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    • Captain Hook
    • By Captain Hook 3rd Jan 18, 8:09 PM
    • 7Posts
    • 5Thanks
    Captain Hook
    Late twenties and fairly clueless. What should we be doing?
    • #1
    • 3rd Jan 18, 8:09 PM
    Late twenties and fairly clueless. What should we be doing? 3rd Jan 18 at 8:09 PM
    To be quite honest, I haven't really considered retirement saving until this point as my wife and I have been prioritising saving for the wedding, raising a house deposit etc. No real Bank of Mum and Dad here. We are hoping to exchange and complete in the next several weeks and so my mind has started to move towards more long-term financial planning.

    Now, as a teacher, I have been contributing towards a defined benefit pension scheme since I started my first teaching job in 2012. The first two-and-a-half years were as part of a final salary (1/60, NPA 65) which has since become a career average scheme (1/57th of pensionable earnings each year, NPA 68). I currently pay 10.2% in each month. As it stands, my total pension amount represents 7.61% of the current Lifetime Allowance. I'm not sure whether that's something that I should be worried about. My wife is a doctor and has been paying into her NHS pension since she qualified in 2012. She doesn't have a clue as to the status of her scheme but believes that it's now based on her career average.

    I'm not entirely sure what our plans are going to be vis-a-vis retirement. We both have another 39 years before our normal pension ages. That's a long time away and I'm not convinced that I will want (or be able) to be working at a high level to that age. I suppose some flexibility would be preferable so that we/I could retire earlier if possible. I understand that your benefits reduce (fairly dramatically) if you retire 'early' and so what I suppose I'm after are tips, anecdotal stories and whatever else that anyone wants to contributes on what we should be doing.

    Should we be making additional voluntary contributions to our pension pots? Buying additional pension, faster accrual...? It's not unlikely that we will both hit the lifetime allowance at some point in our careers. Is this something we should be concerned about? Are Lifetime ISAs worth investigating? I understand that they mature/pay out at 60. Should we be looking at other forms of investment? Keep in mind that we are not particularly interested in finance and are relatively risk-averse.

    Some extra details. In the immediate term, we will be looking to complete our property purchase, 'do it up' to increase its worth, regularly overpay the mortgage, and build up an easy-access emergency fund (ca. 6 months income). We are both at points in our careers where we can take another step forward within the coming year - with the salary increases that will entail. House-wise, we expect to be there for around fix years (which ties in with the 5 year fixed mortgage rate that we have applied for) before remortgaging, looking to extend, or seeking to move to a more high-value property.

    Sorry for the essay. Basically, what plans would you be making if you were in a similar position...
    Last edited by Captain Hook; 03-01-2018 at 8:13 PM.
Page 2
    • ValiantSon
    • By ValiantSon 8th Jan 18, 6:26 PM
    • 2,013 Posts
    • 1,862 Thanks

    A teacher can have a DC scheme running alongside and should, if they want to retire earlier than scheme age.

    Enhancing their pension, then taking a 50% hit is an absurd choice. It would be a good choice if they plan working until scheme age (ie 67).
    Originally posted by atush
    No it isn't rubbish. You may prefer a different strategy, but that doesn't mean that what I said is rubbish.

    I never said that a teacher couldn't have a DC scheme in addition to their DB scheme. Don't put words in my mouth.

    It isn't an absurd choice at all as it offers a guaranteed return. You've also completely ignored the fact that I had actually been discussing with the OP the idea of "funding the gap" alongside faster accrual.

    Actuarial reduction is not 50%. Check the GAD for actuarial reduction factors. You aren't even close.

    Oh, and NPA is 68 for the OP not 67, but then why would you worry about getting that fact correct when you haven't with any of the others?

    Please take your straw man with you.
    Last edited by ValiantSon; 08-01-2018 at 8:19 PM.
    • BobQ
    • By BobQ 12th Jan 18, 12:57 AM
    • 9,964 Posts
    • 13,102 Thanks

    The faster accrual is a guaranteed return, whereas a DC scheme is not.
    Originally posted by ValiantSon
    I never said otherwise.
    Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.
    • ValiantSon
    • By ValiantSon 12th Jan 18, 2:26 AM
    • 2,013 Posts
    • 1,862 Thanks
    I never said otherwise
    Originally posted by BobQ
    I didn't say that you had.

    I was giving an explanation as to one reason why faster accrual was a beneficial option.
    Last edited by ValiantSon; 12-01-2018 at 2:30 AM.
    • CommyTooper
    • By CommyTooper 12th Jan 18, 10:05 AM
    • 55 Posts
    • 71 Thanks
    Mortgage payments become income assets, but only when mortgage is paid.
    You are in good pension schemes. We both have the security of ‘local government’ type pensions, and we are mortgage free.
    I will be fully retired by the end of this year, and my wife within four years. Would urge you to become a “mortgage free wannabe”..... there is a forum on the subject. Our retirement savings started racing ahead when the mortgage stopped, and we have had a whale of a time to date.

    Seems to me your in a good position, stay sensible.
    • Captain Hook
    • By Captain Hook 21st Jan 18, 12:01 PM
    • 7 Posts
    • 5 Thanks
    Captain Hook
    Right-oh, so the situation we're currently at is as follows:

    We're yet to exchange on the house and there's a sizeable building regs sticking point in the way. We have opened one S&S ISA with a meagre monthly direct debit to be reevaluated once we have completed on a house and are in position to plan with more clarity. These are currently invested in Vanguard LifeStrategy 80% while I read and digest online blogs (e.g. Monevator) and the two books I've got hold of on the subject (Smarter Investing by Tim Hale and Ivesting Demystified by Lars Kroijer).

    Obviously, the most financially sound investment we could make is to increase our contributions to our DB pension schemes (TPS and NHS) but we could not access these guarantee due returns until NPA; the hefty actuarial reductions make me wince. Whilst the majority of both sets of our relatives have lived into their eighties and nineties, I'm not convinced that we would be fit enough to benefit from enhanced pensions after the age of 68. So the core purpose of our investments is to 'fund the gap' between early retirement and our DB benefits kicking in at NPA (which is currently 68 for us) although we may both have small sums coming in from 65 from a few years of contributions to pre-2015 Final Salary schemes). 60 is a reasonable target for early retirement since, as we were born in the late 1980s, we are planning to expect our NPA to rise to around 70. As such, we need to work out an acceptable balance between buying additional pension through our DB schemes and investing to fund the gap of early retirement.

    Now, S&S ISAs may yet form a backbone of our early retirement saving. But SIPPs and LISAs are a more efficient (yet less flexible) way to save for our retire-around-60 goal. For me, it appears as though a SIPP should be the logical wrapper since - unless I achieve secondary school headship - I shouldn't hit LTA. To provide context, the career move I'm hoping to make in the next year to assistant headship typically pays £50-55k pa and an eventual aim to deputy head typically rewards £60-65k pa. As a GP, my wife will earn greater sums than these (once she fully qualifies from March 2018) even working part-time. As such, additional contributions to her DB pension may take her closer to the LTA. This means that we need to consider maxing out her S&S LISA allowance to fund her going earlier than NPA with any excess going into the ISA(s) - as opposed to a SIPP. Are there any spreadsheets around for us to play with?

    Also, we do still have short term savings goals. Our cars are both approaching ten years and 100,000 miles - a small SEAT and a smaller Fiat that may not have much longevity. Also, there are homemade improvements to make on the house that we're buying and perhaps most onerously, 'family planning'. We do not wish to buy cars etc 'on finance'. As such, we will be shovelling money into regular savers accounts once we have (re)established our emergency fund of 4 months of outgoings. We will probably also make relatively small overpayments on our mortgage since there aren't no any easy access accounts paying out 2.49+% interest - the rate we hope to pay on our five year fix. We would like to be mortgage-free by 55 yet anticipate one or two (probably two) moves up the ladder to come.

    Have we missed anything obvious?
    Last edited by Captain Hook; 21-01-2018 at 12:07 PM.
    • crv1963
    • By crv1963 21st Jan 18, 12:25 PM
    • 302 Posts
    • 710 Thanks
    Yes, although I don't usually advocate using lease cars in your wife's case as a GP the salary sacrifice of getting an NHS scheme lease car may be efficient in terms of her not going over the LTA, for her it is probably better to save into wrappers outside of pensions, for you a pension wrapper makes sense.

    This strategy would also ensure you have one reliable car at all times, without breaking the bank. One medic I work with has i10 on lease cheap to fuel, and to put his teenagers on the insurance. He's mid fifties and is trying to stay under the LTA. Your wife could also salary sacrifice for childcare vouchers if children are in your plans.

    You could build a decent pot up use her savings from stopping work to retirement age, then you both will have decent DB pensions supplemented with your SIPP, as well as decent sum in ISAs.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
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