Retirement planning - does my plan have any holes?!

Wobble101

Morning all. I’d been planning to retire in two years at 61 but having looked at the sums i now wonder if I could retire a year earlier - next year, at 60. I’d welcome thoughts on my plans!

My partner (60) is retired with a small private pension and a significant and life-limiting illness (albeit one that isn’t affecting our day to day lives much at the moment). We have one child who is at university - the plan set out below allows us to continue this. No mortgage any more.  

In terms of the ‘number’, we’re aiming for a post-tax income of £65k which is a little less than my current take home pay (factoring in the few costs I’d no longer incur). I’ve also assumed some kind of post retirement blow out (holiday etc).

I am lucky enough to have paid into 3 DB pensions. If I take 2 early, that would sum to £48k pa (I’m confident about these sums - one is from a recent quote and the other is based on discussions with an advisor - in both cases they are obviously reduced because I’m taking the pension early). I’ve assumed tax of c £7k pa would be due on these.

The third pension pays a £5k DB annual pension at age 65, plus a small lump sum (£13k) and also has a DC component worth £13k. Then state pensions would kick in, the following year for my husband (fingers crossed) and the year after for me.

So, in terms of meeting our needs, we will have five years at the start where our incoming pensions are smaller than the income we’d like. 

We have £55k in premium bonds, £65k in a cash ISA (recently transferred from an S&S ISA), £80k in S&S ISAs and £20k general savings. (Once we’ve decided what to do re my retirement I’ll take a fresh look at the funds we are in from a cash ladder perspective - they are all multi-asset funds but possibly not the most appropriate.)

Finally, my husband has a small DC scheme worth c £36k (he’s already started drawing down from this). 

Meeting our income needs would require us to take c £25k pa from these sources for the first five years, which seems doable and leaves some savings for the future.

I’d welcome any thoughts on this plans and whether it sounds feasible. The only nagging worry I have is that it’s possible one of the pensions I am planning to take early could end up in the pension protection scheme - as I understand it, the amount I get would reduce but not so much to blow the plan up.

Sorry - that was long. Thank you if you’ve read it through. 

GenX0212

No doubt somewhat a sensitive question but would you still need £65k once your partner is no longer around?
There is probably a lot to be said for enjoying what precious time you can together whilst able to do so.

Albermarle

£65K post tax income in retirement is on the high side.
Usually in these type of 'can I retire' threads, normally most people are planning on needing significantly less than that.
OK everybody is different but have you actually analysed what income you would really need, or is is just that figure because that is what you approx get now ?
Does it include a figure for estimated one off costs ( new boiler, new car, holidays etc) or is that from a separate fund?

Shimrod

Wobble101 said:

I am lucky enough to have paid into 3 DB pensions. If I take 2 early, that would sum to £48k pa (I’m confident about these sums - one is from a recent quote and the other is based on discussions with an advisor - in both cases they are obviously reduced because I’m taking the pension early). I’ve assumed tax of c £7k pa would be due on these.

The third pension pays a £5k DB annual pension at age 65, plus a small lump sum (£13k) and also has a DC component worth £13k. Then state pensions would kick in, the following year for my husband (fingers crossed) and the year after for me.

Have you considered taking some tax free cash from the two pensions taken early? As you are taking them early, you would typically expect a better commutation rate than at 65 - and as you will already be close to paying higher rate tax (before taking any other pension) the cutover point for when the higher pension would be better could be when you are quite old. 

Wobble101

GenX0212 said:

No doubt somewhat a sensitive question but would you still need £65k once your partner is no longer around?
There is probably a lot to be said for enjoying what precious time you can together whilst able to do so.

No I’m sure I would not, but I’d not be getting his SP in that case, so I’d be looking receiving £53k from my DB pensions plus my own SP, less tax.

But thank you - and I agree, enjoying the time we have is a major factor here.

Wobble101

Albermarle said:

£65K post tax income in retirement is on the high side.
Usually in these type of 'can I retire' threads, normally most people are planning on needing significantly less than that.
OK everybody is different but have you actually analysed what income you would really need, or is is just that figure because that is what you approx get now ?
Does it include a figure for estimated one off costs ( new boiler, new car, holidays etc) or is that from a separate fund?

Yes I’ve noticed that. The figure is based on what we spend now but does have some fat in it that would cover holidays and smaller trips. Bigger purchases would need to come from the savings pot mentioned in my post. 

Wobble101

Shimrod said:

Wobble101 said:

I am lucky enough to have paid into 3 DB pensions. If I take 2 early, that would sum to £48k pa (I’m confident about these sums - one is from a recent quote and the other is based on discussions with an advisor - in both cases they are obviously reduced because I’m taking the pension early). I’ve assumed tax of c £7k pa would be due on these.

The third pension pays a £5k DB annual pension at age 65, plus a small lump sum (£13k) and also has a DC component worth £13k. Then state pensions would kick in, the following year for my husband (fingers crossed) and the year after for me.

Have you considered taking some tax free cash from the two pensions taken early? As you are taking them early, you would typically expect a better commutation rate than at 65 - and as you will already be close to paying higher rate tax (before taking any other pension) the cutover point for when the higher pension would be better could be when you are quite old. 

Thank you - I had wondered about that but need to look into it further. I assume the ideal would be to aim for a lump sum that keeps my total pension amount below the higher rate threshold for as long as possible? 

Secret2ndAccount

Hate to broach the subject, but what happens if you go first?  You say partner, not spouse. Do you have up-to-date expression of wish forms in place for all your DB's? Have you figured what the entitlements are, and how the finances work? Just because one person has an illness, doesn't mean the other can't get sick or worse tomorrow.
Think about ownership of the house, and the need for up to date wills too

Albermarle

Secret2ndAccount said:

Hate to broach the subject, but what happens if you go first?  You say partner, not spouse. Do you have up-to-date expression of wish forms in place for all your DB's? Have you figured what the entitlements are, and how the finances work? Just because one person has an illness, doesn't mean the other can't get sick or worse tomorrow.
Think about ownership of the house, and the need for up to date wills too

Also it could be a DB pension scheme rules will mean it will only pay out to a spouse or Civil partner, regardless of any expression of wish forms.

Wobble101

Secret2ndAccount said:

Hate to broach the subject, but what happens if you go first?  You say partner, not spouse. Do you have up-to-date expression of wish forms in place for all your DB's? Have you figured what the entitlements are, and how the finances work? Just because one person has an illness, doesn't mean the other can't get sick or worse tomorrow.
Think about ownership of the house, and the need for up to date wills too

Should have been clear - we are married. Wills up to date, as are expressions of wish forms. The house is in my name - looking into changing that is on my list now the mortgage is paid off but if I did go first that would only be an issue if he wanted to sell quickly, wouldn’t it? 

On pension entitlements, I will need to remind myself of that - but they are ok I think.

Albermarle

Wobble101 said:

Secret2ndAccount said:

Hate to broach the subject, but what happens if you go first?  You say partner, not spouse. Do you have up-to-date expression of wish forms in place for all your DB's? Have you figured what the entitlements are, and how the finances work? Just because one person has an illness, doesn't mean the other can't get sick or worse tomorrow.
Think about ownership of the house, and the need for up to date wills too

Should have been clear - we are married. Wills up to date, as are expressions of wish forms. The house is in my name - looking into changing that is on my list now the mortgage is paid off but if I did go first that would only be an issue if he wanted to sell quickly, wouldn’t it? 

On pension entitlements, I will need to remind myself of that - but they are ok I think.

You will have to decide between being Joint Tenants or Tenants in Common.
Various pros and cons for each