Is retiring at 55 doable with this plan?

hildosaver

Dazed_and_C0nfused said:

hildosaver said:

JayRitchie said:

Why so much into ISAs rather than the NHS AVC scheme or a SIPP? Did you have any pensions before joining the NHS scheme?

I do have a pension prior to NHS scheme and it currently is estimating an annuity of around £4500 per year which I can access at 65. I am focusing now on building funds to enable me to bridge from retirement at 55 till I can access pension/state pension. Although I acknowledge that it may make sense to pay more into my pension or a SIPP, that won't help me in the years I'll need the income between 55 and 68 and that is what I'm trying to plan for. 

Why do you say that?  55-57 maybe but why not 57-68 🤔

Because I'm trying to keep up roughly the same amount of income from 55 till I can access state pension. If I access my DB pension at 57 instead of an annuity of lets say £21k I'd receive an annuity of roughly £12000 (I think) which is a big difference - now if I'm able to create income outside of that that would bring me close to my £30k target then yeah I would consider it but I don't think I'd be able to achieve that. Hense why I'll not be accessing it for quite a few years past 57.

Maybe I'm wrong and I need to do my sums but I think i'll need a bit more than that.

NoMore

Usually the reduction is actuarially neutral so that’s not a problem but even if you don’t want to do that you could still save into a sipp or other pension and get the tax efficiency and take it at 57. You really are paying a lot more tax than you have to because of your fixation on isa. 

hildosaver

NoMore said:

Usually the reduction is actuarially neutral so that’s not a problem but even if you don’t want to do that you could still save into a sipp or other pension and get the tax efficiency and take it at 57. You really are paying a lot more tax than you have to because of your fixation on isa. 

Thanks I'll definately take a look at that and see if it makes sense for me. I admit I'm not an expert at this sort of stuff.

Dazed_and_C0nfused

hildosaver said:

JayRitchie said:

hildosaver said:

JayRitchie said:

Why so much into ISAs rather than the NHS AVC scheme or a SIPP? Did you have any pensions before joining the NHS scheme?

I do have a pension prior to NHS scheme and it currently is estimating an annuity of around £4500 per year which I can access at 65. I am focusing now on building funds to enable me to bridge from retirement at 55 till I can access pension/state pension. Although I acknowledge that it may make sense to pay more into my pension or a SIPP, that won't help me in the years I'll need the income between 55 and 68 and that is what I'm trying to plan for. 

Is the £4,500 a year in a DB scheme or DC? It sounds like a DB scheme but its good to check.

I think you may have a slight misunderstanding about accessing private pension scheme money - at present you can draw from pensions at 57 (based on your age) - so could use that money between 57 and 68.

It's also in a DB scheme. No I know I can access the pensions at 57 but the annuity at that point would be reduced by around 60% - I'll do some sums and see about accessing it earlier but I would want to keep most of it - I think the earliest I'd be willing to access it would be 60-62 depending on the calculations - I'm going to have a 1:1 pension meeting next month so I should have a better idea of how much I would have at each age and can decide from there.

I think you are getting confused between DB and DC pensions.

DB pensions are paid according to the scheme rules and if you want to take your pension before the schemes normal pension age then it is usually reduced to reflect the fact you are asking for it to be paid for a longer period.

A DC pension is like a pot of money and with a modern scheme you can pretty much, subject to relevant tax rules, take money out as you wish.  Currently from age 55 but that is changing to 57.

With your increased taxable earnings, rental income and child you are looking like being into both higher rate tax and HICBC territory so contributions to a DC pension could be extremely tax efficient.

One slight complication could be the annual allowance limit.    Contributions to the NHS scheme are ignored for that, you need to know the pension input amount. Which is a bit complicated as it relates to the increase in value of your NHS pension and an inflation element.

hildosaver

Dazed_and_C0nfused said:

hildosaver said:

JayRitchie said:

hildosaver said:

JayRitchie said:

Why so much into ISAs rather than the NHS AVC scheme or a SIPP? Did you have any pensions before joining the NHS scheme?

I do have a pension prior to NHS scheme and it currently is estimating an annuity of around £4500 per year which I can access at 65. I am focusing now on building funds to enable me to bridge from retirement at 55 till I can access pension/state pension. Although I acknowledge that it may make sense to pay more into my pension or a SIPP, that won't help me in the years I'll need the income between 55 and 68 and that is what I'm trying to plan for. 

Is the £4,500 a year in a DB scheme or DC? It sounds like a DB scheme but its good to check.

I think you may have a slight misunderstanding about accessing private pension scheme money - at present you can draw from pensions at 57 (based on your age) - so could use that money between 57 and 68.

It's also in a DB scheme. No I know I can access the pensions at 57 but the annuity at that point would be reduced by around 60% - I'll do some sums and see about accessing it earlier but I would want to keep most of it - I think the earliest I'd be willing to access it would be 60-62 depending on the calculations - I'm going to have a 1:1 pension meeting next month so I should have a better idea of how much I would have at each age and can decide from there.

I think you are getting confused between DB and DC pensions.

DB pensions are paid according to the scheme rules and if you want to take your pension before the schemes normal pension age then it is usually reduced to reflect the fact you are asking for it to be paid for a longer period.

A DC pension is like a pot of money and with a modern scheme you can pretty much, subject to relevant tax rules, take money out as you wish.  Currently from age 55 but that is changing to 57.

With your increased taxable earnings, rental income and child you are looking like being into both higher rate tax and HICBC territory so contributions to a DC pension could be extremely tax efficient.

One slight complication could be the annual allowance limit.    Contributions to the NHS scheme are ignored for that, you need to know the pension input amount. Which is a bit complicated as it relates to the increase in value of your NHS pension and an inflation element.

Brilliant thanks this is really helpful - so do you think instead of building up savings for the next 7 years I should instead consider opening a SIPP and paying into that? Then use that to help as a bridge once I hit 57? Or should I consider the SIPP rather than the ISA till 55?

Dazed_and_C0nfused

hildosaver said:

Dazed_and_C0nfused said:

hildosaver said:

JayRitchie said:

hildosaver said:

JayRitchie said:

Why so much into ISAs rather than the NHS AVC scheme or a SIPP? Did you have any pensions before joining the NHS scheme?

I do have a pension prior to NHS scheme and it currently is estimating an annuity of around £4500 per year which I can access at 65. I am focusing now on building funds to enable me to bridge from retirement at 55 till I can access pension/state pension. Although I acknowledge that it may make sense to pay more into my pension or a SIPP, that won't help me in the years I'll need the income between 55 and 68 and that is what I'm trying to plan for. 

Is the £4,500 a year in a DB scheme or DC? It sounds like a DB scheme but its good to check.

I think you may have a slight misunderstanding about accessing private pension scheme money - at present you can draw from pensions at 57 (based on your age) - so could use that money between 57 and 68.

It's also in a DB scheme. No I know I can access the pensions at 57 but the annuity at that point would be reduced by around 60% - I'll do some sums and see about accessing it earlier but I would want to keep most of it - I think the earliest I'd be willing to access it would be 60-62 depending on the calculations - I'm going to have a 1:1 pension meeting next month so I should have a better idea of how much I would have at each age and can decide from there.

I think you are getting confused between DB and DC pensions.

DB pensions are paid according to the scheme rules and if you want to take your pension before the schemes normal pension age then it is usually reduced to reflect the fact you are asking for it to be paid for a longer period.

A DC pension is like a pot of money and with a modern scheme you can pretty much, subject to relevant tax rules, take money out as you wish.  Currently from age 55 but that is changing to 57.

With your increased taxable earnings, rental income and child you are looking like being into both higher rate tax and HICBC territory so contributions to a DC pension could be extremely tax efficient.

One slight complication could be the annual allowance limit.    Contributions to the NHS scheme are ignored for that, you need to know the pension input amount. Which is a bit complicated as it relates to the increase in value of your NHS pension and an inflation element.

Brilliant thanks this is really helpful - so do you think instead of building up savings for the next 7 years I should instead consider opening a SIPP and paying into that? Then use that to help as a bridge once I hit 57? Or should I consider the SIPP rather than the ISA till 55?

You should think carefully about what will work best for you.  But a SIPP is usually a much better option than an ISA, simply because of the extra tax benefits the SIPP has.

With a salary of £60.5k your taxable earnings from the NHS would be ~£54k.  Already well into higher rate territory.  Then you have any taxable interest or dividends not to mention your rental profits.  Which I guess are not insubstantial since you can no longer claim finance costs as a deduction from the income.

With a SIPP you are looking at basic rate relief on what you pay, so £4k from you is £5k in the pension.  And that also increases your basic rate tax band and reduced your adjusted net income (useful for HICBC).

Just make sure you understand the annual allowance limit and PIA logic if you are planning on chucking money into a SIPP.

hildosaver

Dazed_and_C0nfused said:

hildosaver said:

Dazed_and_C0nfused said:

hildosaver said:

JayRitchie said:

hildosaver said:

JayRitchie said:

Why so much into ISAs rather than the NHS AVC scheme or a SIPP? Did you have any pensions before joining the NHS scheme?

I do have a pension prior to NHS scheme and it currently is estimating an annuity of around £4500 per year which I can access at 65. I am focusing now on building funds to enable me to bridge from retirement at 55 till I can access pension/state pension. Although I acknowledge that it may make sense to pay more into my pension or a SIPP, that won't help me in the years I'll need the income between 55 and 68 and that is what I'm trying to plan for. 

Is the £4,500 a year in a DB scheme or DC? It sounds like a DB scheme but its good to check.

I think you may have a slight misunderstanding about accessing private pension scheme money - at present you can draw from pensions at 57 (based on your age) - so could use that money between 57 and 68.

It's also in a DB scheme. No I know I can access the pensions at 57 but the annuity at that point would be reduced by around 60% - I'll do some sums and see about accessing it earlier but I would want to keep most of it - I think the earliest I'd be willing to access it would be 60-62 depending on the calculations - I'm going to have a 1:1 pension meeting next month so I should have a better idea of how much I would have at each age and can decide from there.

I think you are getting confused between DB and DC pensions.

DB pensions are paid according to the scheme rules and if you want to take your pension before the schemes normal pension age then it is usually reduced to reflect the fact you are asking for it to be paid for a longer period.

A DC pension is like a pot of money and with a modern scheme you can pretty much, subject to relevant tax rules, take money out as you wish.  Currently from age 55 but that is changing to 57.

With your increased taxable earnings, rental income and child you are looking like being into both higher rate tax and HICBC territory so contributions to a DC pension could be extremely tax efficient.

One slight complication could be the annual allowance limit.    Contributions to the NHS scheme are ignored for that, you need to know the pension input amount. Which is a bit complicated as it relates to the increase in value of your NHS pension and an inflation element.

Brilliant thanks this is really helpful - so do you think instead of building up savings for the next 7 years I should instead consider opening a SIPP and paying into that? Then use that to help as a bridge once I hit 57? Or should I consider the SIPP rather than the ISA till 55?

You should think carefully about what will work best for you.  But a SIPP is usually a much better option than an ISA, simply because of the extra tax benefits the SIPP has.

With a salary of £60.5k your taxable earnings from the NHS would be ~£54k.  Already well into higher rate territory.  Then you have any taxable interest or dividends not to mention your rental profits.  Which I guess are not insubstantial since you can no longer claim finance costs as a deduction from the income.

With a SIPP you are looking at basic rate relief on what you pay, so £4k from you is £5k in the pension.  And that also increases your basic rate tax band and reduced your adjusted net income (useful for HICBC).

Just make sure you understand the annual allowance limit and PIA logic if you are planning on chucking money into a SIPP.

Thanks this is something I hadn't considered so I'll go away and do some research.

QrizB

hildosaver said:

Brilliant thanks this is really helpful - so do you think instead of building up savings for the next 7 years I should instead consider opening a SIPP and paying into that? Then use that to help as a bridge once I hit 57? Or should I consider the SIPP rather than the ISA till 55?

You're now 48, so (unless they change the rules again) you'll be able to access your pensions from age 57.

If we pretend that all your assets are cash, you'll need two years of living expenses outside of any pensions from 55-57, then you'll be able to use pensions after that.

Here's one way to model life after 57.

Allocate enough DC pension to stand in for ten years (57-67) of state pension. At current values that's about £120k. The idea being that this will bridge you through retirement until your SP is payable.

Then you work out what age to claim your DBs such that, from that age, DB and SP meet all your income needs.

And then, assuming that you've not decided to claim your DBs at age 57, see what extra DC pension you need to get you from 57 to your DB claims.

hildosaver

QrizB said:

hildosaver said:

Brilliant thanks this is really helpful - so do you think instead of building up savings for the next 7 years I should instead consider opening a SIPP and paying into that? Then use that to help as a bridge once I hit 57? Or should I consider the SIPP rather than the ISA till 55?

You're now 48, so (unless they change the rules again) you'll be able to access your pensions from age 57.

If we pretend that all your assets are cash, you'll need two years of living expenses outside of any pensions from 55-57, then you'll be able to use pensions after that.

Here's one way to model life after 57.

Allocate enough DC pension to stand in for ten years (57-67) of state pension. At current values that's about £120k. The idea being that this will bridge you through retirement until your SP is payable.

Then you work out what age to claim your DBs such that, from that age, DB and SP meet all your income needs.

And then, assuming that you've not decided to claim your DBs at age 57, see what extra DC pension you need to get you from 57 to your DB claims.

Thanks - yeah I like the idea of this - I'll need to get the calculator out and start doing the sums to see what is possible.

JayRitchie

hildosaver said:

JayRitchie said:

hildosaver said:

JayRitchie said:

Why so much into ISAs rather than the NHS AVC scheme or a SIPP? Did you have any pensions before joining the NHS scheme?

I do have a pension prior to NHS scheme and it currently is estimating an annuity of around £4500 per year which I can access at 65. I am focusing now on building funds to enable me to bridge from retirement at 55 till I can access pension/state pension. Although I acknowledge that it may make sense to pay more into my pension or a SIPP, that won't help me in the years I'll need the income between 55 and 68 and that is what I'm trying to plan for. 

Is the £4,500 a year in a DB scheme or DC? It sounds like a DB scheme but its good to check.

I think you may have a slight misunderstanding about accessing private pension scheme money - at present you can draw from pensions at 57 (based on your age) - so could use that money between 57 and 68.

It's also in a DB scheme. No I know I can access the pensions at 57 but the annuity at that point would be reduced by around 60% - I'll do some sums and see about accessing it earlier but I would want to keep most of it - I think the earliest I'd be willing to access it would be 60-62 depending on the calculations - I'm going to have a 1:1 pension meeting next month so I should have a better idea of how much I would have at each age and can decide from there.

I think others have cleared up the benefits of putting money into an AVC scheme or SIPP above an ISA.

I think there are some things to consider which would require a little more background:

- does the rental income go through your tax return or your wife's or a split between the two? Which of you pays tax on rental 3 (being the one you would retain into retirement?

- how old is your wife and would she retire at the same time as you?

- how much joint, post tax money would you look to spend each year between 55 and 68 in current prices on top of the rental income from the one remaining property? When you note £25-30k a year is that on top of the rental income?

- have you checked how many years you would each need for full state pension entitlement?