Is what I am doing sensible? What would you do

Mistermeaner

Age 46, partner 41

We've hit and then exceeded our 'number'. We live a relatively modest lifestyle, no debt other than £167K mortgage on house worth 500K+

Our retirement provision is:

A LISA each, combined value £100K+ in 100% passive global equities

Partner is in LGPS (albeit low paid and only 3 years service to date)

We each have a DC pension, hers worth 200K 100% passive global equities

Mine is worth £1.052million, currently 60% in passive global equities, 40% money market

I sold units in my pension end of last year after going over the million to get 300K in cash. Recently sold some more to go 400K. Logic being that having hit the number why take any more risk? even with this we still have 900K in global equities. Markets do seem unjustifiably toppy to me but thats just my limited opinion.

Im not a fan of bonds, maybe its recency bias but they seem to perform very poorly and if you want diversification to preserve value then surely a cash/equity mix will achieve this.

Also thinking if markets tank, and i mean tank (like the covid drop or early 2025 drop) i may use some of the 400K to buy back in at lower cost….. maybe…. (time in the market not timing the market etc……)

I have also stopped adding to my DC pot (other than to get company contribution) and am taking the tax hit to invest in a S&S ISA and cash ISA. Currently S&S is 68K roughly 50/50 global equities and cash), cash isa is £14K. This is my early retirement pot i am focussed on building to get out of the workplace prior to DC pension access

Any thoughts on what I am doing. Sensible/Silly? Missing anything? What would you do? I dont really want or need any growth in pensions (other than keeping ahead of inflation) main goal is to retire ASAP.

HedgehogRulez

welcome to the club

Personally i wouldnt have cash in my pension given you have 12 years until you can access your pension

ali_bear

You're not the only one thinking a stock market correction is on the way

https://www.bbc.co.uk/news/articles/c75kp1y43lgo

But we're talking about a possible correction here, not a megaslump. Perhaps back to where it all was 2-3 years ago?

phlebas192

There's rarely a good reason for holding a large amount of cash in a SIPP. In your position, if I wanted to be safe then I would put all the cash into index linked gilts. Probably around £200k into one maturing close to when you can withdraw from the SIPP (with the intention of using it to fund the tax-free PCLS) and the rest in ones with maturities covering the period between then and when you reach SPA. But I would most likely put the latter amount into equities given the time frame.

Since you and your employer are still contributing to your DC, there's not much point worrying about withdrawing at a level that will keep you within the basic rate tax band. You are going to exceed it and probably by a significant margin so just accept it and focus on post-tax return rather than tax efficiency.

Your wife can contribute to a SIPP up to the difference between he

As for ISAs, it definitely makes sense to prioritise them over the pension utilising both yours and your wife's allowances. Concentrate on equities once you've got a sufficient emergency cash fund.

Bottom line is you have essentially won the retirement game so you don't need to play it overly safe.

squirrelpie

Are you married? If not that seems like it could be an important financial error.

Mistermeaner

romantically entered into a civil partnership earlier this year. Once I explained the tax benefits to her she was swept off her feet. Also did LPOAs reciprocally. Forgot Valentine’s Day though 😬

Mistermeaner

thanks for the advice re gilts. Whenever I’ve looked at those, at least the gilt funds available within the workplace pension wrapper the the performance looks awful often significantly losing value. The money market funds seem to do so much better at least generally keeping pace with inflation

I get it that if you buy a proper index linked gilt and hold til maturity you can’t really lose but those only seem available in a sipp or isa - workplace pension schemes only seem to offer gilt funds which don’t seem to perform great

if I’m missing something happy to be corrected thanks

barnstar2077

Assuming you see your finances as mixed, would it be a good idea to start paying most of the bills from your salary and have your partner/wife pay the maximum she can into her pension? Would seem to be advantageous tax wise when you start to withdraw later.

Mistermeaner

the most tax efficient thing for pension saving is for me to Sal sacrifice as I’m a 100k+ earner …. However as our collective pensions is deemed sufficient i see no further value in tax efficient pension savings, we need cash outside of pensions and while that means a massive tax hit for me there’s no benefit in her saving 20% tax relief on future pension savings… we’re better with her money as cash in hand

…. I think unless I have missed something thanks

Storcko14

You look like you're in good shape and wise to think about preservation rather than growing the pot if you feel you have enough. Assuming you have no kids and you work as one financial unit here's a few things based on my experience (echoing others' posts):

1. You don't have a lot of guaranteed income so maybe prioritise your partner's DB pension if you can.
2. Be very wary of inflation. The MM funds will probably lose value in real terms over the long term so definitely look at an index linked gilt ladder (not a fund) as a way of protecting some of your cash until at least you get to SP age. Even if that only covers the 'keep the lights on' money it's a great reassurance.
3. You're right to load balance SIPPs and ISAs - having tax free funds to draw alongside taxable offers great flexibility.
4. Now you've essentially won the financials game, have a good think about how you'll spend your early retirement. I spent a couple of years immediately before retirement figuring that out and doing some courses which was as good an investment as I've made.
5. You're young so when you do retire think carefully before triggering the MPAA on your SIPP as this might make a difference if you ever did decide to go back to work or take a lucrative consulting gig.

You've done well - good luck with what comes next!

squirrelpie

You don't have a lot of guaranteed income so maybe prioritise your partner's DB pension if you can.

That can be fixed by buying an annuity with part of his pension when the time comes? AIUI that also avoids MPAA.