Hubby's retirement at 60 in March 2008

jeanssis

Too much private info, sorry.

jem16

jeanssis wrote: »

Other than this he's getting an annual pension of £9,302.96 gross plus a supplementary annual one of £3,117.09 gross & has been told the two pensions will go into our bank a/c on 14/3 also. Do I understand these two pensions totalling £12,420.05 will be divided by 12 ? However, OH says the two pensions are taxed (lump sum isn't taxed apparently) so what can I actually expect to get from his two pensions NET monthly ??

Assuming normal tax code of 522L and no other income, he would get £859.21 per month. However that includes NI of £66.18 which he probably won't have to pay as he should already have 30 years NI contributions which will be needed for anyone reaching state retirement age after 2010. So it should be £925.39

See this calculator for help.

http://www.listentotaxman.com/index.php?calc=1&year=2007&age=0&add=0&taxcode=&period=1&ingr=12420.05&Submit=Calculate

sleepless_saver

This is an ideal time for you both to sit down and review all your finances to make sure they meet your needs in retirement. I did this last year and feel much happier having got it all sorted.
Things to think about include whether you are making use of your personal tax allowance by having savings in your name rather than tax paying husband's; have you maxed your cash ISAs; is husband's pension going to increase with inflation - if not, do you need advice on investing for growth; is your savings/investment mix still the right one; and do you need to budget more carefully to be sure you can live comfortably with your lower income. And make a will if you don't have one, including one for your Spanish property..
Once you've done all that, you can relax and enjoy it!:beer:

jamesd

The lump sum would typically be invested in a stocks and shares ISA, along with more of your savings. Then you can take a regular tax free income from the ISA if desired, or use it to provide top-up money for things like medical costs. So if neither of you has used any ISA depositing so far this year, 7,000 would go into a S&S ISA for each of you before 5 April and 7,200 (raised limit) in the next tax year, with the rest going in over the next few years. You don't actually have to buy the investments now, just get the money in before the end of the tax year. You'll get taxable interest on the money until it's invested.

Don't be concerned about the talk of stocks and shares and the current market drops - they are effectively an investment sale. It makes it a better time to be buying using regular investing and you can choose a mixture for a particular level of up and down movement that you desire, subject to being willing to accept a minimum of about 10-15% downturn in a bad year. In exchange for the down risk you get greater average benefit than a savings account. I suggest that you read Ok then - How do I choose a S&S ISA to get an idea of what a sector allocation is.

Once the money is fully invested inside the ISA tax wrapper you can expect to be able to take about 5% of the capital as income each year while still getting some capital growth to cover inflation, so about an extra 250 tax free a month. You could start that as soon as he retires if necessary, though it's better to wait a couple of years for all of the money to be invested if you can.

For your savings accounts, are you a tax payer? Are the savings accounts in your name? If you're not a tax payer and the accounts aren't in your name you should strongly consider opening regular saver accounts in your name so that you can get up to your personal allowance in interest tax free. You each get your own personal allowance.

Assuming that you aren't a tax payer the 31,600 balance of the 60,000 after paying the rest into ISAs in each of your names should really be in an account in your name since you'll get around 1,900 a year in interest on it, though most of that needs to be left in the account to cover inflation.

Do you have any pensions in your own name? Individual pensions are a good way to exploit the no tax personal allowance and one of the best deals around is pension contributions for someone who is not earning but who can still get tax relief on pension contributions of 3600 (after relief) a year. If you won't get any pension in your own name then starting a personal pension for you is an excellent high priority move, since you'll get tax relief on the money going in and pay no tax on the pension you eventually take because it'll be less than your personal and age tax allowances. You'll be able to choose to take the pension at any time up until you're 75, at which point you must "take benefits" from it in some way - usually via an annuity. It's an excellent way to provide for your own income to be topped up later if his work pension provides less than a 100% pension for you after his death - 50% is common. But you don't need to wait for that if you do find that you need the extra income sooner.

12,000 is a pretty good pension target for him. Personal allowances including the age allowance for over 65s are rising to about 10,000 a year so only the upper 2,000 will be subject to tax at 20% in a few years. Combined with the tax free ISA investment income he'll end up paying very little tax. With most of the other non-ISA savings accounts in your name and using our own tax allowance the two of you could easily end up paying tax of only a few hundred Pounds a year once he's over 65.

Debt_Free_Chick

Although there are options other than an S&S ISA, if income is needed - and an S&S ISA is perhaps not suitable if a guaranteed income with no potential for a fall in capital, is required.

Just a general observation, to be throw into the melting pot.

jamesd

What are you thinking of? Maybe annuity purchase in her name rather than his with some of the lump sum, to exploit her personal tax allowance, combined with much of the annuity being withdrawing of capital and tax free anyway? Might well be an interesting option to cover the time until the state pensions start, with no risk at all.

Pension contributions then later annuity purchase or the ISA income options seem better if there's no immediate income need and no absolute objection to some up and down movement of some of the capital value.

Certainly no shortage of options here - more a need to know how well the possible incomes match the anticipated needs so suggestions can be adjusted accordingly.

jeanssis

Too much private info, sorry.

jamesd

Good to hear that you have the savings sorted out.

Your own pension income is low enough that there's going to be benefit in investing in a personal pension for you.

ISAs are a must have item. If you need time to learn about investment option within them, just put the cash in there and get the interest for a while, though it'll be taxed at 20% in the stocks and shares ISA, so you might want to use cash ISAs up to that limit if you do think you'll need learning time. From April it's expected that you'll be able to transfer cash ISA money into stocks and shares ISAs (but not the other way around) so it won't be a problem to change later.

Eventually you'll probably have almost all of your savings and investments in a mixture of cash and stocks and shares ISAs. Regular saver accounts are the most likely exception because you can get their high interest rate tax free until your total income reaches the personal allowance limit, though he can't.

If you give us some idea of whether your income looks as though it'll be sufficient or if not how much more will be needed, when and for how long (like until state pensions start) we'll probably be able to come up with efficient ways of getting it.