Sense check, Accumulation to Deaccumulation

Workerbee999

We have been happy managing our own accumulation for retirement- with lots of help from this forum. But a bit less sure now we are nearly ready to retire and would welcome a sense check of the plan and if there are things we have not thought of. I have tried to include all relevant info but it has made the post very long, apologies.

1) Outside of financial, do we have a plan? Yes, retiring to rather than from, hobbies and travel planned, getting fit while still working, OH retired a year ago, now 55. I plan to retire in a year at 56, current earnings planned to fund house move and some significant travel. Savings already put aside for house deposit for son. Happy with planned retirement dates.

2) Do we know our number and will we have enough? Yes I think so, combined number is £6,250 pm net. Both will have full SP at 67. 

 OH: £41k DB NRD 63 plus 3x pension in payment as TFLS (so reduces if pension taken early). Inflation increases max 5% in deferral and payment. 2/3rds spouse pension. Attached AVCs that can be taken as part of TFLS approx £65k. Not 100% sure on the commutation factor depending on how AVCs have been taken into account, somewhere between 16-20 but will ask. Also has crystallised SIPP with £90k left after taking £30k TFLS. Won’t work again so reduced annual allowance after taking taxable cash is not an issue.

Me: Still accruing DB, no carry forward left and DB uses annual allowance after adding £12k AVC later this year. 3x DB totalling £40k. 

£2k @ 65, don’t know details 
£22k at NRD 60 (£15k linked AVCs, max increase in deferral average 4%, fixed at 2.5% in payment,      50% spouse pension. Not sure on commutation rate or if spouse pension changes if pension is taken early). 

£16k at NRD 62, will be £60k linked AVCs, uncapped inflation increases, TFLS £16k. 50% spouse pension. Commutation rate 12:1.
DC/SSIPs total £580k. In process of taking max TFLS - not needed for retirement, always planned for house move. £200k global stock tracker, rest in MMF or cash.

Combined cash savings -ISAs etc, £300k

3) Current plan
Drawdown my SIPP/DC to 40% tax band annually after retirement next year then top up DBs to this as they start. Any DC left is contingency. Don’t take DBs early as it will be hard to get the DC out without paying 40% tax
Consider taking OHs DB now or in a year or two, maybe with max lump sum. Asking for quotes with some concern over budget impact on TFLS. SIPP to be exhausted to top up without paying 40% tax and combined to ensure at least personal allowance is drawn each year.
Some of the TFLSs or AVCs will need to be held back to fund the gap between net pensions and our monthly “number”.

4) Concerns
Balancing pensions so not too much back-ended when older = main consideration for timing and proportion of TFLS of OHs. Don’t want to pay 40% tax unnecessarily although is a risk when one of us is left.

Maximising benefit of TFLS but balancing with proportion of guaranteed income. Don’t want to really worry about investment income when old but want to enjoy life.

Inheritance less of a concern as son will get house - DB pension would make a big contribution to care costs. Don’t want son to face an inheritance tax bill though once pension are subject to IT so another benefit of exhausting DCs first and have higher DB - but then it dies with us.

Inflation risk for DB above caps - one of mine is uncapped, one fixed to 2.5%, how to best decide which one if taking any early. Risk of going into 40% tax with SP if bands don’t increase in the future.

Balancing level of guaranteed income when one of is on our own - in particular will OH have enough if we take that early?

How to best manage cash outside pension - a lot will be spent on house move and travel, maxing ISAs, maybe premium bonds, low coupon gilts ( heard of them but don’t really understand).

What else do I need to consider? I’m lost in spreadsheets trying to work out the optimum combination…..

Marcon

A couple of months ago you posted this happy news: 'Firstly, due to a one-off bonus windfall I am likely to have total taxable income of around £220k this year.'

Workerbee999 said:

How to best manage cash outside pension - a lot will be spent on house move and travel, maxing ISAs, maybe premium bonds, low coupon gilts ( heard of them but don’t really understand).

What else do I need to consider? I’m lost in spreadsheets trying to work out the optimum combination…..

Probably not a good idea to invest in something you have heard of but don't understand - how can you judge if such a product will help you achieve your goals if you don't know what it does?

Maybe now is the time to invest some of that lovely loot in proper financial advice, based on a full understanding of your circumstances, attitude to risk etc?

Workerbee999

Hi Macron.
yes I know I need some proper advice but I want to go in there armed with all the things I need to consider to make the most of it, not to waste it on things I have already learnt through the massive help of this forum. Gilts are definitely something I need to understand and I wouldn’t touch them without proper guidance. I get the basics of low coupon being good for lower taxable income and the growth from purchase price to face value creates the interest rate that is not taxable growth, but get lost when posts mention dirty prices etc or how to work out which is the best value to buy.

if any posters say, yes everything I have posted so far makes sense but you are completely missing x then I will make sure I cover that off too.

I haven’t spoken to pensionwise so far either, are they more general overview type of information or useful for individual planning?