Pension and retirement planning advice please

Summerbulbs

I am 54 years old and would like to retire at 60. I’ve been working at a university for the last 15 years and at 60 the teachers pension calculator suggests I will be able to access £18k per annum. I have £50k in cash isas and approx £100k across two Sips. I have no mortgage and a have circa £1200 a month that I have ‘spare’ each month which I would like to make work for me to enhance my pension. My magic number is £35000 by the time I am 60.  Is this possible ? where is the best place for my £1200 per month ? How do i draw down on the pensions and cash etc to maximise interest etc? Any help gratefully received… I’m not the most financially literate, thank you !

Albermarle

Normally adding more to a pension is the best way to increase your retirement pot/income due to the tax advantages.( even better if you are a higher rate taxpayer) 
You maybe able to buy extra pension income in your current scheme, but I am not sure about that and you would need to check.
Otherwise you could just add to one of your SIPP's
At first glance £35 K after tax from 60 looks like too much of a stretch, but once the state pension kicks in then you could be OK.
Some people take more from their SIPPs in the years before the state pension starts and less afterwards, but you have to be careful how you calculate the amounts without risking your money running low in later years.
It also depends on how your SIPPs are invested and well they do.

I think if you are going to manage the situation efficiently, you are going to have to address this issue ;

 I’m not the most financially literate, 

Or get some professional advice.

TheTelltaleChart

I also don't know whether buying extra teachers pension is an option at all, or a good one.

However, failing that, a SIPP is the obvious way forward. You could plan to bridge the gap before your State Pension starts (probably at age 67?) with the help of the 25% you can withdraw tax-free when you take benefits from the SIPP, while buying an index-linked annuity with the remaining 75% to provide a permanent income (to supplement the teachers & state pensions).

£1200 a month into a SIPP for 6 years would add £86.4k plus whatever tax relief is applicable. With £100k already in SIPPs, and also ignoring investment growth, that gives you £186.4k in SIPPs at age 60. The 25% tax-free lump sum would be £46.6k, and the other £139.8k could be used to buy an index-linked annuity.

That annuity would (at current rates for a 60-year-old, of c. 4.5%) pay c. £6.3k per year, increasing with inflation. Combined with £18k teachers pension, and £11.5k state pension, that's £35.8k.

That only leaves filling in the 7-year gap (from 60 to 67) until state pension begins. Before that, your pensions would only be £24.3k. So you'd need to spend about an extra £11k per year. That could be taken from the £46.6k lump sum (for 4 years or so), and then by dipping into the £50k you have in cash ISAs, depleting it to c. £20k before your state pensions kicks in.

So that was doable, if a bit tight, but then it ignored tax relief and assumed zero investment returns, so in reality it might work out a bit better. (EDIT to add: though I also ignored tax on pensions, so if you meant you want £35k after tax, that works the other way.)

Marcon

Summerbulbs said:

I am 54 years old and would like to retire at 60. I’ve been working at a university for the last 15 years and at 60 the teachers pension calculator suggests I will be able to access £18k per annum. I have £50k in cash isas and approx £100k across two Sips. I have no mortgage and a have circa £1200 a month that I have ‘spare’ each month which I would like to make work for me to enhance my pension. My magic number is £35000 by the time I am 60.  Is this possible ? where is the best place for my £1200 per month ? How do i draw down on the pensions and cash etc to maximise interest etc? Any help gratefully received… I’m not the most financially literate, thank you !

So you want to almost double your pension provision in the next 6 years and need a tutorial of how to then access those funds in a tax efficient manner, all based on a couple of lines of information...

There are no such things as magic numbers any more than there are magic money trees (although I live in hope on both counts!), but some proper financial advice is worth paying for. It could stop you making some unwise investment decisions, and maximise your chances of at least uncovering a little money bush which could get you nearer to your target than might otherwise be the case.

leosayer

Becoming literate in pensions, investments, risk and taxation takes a long time and dedication. For most on this board it is either their full time job or effectively a second job and has been for years.

You need to get moving quickly as the next few years are critically important for maximising the available opportunities but without risking what you have already accumulated.

Go and see an IFA.

Albermarle

leosayer said:

Becoming literate in pensions, investments, risk and taxation takes a long time and dedication. For most on this board it is either their full time job or effectively a second job and has been for years.

You need to get moving quickly as the next few years are critically important for maximising the available opportunities but without risking what you have already accumulated.

Go and see an IFA.

Becoming literate in pensions, investments, risk and taxation takes a long time and dedication

To learn all the finer points maybe, but a basic understanding is not that difficult. It is not rocket science.  I think it is as much about being generally interested in money matters, and being reasonably numerate.

 For most on this board it is either their full time job or effectively a second job and has been for years.

Although there are clearly some who work/have worked in the sector and a few who clearly have put the hours in, I would not say that would apply to most regular contributors.

Go and see an IFA.

Probably good advice in this particular case.