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  • FIRST POST
    • stephen0002002
    • By stephen0002002 7th Mar 18, 10:02 AM
    • 19Posts
    • 3Thanks
    stephen0002002
    Ready for retirement
    • #1
    • 7th Mar 18, 10:02 AM
    Ready for retirement 7th Mar 18 at 10:02 AM
    Hello.
    I'm 62 this year and hope to retire in a few months time. I am lucky (I know). I have saved up in a personal pension of 250K - (invested in a Royal London fund ready for drawdown). I am also looking to Transfer funds from 2 final salary pensions the TV's worth about 250K in total. It seems like a good time to transfer those.

    I would like my funds to grow so do I consolidate (and go with charges and another fund) or consider say index trackers, as they do look interesting (but I am a novice). Do I take the full 25% int free - is that a no brainer ?

    I would like to have 30K per year for the next few years if that's possible so we can travel a bit. At least until our OAPs cuts in in a few years time. My wife (62) doesn't have a pension. I also like to look after my grown up kids when I can :-) Advice or thoughts would be welcome folks. Thank you very much.
Page 2
    • Triumph13
    • By Triumph13 8th Mar 18, 4:12 PM
    • 1,187 Posts
    • 1,472 Thanks
    Triumph13
    Thank you for your thoughts so far, appreciated.
    I feel if I do transfer the final salaries then growth would be important to ensure the pot does not dwindle too fast.

    I also factor in old age Pensions (OAP) @ 12k in 3-4 years time.

    I've thought long about life expectancy. My own thoughts are. If we're lucky to actually both get to 75-80 (there no guarantee) then things slow down, so will our expectations (and costs), the old age pension itself is still there at least (hopefully). So thats' a happy place. We cut our cloth by then and be happy with what we have. Getting to a good age and hopefully healthy is a reward in itself.

    I understand the £-balanced view, thank you for that, good folks.
    But I do feel the next 10-15 years are worth living well in.
    We can save up for ripe old age (which we may not get to) but why not live well now before we slow down the pace.
    Originally posted by stephen0002002

    You want to live well for the next few years and defined that as £30k pa. Others are pushing you to not give up the security of the FS scheme. My question is why is your state pension number so low because if you fix that you can do both!
    Full state pension is £8,300 pa each. Have you got forecasts yet as even though you were contracted out some voluntary NICs should still get you up to £7,500 and you may well be able to get the Mrs up to full SP.
    If you took the DB without any tax free (assuming this is an option) that would be £12k pa. Add in say £15k pa of SP between you gets to £27k pre tax / £25k post tax. £150k of your DC funds drawn down at 4% pa is enough to get you up to £30k pa post tax. It takes about £50k to back fill the gap between retirement and state pensions kicking in leaving the final £50k to pay those voluntary NICs and give you a decent emergency / luxury fund if you don't already have one.
    If the DB insists you have to take some lump sum then simply defer the DB until it reaches a similar position, living on DC funds in the meantime and replenishing them from the lump sum when you do take the DB.
    Simples!
    • stephen0002002
    • By stephen0002002 10th Mar 18, 11:00 AM
    • 19 Posts
    • 3 Thanks
    stephen0002002
    Thank you for your thoughts. I am thinking a bit more cautious now.

    (1) To defer at least 1 FS pension ( its worth 6K in 2021 )
    Maybe? (also) defer second FS pensions ( worth 6K in 2021 )
    (Leaving the int free alone in these).

    (2) Using the int free 25% from the PP only.

    (3) Using the 25% int free (just enough) to pay off the int-free credit cards. And thereby reducing that debt.
    • crv1963
    • By crv1963 10th Mar 18, 11:42 AM
    • 302 Posts
    • 710 Thanks
    crv1963
    Thank you for your thoughts. I am thinking a bit more cautious now.

    (1) To defer at least 1 FS pension ( its worth 6K in 2021 )
    Maybe? (also) defer second FS pensions ( worth 6K in 2021 )
    (Leaving the int free alone in these).

    (2) Using the int free 25% from the PP only.

    (3) Using the 25% int free (just enough) to pay off the int-free credit cards. And thereby reducing that debt.
    Originally posted by stephen0002002




    Hi Stephen0002002,


    I think the cautionary advice about leaving the FS as a floor of safe income and the PP to i) reduce debt and ii) live on for 3 years until FS kicks in is a good plan.


    We are not as close to final retirement as you but our plans are to draw FS pension and use PP to bridge gap until SP starts so maintaining income levels at a steady rate. We are just starting to build the PP aggressively at the moment.


    I would check the following- i) SP forecasts and can you use any of the 25% TFLS from the PP to pay any missing contributions to ensure you both maximise your SP when it starts? ii) Can you pour any/ as much as possible into a PP for your wife? If she has any earnings then upto her earnings limit if none then the £2880 pa into a SIPP to get the £720 pa money from HMCR, this could be a cash SIPP, draw as needed?


    My view (and Mrs CRV) is that all/ any little pots all add to the mix of income/ cash available and if not needed there and then it can be left until it is needed.


    Depending on your plans for the 30k pa income balancing it so you pay the lowest possible income tax may need looking at- if most of the pension income is yours you will pay more tax, we too will have this imbalance which we are trying to address through building Mrs CRV pension up- drawdown up to her personal allowance when we start taking it, accept that my FS pension will be taxed regardless but take the lowest amount we need from my SIPP when we start taking it.


    We intend putting the TFLS into ISAs, some as a cash reserve some invested for growth.


    You may find ways to cut living costs for instance travel- last minute deals although not as numerous as they were are still there if you want some holidays and feel you can be flexible- we're testing this out later this month- going down travel agents and asking where can we go in the next 3 days for a week in the sun? When retired we'll look for deals on holiday cottages etc and go as and when we want. For DIY products I go to B&Q take my pensioner mother and buy things on a Tuesday when she gets her pensioner discount even if the project doesn't get started until a later date! Yes at 79 my mother still throws paving slabs about altering her garden and climb ladders to lop tree branches off, so you do need to plan a floor of reasonable income because you don't know the end date!


    Just my thoughts, hope they help.


    CRV
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • stephen0002002
    • By stephen0002002 13th Mar 18, 3:05 PM
    • 19 Posts
    • 3 Thanks
    stephen0002002
    Thank you for those thoughts.

    Currently looking to defer the FS pensions (2) which now seems a good basis for safety net. (thanks folks) These are index linked = useful.

    Using the PP when I retire up to our SP's in 3-4 years time. I'm unsure if its an idea to use the PP int-free part as our income on its own for the first year ?

    The int free credit cards still have 12-months to run with int-free time so I may keep them for now.

    I feel our retirement budget is high tbh (32K ?).
    But we like to travel (breaks) and it is the first year of retirement.
    So we don't want to get dreary :-)

    I do feel it will be important to monitor outgoings now more closely.
    We've never really had to do this before.
    Which is probably a reason the excess used to be swapped to the credit cards. Something to guard against in future.

    Thank you for the ideas on tax for my wife. I'm not sure we can cut anything in for her pension wise as I only have 2-3 months to go at work. And so not sure if it would still be worthwhile starting a pension for her now.

    Many thanks to you, this has been really useful for us..
    Last edited by stephen0002002; 13-03-2018 at 3:09 PM.
    • LHW99
    • By LHW99 13th Mar 18, 9:51 PM
    • 1,316 Posts
    • 1,214 Thanks
    LHW99
    Thank you for the ideas on tax for my wife. I'm not sure we can cut anything in for her pension wise as I only have 2-3 months to go at work. And so not sure if it would still be worthwhile starting a pension for her now.
    So that could be one contribution now for 2017-18 and one for 2018-19
    Both with 20% tax paid back in. Not much, but could be left to grow with small additions over time, or used as an extra boost to defer her SP for 6 months or so to get an increased payment (or top up any missed years later on).
    • AnotherJoe
    • By AnotherJoe 13th Mar 18, 10:20 PM
    • 9,601 Posts
    • 10,673 Thanks
    AnotherJoe

    Thank you for the ideas on tax for my wife. I'm not sure we can cut anything in for her pension wise as I only have 2-3 months to go at work. And so not sure if it would still be worthwhile starting a pension for her now.

    Many thanks to you, this has been really useful for us..
    Originally posted by stephen0002002
    Depends. How often do you casually toss £720 a year away? She could open a SIPP now before April 6 and get the first installment in. If your wife has an income now, she could get more than that.
    • jerrysimon
    • By jerrysimon 14th Mar 18, 10:15 AM
    • 282 Posts
    • 219 Thanks
    jerrysimon
    Based on great advice here, I did that in the last 18 months before I retired setting her up with a SIPP through H&L (she was earning about 8K then) and earnt about 2.5K on her small income. It took minutes to set up and do a bank transfer. Although she now only earns 3K I still did another £2880 contribution this year and will be looking forward to earning another £720 tax back for her.

    A no brainer really!
    Last edited by jerrysimon; 14-03-2018 at 10:19 AM.
    • stephen0002002
    • By stephen0002002 14th Mar 18, 12:00 PM
    • 19 Posts
    • 3 Thanks
    stephen0002002
    SIPP for wife. (She is retired 62).
    Well folks that's interesting, thank you, I will take a look at that.
    How is that set up and how would we claim the tax back or is it automatic ?
    Last edited by stephen0002002; 14-03-2018 at 12:05 PM.
    • LHW99
    • By LHW99 14th Mar 18, 7:53 PM
    • 1,316 Posts
    • 1,214 Thanks
    LHW99
    If you use Hargreaves Lansdown you can do it quickly online as jerrysimon says and they would reclaim basic rate tax automatically.
    • happyandcontented
    • By happyandcontented 14th Mar 18, 8:02 PM
    • 1,108 Posts
    • 2,152 Thanks
    happyandcontented
    A point to consider is that for my OH's FS scheme if it is not in payment at the point of death no spousal benefit is payable, the benefit is simply a return on premiums. We had no idea this was the case until the IFA we engaged pointed it out.
    • stephen0002002
    • By stephen0002002 17th Mar 18, 9:46 AM
    • 19 Posts
    • 3 Thanks
    stephen0002002
    Thank you for your help.

    My wife (62) is retired (no income) and it has been suggested we put £2880 into a sipp for her. Can we do that for the next few years or is there a cut off point ?

    And when it comes to taking her sipp pension (drawdown?) can I ask what personal allowance would she have ? Would she have her own allowance like mine (£11,500).

    Thank you.
    Last edited by stephen0002002; 17-03-2018 at 9:49 AM.
    • MallyGirl
    • By MallyGirl 17th Mar 18, 10:26 AM
    • 2,736 Posts
    • 7,745 Thanks
    MallyGirl
    You can add the £2880 until she turns 75

    Same allowance as you - currently £11,500
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    • crv1963
    • By crv1963 18th Mar 18, 6:50 AM
    • 302 Posts
    • 710 Thanks
    crv1963

    And when it comes to taking her sipp pension (drawdown?) can I ask what personal allowance would she have ? Would she have her own allowance like mine (£11,500).
    Originally posted by stephen0002002



    If you both wanted you could transfer part of her personal allowance to you to reduce your tax bill when you take the pensions.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
  • jamesd
    The 9K pa is what my F.Salary pensions would pay me "now" at 62.
    Spouse gets 50% of F.Sal pension - ( but with a TV fund its 100% ).
    Yes FS is index linked.

    TxValue (of £250k) in theory would last a long time.
    I'm 62 so if it lasted 20+ years I'd be 82 then.
    Originally posted by stephen0002002
    £250k in exchange for £9k of income looks like a good deal, since the income is only 3.6% of the capital.

    There's a cheap and easy way to "buy" more inflation-linked income: deferring claiming your state pension. It's increased 5.8% for each year of deferral. Assuming yours starts at £8,000 a year that's an increase of £464 for each year you spend £8,000 from the pot to substitute for the state pension. You can't practically get to £9k this way because that takes 19 years but you could get a lot of the way there if you both deferred.

    Since there are two final salary pensions you should look at them individually because:

    1. the transfer value paid vs the income and benefits given up can vary a lot between different pensions
    2. it might pay to transfer just the one with the best transfer value and keep the other one to provide a top up guaranteed income above the state pension and deferring.

    If you were to take a £250,000 transfer value and use the Guyojn-Klinger drawdown rules you could expect to start on at least £12,500 instead of £9,000. That would decrease if you happen to live through unusually bad investing times =ir increase in good times, this willingness to be flexible about at least some part of your income is at the core of the transfer approach. You can limit the variation potential in many ways, including state pension deferring, spending money on annuities from time to time or just picking a lower starting income.

    Using trackers is often an excellent choice, particularly for those not already very familiar with investing.
  • jamesd
    I'm unsure if its an idea to use the PP int-free part as our income on its own for the first year ?
    Originally posted by stephen0002002
    You have an income tax personal allowance. Use it or lose it, so use it. You don't have to actually spend the money but be sure you take enough taxable to fully use the allowance.

    The int free credit cards still have 12-months to run with int-free time so I may keep them for now.
    Originally posted by stephen0002002
    Good move, making money while you're paying nothing to have use of it.

    I feel our retirement budget is high tbh (32K ?).
    But we like to travel (breaks) and it is the first year of retirement.
    So we don't want to get dreary :-)
    Originally posted by stephen0002002
    It appears to be well below what is sustainable so I don't think calling it high in the context of the assets you've accumulated is right. Assuming you use the Guyton-Klinger drawdown rules a couple of state pensions of £8,000 each plus 5% or more of £500,000 takes you to £41,000 a year and you can pick a lower success rate and start higher if you're willing to take bigger drops if you happen to live through worse than average investing times in retirement. Starting at £50,000 and planning to decrease over time wouldn't be unreasonable even ignoring anything other than the state pension that your other half might add.

    It's also worth knowing that spending tends to decline in retirement, more for those like you with lots of money. Not due to lack of money, it just doesn't get spent and ends up in savings instead. Nothing wrong with planning to do this from the start.

    Well worth looking over Drawdown: safe withdrawal rates and experimenting with cfiresim and your guaranteed and variable potential incomes.
    • stephen0002002
    • By stephen0002002 22nd Mar 18, 8:45 PM
    • 19 Posts
    • 3 Thanks
    stephen0002002
    TY for those thoughts.

    My plan was to transfer both FS pensions before I started this thread.
    I had run lots of excel growth scenarios for the next 20-30 years and things seemed pretty good, given a fair wind.

    My thoughts were, with reasonable luck and growth (nothing greedy and even though there's no crystal ball). Growth "could" be better than the index linked or 1% to 3% (capped) in my 2 x FS funds.

    Then after the earlier replies suggesting caution, I started to think again.

    So it is good to get another perspective, TY, that falls more inline with my earlier thoughts, and good food for thought.

    My only concern then was that I don't have experience of funds like index trackers, as yet. Which is why I was asking for some pointers.

    Thank you for the thoughts on Guyojn-Klinger drawdown rules.
    That's very useful reading.

    So I'd like to ask, if you were me would you go for the transfer values on both FS's. Or maybe defer as I said for at least 12 months until I get a better idea how the market works. The responsibility is mine of course.

    My IFA cuts in in a few days and I would like to make some decisions asap. Your thoughts and any other pointers are really helpful and appreciated. TY.
  • jamesd
    So I'd like to ask, if you were me would you go for the transfer values on both FS's.
    Originally posted by stephen0002002
    I'd want to know the benefits and transfer values for each because my answer could be different for each. Then I'd want to know how much you value certainty - transferring just one could be good - and how far the state pensions will go compared to your minimum needs.

    You seem to place a high value on the flexibility to spend more in early years and that combined with typical current transfer values suggests that ttransferring is likely to be a good match.
    Last edited by jamesd; 23-03-2018 at 7:23 AM.
    • pip895
    • By pip895 23rd Mar 18, 9:13 AM
    • 577 Posts
    • 321 Thanks
    pip895
    I would talk to an IFA who can advise you regarding a DB transfer but keep an open mind - you may well be better off keeping both.

    The transfer values don't seem that great. I have a DB pension that if I took it now would yield just over 9k/annum but the transfer value is over 500k. I am younger at 56 and female which would both tend to support the value, but even so its a big difference.
    • ffacoffipawb
    • By ffacoffipawb 23rd Mar 18, 9:25 AM
    • 2,468 Posts
    • 1,626 Thanks
    ffacoffipawb
    I would talk to an IFA who can advise you regarding a DB transfer but keep an open mind - you may well be better off keeping both.

    The transfer values don't seem that great. I have a DB pension that if I took it now would yield just over 9k/annum but the transfer value is over 500k. I am younger at 56 and female which would both tend to support the value, but even so its a big difference.
    Originally posted by pip895
    Being female should make no difference, transfer values may be gender neutral nowadays?
    • happyandcontented
    • By happyandcontented 23rd Mar 18, 9:49 AM
    • 1,108 Posts
    • 2,152 Thanks
    happyandcontented
    Does anyone (who is not an IFA) wonder if the reason IFA's won't come out and say go ahead and transfer from a FS scheme is actually more to do with their possible liabilities down the line than the best interests of the customer?

    We have seen 3 correctly qualified advisors and of the three I was a categoric no without even looking at the details of the scheme, 1 was a yes, but we weren't sure of him on a personal level. The third said he would look at the detail and discovered that spousal benefit only exists if the pension is in payment which was a blow to us. We sensed a reluctance to transfer although he was not categoric, and he has almost advised against paying the fees to have an in-depth analysis to facilitate a transfer.

    We swing from transferring to not......

    Once you have paid for the required advice is it necessary to follow it or have you done what is needed to transfer?
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