlikely that the state pension would be abolished’ - and I agree but there are many other things that ‘might’ happen in your 30 year timeline such as the state pension becoming means tested - in which case you, and many others, could find their success with private pensions costs them when it comes to a state pension. Nothing is guaranteed especially when governments are involved!

Pipthecat

Bumblingbee said:

Ok, how much do we need?? What have I missed? Too generous or too prudent? Thoughts welcome

Your children maybe.  I'm 53 and have a 17 and 19 year old.  They get expensive with things like cars, car insurance,  uni and much more to come as they get older.   I'm very happy to help them but never factored how much they would impact my salary just when I was hoping to stuff my pension with surplus cash.  I have gone from thinking about early retirement to now retiring later as I want to be in a position to continue to help them.

jim8888

Bumblingbee said:

Ok, how much do we need?? I have used our current income and expenditure and just amended slightly - I'm assuming that we'd maintain our current lifestyle, yes we'll be much older and things may change slightly but given retirement is c30 years away it seems a reasonable place to start. I've removed mortgage and life insurance, adjusted water down slightly, left G&E the same, adjusted food and fuel down slightly, and added a miscellaneous of £500p.m to cover eating out, entertainment, clothes etc over the £50pm as there's no value in really guessing how much they would be independently given our life will be significantly different to now.

So broadly £30,000 per year? What have I missed? Too generous or too prudent? Thoughts welcome.

It's good that you are budgeting for "miscellaneous" spending. Years ago I decided to start tracking the money we were spending over and above all our "known" expenditure on a monthly basis. Things I was classing as "this and that" - the odd meal out, the lawnmower service, the car tyre etc.. - which I'd dip into our savings to fund. I was shocked when I realised that every month I was shelling out around 20% over and above our budget to fund "this and that", and that rule of thumb has stuck with me now for decades. I account for everything that is definitely coming off and, every month, I'm still spending up to 20% above it!

MallyGirl

I have started tracking under various headings this year. The miscellaneous column this month has included a replacement kettle, a replacement security light and a replacement Sonos amp that all died. Maybe we had a power surge - maybe it was just because they were all 12+ years old. Thankfully we won't need to budget that carefully once in retirement.

barnstar2077

I'm going to start tracking any purchase or service over £100 next financial year.  I already have my monthly budget, but think it will be quite insightful.  I've had a few big buys recently that have made me rethink about the size of my needed house maintenence and white goods budget in retirement.