Look at my DIY plan, comments suggestions and criticism welcome

ali_bear

Hello

Appreciate the collected pensions and retirement wisdom available on this here forum. I have read lots and learned much. Enough to make a DIY plan for my retirement finances. I am in a good position and I know my circumstances will be more comfortable than many at this stage of life. But I have been working hard, was never married and have no offspring, so that all helps. I am humbly asking if anyone can see any mistakes I am about to make, offer suggestions etc. But I think I now have a good plan. Here goes. 

I just turned 59 and will be stopping work imminently. I have no debts, a modest lifestyle and only need about 2k a month to get by. I have a small DB pension that starts in a years time. I have a full NSP coming in 8 years time. I have over [details redacted] my workplace scheme. 

I had been planning on a flexible approach to the next couple of years, such that I would take zero pension income until late next tax year, giving me up to 18 months to change my mind and go back to work without triggering the reduced MPAA, while not missing out on the tax free allowance in any tax year. But I have realised that even if I did that, there would be no point making more big pension contributions because any more money I put in would probably end up getting taxed as pension income at 40% anyway. So in the unlikely event that I do go back into work I would be content with only saving 10k a year max into a new DC fund and paying whatever income tax was due on the salary. 

Now the plan is to convert my paid-up workplace pension into a SIPP with one of the mainstream platforms then commence FAD withdrawals this autumn.

For the next 8 years (until SP kicks in) I will take a tax free £15800 and taxable income of £47400 each year thus just avoiding higher rate tax. This is more than I need but I plan to pay in up to 20k a year into the S&S ISA during this period - depending on how much I manage to spend on living the good life! The ISA is a flexible buffer. 

After state pension age I will change direction. Stop paying into the ISA and switch to drawing on that, the DC fund and of course the SP. I may buy an annuity. 

I worked all this out using current values but can reckon on the DC fund and ISA growing just a bit faster than inflation, cash savings less than inflation. And I will review how it goes and adjust if necessary because of life situation or financial outcomes. Maybe I'll need all of the tax free cash at some point if I decide to move house or something. All I have to really think about is the choice of investment funds wrapped in the SIPP and ISA. 

Pretty good plan huh? 

Simon11

I would have retired years ago in your position!

A few thoughts- have you sorted out a will? Unless you live till 100's or go into nursing home for a long time, you are likely to have quite a lot of money left over.

Do you have a plan for later in life when you are unable to support yourself as without having a partner or off-spring, who could make financial & health decisions on your behalf if needed?

Marcon

ali_bear said:

Hello

Appreciate the collected pensions and retirement wisdom available on this here forum. I have read lots and learned much. Enough to make a DIY plan for my retirement finances. I am in a good position and I know my circumstances will be more comfortable than many at this stage of life. But I have been working hard, was never married and have no offspring, so that all helps. I am humbly asking if anyone can see any mistakes I am about to make, offer suggestions etc. But I think I now have a good plan. Here goes. 

 

Pretty good plan huh? 

But if could almost certainly be better...eg setting up 3 'small pots' you can cash in, each of no more than £10K, which means the MPAA isn't triggered and they don't count towards your Lump Sum Allowance.

If you'll be withdrawing more than half a million pounds from your DC pension over the next 8 years, then you have plenty of funds to spend some on proper financial advice - the sort you pay for, based on a full understanding of all relevant factors, rather than just a few paragraphs.

Whatever you do, have a happy and comfortable retirement. Sounds as if you've earned it!

Cobbler_tone

Personally, if I had that behind me and only needed £2k a month I would be spending it with gay abandon, without worrying too much of where it was coming from. 
I understand your motivation of trying to be as tax efficient as possible but unless you do want to splurge a lot on a property, then you are never going to spend it all. In fact, you won't spend the interest/growth.
It sounds like your retirement hobby might be financial admin. It's not the first time we have seen the (more favourable) dilemma of having more money than your lifestyle needs.
I'd personally be browsing for an Audi RS e-tron GT.

Congratulations 

leosayer

It's a good plan but not complete if you don't have an investing strategy.

You mentioned this almost as a footnote but it's a critical component even for someone in the comfortable position that you are. How are you currently invested?

Also, why are you waiting until state pension to start an annuity? If you know what your spending requirements are then why not lock that in, inflation linked? That might take some of the pressure off being almost entirely depending on investments.

kempiejon

Looks like the money is set and that also looks like all you've planned for.
For the efficiency of it 3 small pots is a good move, as said the tax free cash isn't part of the taxfree allowance which it looks like you'll be knocking on the door of.
Did you make a plan on how to fill all the time that comes when work winks away? For some I know it can be  a wrench and finding what do with ones time a struggle. I know one can slide into box sets, afternoon drinkies, sloth and expanding waistband. Which if that's your plan crack on, have a few months of glory but for the next decades I think we need to broaden one's horizons.

Then perhaps a look at the Gospel of Wealth by Carnegie https://www.carnegie.org/about/our-history/gospelofwealth/

ali_bear

Marcon said:

But if could almost certainly be better...eg setting up 3 'small pots' you can cash in, each of no more than £10K, which means the MPAA isn't triggered and they don't count towards your Lump Sum Allowance.

Is it possible to de-merge one large DC fund into 3 small pots plus the remaining, for that purpose? 

Possibly using an IFA would be a good idea, to get an annuity set up and some solid advice on the investment strategy. 

I do have a current will but I am planning on changing that, the majority going to a particular charity. 

I honestly don't think my pension will be that big, it only makes for "comfortable" according to the tables. 

I used to enjoy work but not any more at least with my current employer. I would consider doing a minimum wage feel-good job but I haven't thought of one yet. If I got a juicy job offer doing what I do now for a few years I would still be tempted. 

I'm really not in the same league as Carnegie 

Triumph13

I would be tempted to just take advantage of the current annuity rates and lock in enough to give you security for life, then it doesn't really matter what you do with the rest.  Eg if you bought an RPI indexed annuity for £600k, that would mean that once that, SP and DB were online, you'd have £3k a month post tax vs the £2k you say you need.  You'd need to take £200k of tax free cash at the same time.  £80k of that fills in for your state pension for 8 years.  The rest gets put into ISAs over the next few years.  

That leaves you £200k in the pension, £220k ultimately in ISAs and your £50k cash to do with what you will.

MK62

In the OP's apparent position (no spouse or children), I think I'd be considering an IL lifetime annuity to pay around £15k pa now.......and an 8 year collapsing IL gilt ladder to pay £12k pa until SP kicks in - that should provision the required £2k pm, net and index linked, for life.
Then implement the investment plan with the remainder.......

PS....seems I was looking at a cached version of the thread, which didn't include Triumph13's reply above.....

Marcon

ali_bear said:

Marcon said:

But if could almost certainly be better...eg setting up 3 'small pots' you can cash in, each of no more than £10K, which means the MPAA isn't triggered and they don't count towards your Lump Sum Allowance.

Is it possible to de-merge one large DC fund into 3 small pots plus the remaining, for that purpose? 

If the provider offers that facility, yes. I understand from others posting on this board that HL does (others might).

Alternatively check if the 'large' DC fund permits partial transfers; or transfers of the whole amount split up amongst different receiving schemes.

ali_bear

I looked again at some annuity quotes - prohibitively expensive!