DB 15k at 60 or 20k 65?

BENNZ787

My first question on this forum. 

I’m 57 and have the title options to consider. 

I realise I’m not providing much info but as your answers/questions arise I will answer as best I can. 

I’ve been a lurker for quite some time and have been impressed with the quality of forum debate. 

Thanks in advance. 

p00hsticks

BENNZ787 said:

My first question on this forum. 

I’m 57 and have the title options to consider. 

I realise I’m not providing much info but as your answers/questions arise I will answer as best I can. 

I’ve been a lurker for quite some time and have been impressed with the quality of forum debate. 

Thanks in advance. 

First set of questions off the top of my head are:

Are you still working ? If so how much do you earn and when do you plan to retire ?
What is your 'number' - the amount that you think you will need to live on in retirement ?
Will you be entitled to a full state pension at 67 ? 
Do you have any other pensions that will come into effect later ?
Are you married / with a partner and if so what is their pension provision like ? 
What level of savings do you currently have ?

BENNZ787

Still working and net £125k. Plan to go at 59/60, allowed to work to 65. 

I work in the UK but live overseas and have been doing this for 27 years. 

6 more years give me full SP. but I only pay class 2 so it’s dirt cheap. 

From age 65 I have a foreign pension of £23k for life. My wife the same. We have no kids. 

I also have £900k DC pot. 

Savings £80k cash. Wife has also but won’t tell me how much! She’s 52. 

My wife has always been career woman but I’ve never wanted to know what she has - I have only one concern that she will be ok when I’m gone. Although who knows but she is younger, smaller, and her family genes seem pretty good so there’s every chance it is me first. 

We own our home overseas and a flat in London that gives us £12k net. 

I’m asking all this because I recently had a career disappointment and it’s highlighted that I wish to go sooner rather than later. 

How much for retirement? Not sure but the figure goes down all the time because life is becoming simpler and cheaper. Having experienced quite a bit of luxury travel, etc we actually prefer cheaper hotels and as my wife says, once she could afford the luxury handbags etc, she no longer has an interest. 

Same with restaurants etc, they’re far more enjoyable when they are an occasional treat rather than everyday experience. But each to their own so I’m not criticising those with different ideas. 

tacpot12

Another importnat question is when does your wife think she might want to retire, and is she happy for you to retire before she does? Are you happy to retire before she does, as this means you might still be constrained as to when she can get time off work for holidays?

OldScientist

One key question is how much do you expect to spend in retirement? since a number of decisions then flow from this.

If I understand your position correctly, you (ignoring your wife for the moment) will have a full SP (~£12k), a foreign pension worth £23k (is that inflation adjusted?), and a DB pension worth either £15k or £20k (again, is that inflation protected?).

That means in the long-term you would have a baseline income of either £50k or £55k depending on when you take your DB pension. Assuming a 3% 'safe' withdrawal rate from your DC pension this would potentially provide a further £27k or so (an RPI annuity is also a possibility).

If you expect your expenditure to be less than £50k, then it probably doesn't matter whether you take your DB pension early or not. If you expect your expenditure to be greater than £50k then it might matter more since there is a compromise between having less income earlier (which means spending more from your DC pot) or more income later (which means spending less).

BENNZ787

Thanks for the responses. 

The £23k is fixed or there is an option to take less and then have it adjusted upwards annually with inflation. 

The company scheme is adjusted up to 5%. 

Finally, for those who have retired does up to £50k provide for a nice retirement? Bearing in mind I have no expensive hobbies or club memberships and try to eat a normal, reasonably healthy diet. Don’t even drink much. To be honest we have a fair bit more but I’m trying to think of worst case. 

We do pay about £4.5k annually for service fees where we live, but you get quite a bit for it, especially compared to the UK.

Likely to remain overseas but haven’t discounted coming back to UK. All my finances mentioned have been earned and based in the UK. Using St James for my pension pot. 

And back to the question of how much we need in retirement I find it hard to answer. I can spend money easily enough if you give it to me but I don’t need to. Beyond a certain amount I don’t find it provides any extra happiness and normally I’m irritated when I’ve bought something I don’t need (like a gadget when the old one was fine). So I would say what I’ve spent over the years has a lot of room to be reduced with no negative effect on my happiness and possibly an upside.

I suppose what I’m ultimately asking is now ok to be going or at least 59? 

k6chris

OldScientist said:

One key question is how much do you expect to spend in retirement? since a number of decisions then flow from this.

If I understand your position correctly, you (ignoring your wife for the moment) will have a full SP (~£12k), a foreign pension worth £23k (is that inflation adjusted?), and a DB pension worth either £15k or £20k (again, is that inflation protected?).

That means in the long-term you would have a baseline income of either £50k or £55k depending on when you take your DB pension. Assuming a 3% 'safe' withdrawal rate from your DC pension this would potentially provide a further £27k or so (an RPI annuity is also a possibility).

If you expect your expenditure to be less than £50k, then it probably doesn't matter whether you take your DB pension early or not. If you expect your expenditure to be greater than £50k then it might matter more since there is a compromise between having less income earlier (which means spending more from your DC pot) or more income later (which means spending less).

This is by far the most important question.  For some people, living off £30k pa now that (for example) their mortgage is paid off, is a very comfortable retirement.  For others it might seem like abject misery.  Spend some time with a spreadsheet and go through what you have spent in the last 2-3 years, to try and get a realistic view of what you will need.  Include things like car replacement, holidays, gifts, house repairs, clothes etc.  Honesty is really important.  There is a thread on the forum called The Number which should help.  Good luck!

PootleF

I’m a bit younger than you but expect to be in a similar position in both DB and DC terms by around your age. 

My thinking at the moment is that I will take the higher DB amount later. My DB increases with CPI whereas my investment returns on DC are unknown, so the higher DB is my ‘insurance’ for living much longer than average life expectancy, meaning I can spend a higher proportion of my DC pot doing fun stuff earlier 

p00hsticks

BENNZ787 said:

Finally, for those who have retired does up to £50k provide for a nice retirement? Bearing in mind I have no expensive hobbies or club memberships and try to eat a normal, reasonably healthy diet. Don’t even drink much. To be honest we have a fair bit more but I’m trying to think of worst case. 

Everyone has their own individual 'number' - what constitutes a nice retirement for some would seem frugal to others, so this is probably something you need to sit down and work out for yourselves, especially as it will depend on prices, costs etc wherever you are based overseas - most here are UK based so costs (e.g.heating, taxes, general cost of living) may be completely different to your lifestyle where you are. 

BENNZ787

Thanks everyone. Food for thought. Although the living expenses is quite hard to figure out with my lifestyle of travelling to the UK and then travelling some more as part of my job. Obviously in retirement I won’t be maintaining that type of lifestyle. 

I think this comment covers my thinking nicely: “investment returns on DC are unknown, so the higher DB is my ‘insurance’ for living much longer than average life expectancy, meaning I can spend a higher proportion of my DC pot doing fun stuff earlier “
Just out of interest PootleF do you consider yourself comfortably off with the financial position you’re in? 

Albermarle

This a well known study of retirement income/living standards.
Home - PLSA - Retirement Living Standards

Although 'study' might not be quite the right word as its methodology does not seem that robust.
When it has been discussed on the forum before the most commonly expressed opinion is that figures are rather high, at least for the 'Comfortable ' retirement.  Note that figures are for income after tax and with no rent or mortgage costs.
'Which' produce a similar report, although their figures are quite a bit lower.