Equity Release or Re-Mortgage to fund retirement?

Kynthia wrote: »

Wow, someone has a temper. Do you react to people like that in real life or just from behind a keyboard?

There was a period of a good few months where literally every week we would get a fresh thread on WASPI's campaign to restore State Pension inequality (many of them started by MSE staff members doing some excrement-stirring). Naturally this was a time when a lot of people got riled up - the entire strategy of the WASPI campaign was that if enough people got angry enough the government would be forced to give them some free money, and as every action has a reaction, this also induced anger in those who didn't think they should get it.

The OP's post clearly triggered a flashback in AnotherJoe. It was still an unwarranted response, but I'm trying not to dogpile.

As others have said, if the figures are correct, the OP doesn't have a problem. It is probably WASPI to blame for :mad:ing them up and making them think that as their State Pension Age had been increased, they must have a problem.

Triumph13 wrote: »

the SP age changes (which most on here believe were fair and reasonable)

Virtually everyone here seems to believe that the big change, 60 to 65, was adopted with a generous notice period (about 15 years, was it?) and phased in in a reasonable way.

There's room to argue about the marginal changes from 65 to 67, or in this case 66. But if someone's retirement plan wasn't robust enough to cope with a one year increase it wasn't robust enough at all.

ashpan wrote: »

A possible but by no means guaranteed investment return of £7k pa from December 2019

Please say more about this, notably the nature of the investment and where the money to fund it is coming from.

ashpan wrote: »

equity release ... remortgage with an early repayment option

You don't seem to have a need for equity release to retire now. It's uncommon for normal mortgages to have repayment restrictions or penalties beyond five years. Normal mortgages to say 85 on interest only basis to say 85 are available, older on repayment basis and increased availability likely next year.

While you don't seem to need this money just to retire, you might want to consider using it to increase your potential income in retirement. Downsizing or relocating while still quite young are two possibilities. Those would also offer the potential of a place that might be better suited to possible reduced mobility later in life than where you are now. You're rather young for equity release but could plan to increase spending now and follow up with equity release to maintain that spending later.

ashpan wrote: »

would like to retire at 60 (next month) ... im unable to do so (unless i go for one of the options below) for another 6 years ... i have £500 pcm coming in from my nhs pension, £50k in savings and £120k in private pension/ISAs ... I need around £1000 pcm to live on

As others have noted, this doesn't appear to be challenging since you have ample money to cover a shortfall of £500 pcm.

A general plan could start with taking the tax free lump sum from the pension and using this to fund ISA investing up to the annual limit for as long as possible. Place the rest into flexi-access drawdown and draw out the difference between your NHS pension and income tax personal allowance from this taxable 75% of the pension as well. That gets it out free of income tax, a nice benefit. With 11850 allowance and 6000 NHS pension that's 5850 out tax free and just 150 of your income need remaining. If your pension will still have money left after six years I suggest taking that from it as well, if it'll run out, stick to just the part within your personal allowance so you can get it all out tax free.

With money outside the pension you might want to consider some peer to peer lending. Perhaps £20000 via Ablrate with perhaps 10% expected net interest after bad debt, raw rates typically 12% or 13%. And perhaps another £10000 via Unbolted, expect about 7% if you only use autolend, with no bad debt allowance needed. Ablrate can be done in their ISA while Unbolted offers no ISA but P2P interest is covered by both the personal savings allowance and the starting rate for savings, so no income tax would be due. That's another £2700 of likely but not guaranteed income.

Perhaps a more interesting question for you might be what income you can have throughout retirement if you wanted more?

That starts out with you having or probably being able to get at least 8500 a year from the state pension. If your forecast isn't at least that much tell us and we can work out how to get there. NHS on top takes you to 14500 a year, 1208 a month.

Ignoring investment gains and tax you can also fund that from now, drawing on your 170k of private pension, ISA and savings. That would take 51000 to fund the amount beyond the NHS pension, leaving 119000.

One of several approaches to taking drawdown income from investments is called the 4% rule. In the US it's that if you take an income of 4% of your starting pot before costs, about 3.5% after, you wouldn't have run out of money even in the worst of times over the last 125+ years. The equivalent UK rate is 0.3% lower, so 3.2%. On 119000 that's another 3800 a year, increasing with inflation, taking you to £18300 a year. But that's from state pension age, not now, so you can't quite start that high because each extra 1000 costs you 6000 of capital until then and lowers the income potential by 192 a year. What is affordable is 3000 more, taking you to £17500 a year starting now.

However, if your life expectancy is normal you can do better still by deferring claiming your state pension. This causes it to be increased by 5.8% for each year it's deferred. Assuming yours is to be 8500 and you did this for five years you'd add 2465 to your guaranteed income and reduce your unguaranteed 4% rule income by 5 * 8500 * 0.032 = 1360 a year. That'd get you to a total income of 17500 - 1360 + 2465 = £18605 a year. Of that, 6000 + 8500 + 2465 = £16965 is inflation-linked and guaranteed for life. That's perhaps too much guaranteed because it drains 42500 of your remaining capital and because spending normally decreases as people get older. Two or three years of deferring might be a better balance of guaranteed or flexible income and keeping capital.

So that sort of income in the range of £17000-19000 a year starting now is the sort of level that you might consider.