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  • FIRST POST
    • LateStarter
    • By LateStarter 15th Apr 19, 10:02 PM
    • 226Posts
    • 243Thanks
    LateStarter
    Advice on Timing
    • #1
    • 15th Apr 19, 10:02 PM
    Advice on Timing 15th Apr 19 at 10:02 PM
    As I'm heartily fed up of working, I'm trying to plan my way out (please don't suggest death). I'm 53, hoping to retire by 62/63, which seems a long time away. I'd like to have maybe 3 years of cash available then (maybe 75k), so I'm not forced to draw down from the pension if it's going through a bad patch.


    So here's my question - now that I've got a year of emergency cash, does it make sense to throw every extra penny into the pension, at least for the next couple of years, to get the best chance for growth? I could then save more cash in the years closer to retirement to build up the cash pot. What do you think?
Page 1
    • Triumph13
    • By Triumph13 16th Apr 19, 7:14 AM
    • 1,450 Posts
    • 1,962 Thanks
    Triumph13
    • #2
    • 16th Apr 19, 7:14 AM
    • #2
    • 16th Apr 19, 7:14 AM
    As regards timing, all the research says that it's better to invest early, but I'm sure you'll have some people advise you, quite reasonably, that market valuations are high at the moment and to hold off. On average the mantra is 'time in the market not timing the market', but we are never in average times.
    There is a bigger point about whether 3 years' spending is the 'right' amount to hold as a buffer against downturns which will also get conflicting answers as it can be quite a drag on returns.
    You pays your money and you takes your choice I'm afraid. If 3 years' buffer is what it takes to help you sleep at night then that is probably more important that trying to maximise your returns. Would hedging your bets and building both the pension and the cash in tandem 'feel' better?
    • shinytop
    • By shinytop 16th Apr 19, 7:52 AM
    • 243 Posts
    • 261 Thanks
    shinytop
    • #3
    • 16th Apr 19, 7:52 AM
    • #3
    • 16th Apr 19, 7:52 AM
    Whether you keep it in cash or investments, the more important question is whether to put it in a pension or not. Even if you keep it in cash, the tax breaks mean available mean you're likely to be better off putting it in your pension, especially if you are a higher rate taxpayer and/or can contribute by salary sacrifice. That's what I did/am doing in the run up to retirement and it's working very well for me.
    • crv1963
    • By crv1963 16th Apr 19, 8:42 AM
    • 787 Posts
    • 1,810 Thanks
    crv1963
    • #4
    • 16th Apr 19, 8:42 AM
    • #4
    • 16th Apr 19, 8:42 AM
    As I'm heartily fed up of working, I'm trying to plan my way out (please don't suggest death). I'm 53, hoping to retire by 62/63, which seems a long time away. I'd like to have maybe 3 years of cash available then (maybe 75k), so I'm not forced to draw down from the pension if it's going through a bad patch.


    So here's my question - now that I've got a year of emergency cash, does it make sense to throw every extra penny into the pension, at least for the next couple of years, to get the best chance for growth? I could then save more cash in the years closer to retirement to build up the cash pot. What do you think?
    Originally posted by LateStarter
    It all depends on attitude to risk. Then there's the topic of where to keep the cash in case of a crash. Is your years worth of cash working or losing value to inflation?

    My attitude to the cash reserve is to place it somewhere it works- my thoughts are we need a couple of months cash reserve, can use credit cards in an emergency- liquidating other assets such as Premium Bonds, National Savings to pay the bill when it comes in.

    Currently we are putting money into Mrs CRV pension- the uplift is worth having. But you also need to think about how you will withdraw the savings.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • pensionpawn
    • By pensionpawn 16th Apr 19, 9:17 AM
    • 152 Posts
    • 100 Thanks
    pensionpawn
    • #5
    • 16th Apr 19, 9:17 AM
    • #5
    • 16th Apr 19, 9:17 AM
    Dump all you spare income into your pension and use whatever proportion of your TFLS at the appropriate time to supplement your cash reserves. I would keep the cash in a staggered array of 3 - 5 year cash ISAs which will allow you to A. keep track with / minimise loss against inflation, B. access your cash in contiguous financial years. That said three years of cash would for me be a minimum of 37k5 which is a lot of money, and potentially a high proportion of your pension pot(s) to cap to zero growth (more likely very slow depreciation). I'm the same age as you and am doing all I can to be fiscally independent by 57, having also had enough of the lunacy of the surrounding work environment (although I actually enjoy, more or less, what I do). What about the option of part time work to bolster cash if the markets deteriorate for any period of time?
    • cloud_dog
    • By cloud_dog 16th Apr 19, 9:33 AM
    • 4,203 Posts
    • 2,572 Thanks
    cloud_dog
    • #6
    • 16th Apr 19, 9:33 AM
    • #6
    • 16th Apr 19, 9:33 AM
    As I'm heartily fed up of working, I'm trying to plan my way out (please don't suggest death). I'm 53, hoping to retire by 62/63, which seems a long time away. I'd like to have maybe 3 years of cash available then (maybe 75k), so I'm not forced to draw down from the pension if it's going through a bad patch.


    So here's my question - now that I've got a year of emergency cash, does it make sense to throw every extra penny into the pension, at least for the next couple of years, to get the best chance for growth? I could then save more cash in the years closer to retirement to build up the cash pot. What do you think?
    Originally posted by LateStarter
    I'm in a similar boat, insofar as I identified (perhaps a little late in the day) that what I didn't have was flexibility regarding retirement. I have a good DB scheme which kicks in at 65 and my SPA is 67.

    Due to me being:
    1. Too old for a LISA
    2. A HRT payer
    3. My company using Salary Sacrifice
    I have opted to make additional contributions in to a DC AVC pot. I have a few years less than the 10 years you indicate but I am hedging my bets. I am placing 25% of my contributions in to a cash equivalent fund (I am somewhat limited to available funds), and the rest in to an international fund.

    I would like to draw on this pot from 60, and the intention is that this pot would fund the gap between early retirement and 65.

    I would usually invest all the money but with my contributions only costing me 58% of the actual contribution I'm happy to leave some in a cash equivalent fund and to suffer some inflation erosion.
    Last edited by cloud_dog; 16-04-2019 at 9:38 AM.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • bluenose1
    • By bluenose1 16th Apr 19, 11:16 AM
    • 2,096 Posts
    • 3,413 Thanks
    bluenose1
    • #7
    • 16th Apr 19, 11:16 AM
    • #7
    • 16th Apr 19, 11:16 AM
    I'm in a similar boat, insofar as I identified (perhaps a little late in the day) that what I didn't have was flexibility regarding retirement. I have a good DB scheme which kicks in at 65 and my SPA is 67.
    Originally posted by cloud_dog

    When I have crunched the numbers I have decided to take my DB scheme pension at 55 as wont be financially worse off until mid 70s.
    From when SP starts at 67 I will have a good income, so to me worth it to retire 5 years early, rather than hold out with the related stress of working etc.
    Lovely thought going 5 years earlier than expected.
    Money SPENDING Expert

    • LateStarter
    • By LateStarter 16th Apr 19, 8:55 PM
    • 226 Posts
    • 243 Thanks
    LateStarter
    • #8
    • 16th Apr 19, 8:55 PM
    • #8
    • 16th Apr 19, 8:55 PM
    Thanks for the comments all. The idea of using the TFLS as the 'interim' cash to get to SP age is an interesting one; I certainly wasn't planning to crystallise/withdraw that much so I'll have to re-do the figures (I feel another spreadsheet coming on)



    I've salary-sacrificed so that none of my income falls in the 40% bracket, and I'm feeding 550 pm into 5% regular savers. My initial question was because I was wondering what to do with those pots when they mature. My company is both unwilling and incapable of getting ad-hoc requests right, so I've started a SIPP to put and extra income/savings into.



    Shinytop, have I understood you right? Can you really just put cash into a pension SIPP, leave it uninvested, AND get the government top-up?
    • LateStarter
    • By LateStarter 16th Apr 19, 9:01 PM
    • 226 Posts
    • 243 Thanks
    LateStarter
    • #9
    • 16th Apr 19, 9:01 PM
    • #9
    • 16th Apr 19, 9:01 PM
    Dump all you spare income into your pension and use whatever proportion of your TFLS at the appropriate time to supplement your cash reserves. I would keep the cash in a staggered array of 3 - 5 year cash ISAs which will allow you to A. keep track with / minimise loss against inflation, B. access your cash in contiguous financial years. That said three years of cash would for me be a minimum of 37k5 which is a lot of money, and potentially a high proportion of your pension pot(s) to cap to zero growth (more likely very slow depreciation). I'm the same age as you and am doing all I can to be fiscally independent by 57, having also had enough of the lunacy of the surrounding work environment (although I actually enjoy, more or less, what I do). What about the option of part time work to bolster cash if the markets deteriorate for any period of time?
    Originally posted by pensionpawn

    Part time work is definitely an option, I'm on a decent wage now but certainly not enjoying it as much. If I could get the pension pot big enough (ha!), I really consider a lower paid/part time job to keep me occupied for a few years.
    • bluenose1
    • By bluenose1 16th Apr 19, 9:29 PM
    • 2,096 Posts
    • 3,413 Thanks
    bluenose1
    Could you not put more into your work pension? You cannot beat the benefit of salary sacrifice.
    Money SPENDING Expert

    • LateStarter
    • By LateStarter 16th Apr 19, 9:42 PM
    • 226 Posts
    • 243 Thanks
    LateStarter
    Could you not put more into your work pension? You cannot beat the benefit of salary sacrifice.
    Originally posted by bluenose1

    You are right, if course, but at the moment I'm in a running battle with both HR and Finance, as my previous request to raise the salary sacrifice percentage went unactioned for the 1st month, without even a "sorry". My latest request has found the one accountant who can't do maths, who says HR sent him the wrong figures, who claim they didn't. Bluntly I'm tired of dealing with them.
    • Triumph13
    • By Triumph13 17th Apr 19, 8:47 AM
    • 1,450 Posts
    • 1,962 Thanks
    Triumph13
    For Sal Sac benefits it's worth keeping on fighting HR. Using a SIPP your 80 becomes 85 when you get it out - a 6.5% gain that can be easily gobbled up by fees and bad rates. With Sal Sac,even below the 40% band, your 68 becomes 85 (more if the employer shares their savings) for a 25% gain. Park your cash in a savings account or ISA until HR get their fingers out.

    The reason I didn't even suggest cash inside the pension is that many (most?) schemes seem to give a negative return on cash after fees even before inflation and with 10 years until retirement that would be vicious. If you want cash inside the pension then get it in in the last few years - subject to any worries about needing to retire earlier than expected and during a downturn of course!
    • shinytop
    • By shinytop 17th Apr 19, 9:13 AM
    • 243 Posts
    • 261 Thanks
    shinytop
    Shinytop, have I understood you right? Can you really just put cash into a pension SIPP, leave it uninvested, AND get the government top-up?
    Originally posted by LateStarter
    I think others have answered but yes. I've put in cash only for the last 18 months or so into my company scheme via salsac, my stand alone SIPP and Mrs S's stand alone SIPP. HMRC don't care what you do with it as long as it's going into a pension. Yes I might be losing out in possible returns and inflation but at least it's guaranteed.
    • LateStarter
    • By LateStarter 17th Apr 19, 11:29 AM
    • 226 Posts
    • 243 Thanks
    LateStarter
    I agree I shouldn't be looking at cash inside the pension now, but I was planning to save 5k a year, so I can have 70k in 10 years. It seems better to invest the extra 5k into the pension fund - along with the 20k I'm currently putting in (and get the HMRC contribution too). Then, 2 years before retirement, hold all pension contributions as cash, and essentially get 25% HMRC top up on that. That way my cash position would be 62k in the pension, which I could then extract as part of the TFLS. Does that make sense?

    I'm starting to see a bit of light here.
    • steampowered
    • By steampowered 17th Apr 19, 12:54 PM
    • 3,134 Posts
    • 3,157 Thanks
    steampowered
    I think you need to turn your question around.

    Rather than "hoping to retire at 62/63", the question is "when can I afford to retire with the level of income in retirement which I require".

    This will depend on what your pension provision looks like.

    It is worth putting some numbers into pension calculators, if you haven't done this already.

    Over a 9-10 year period it is definitely likely that you'd be better off investing spare money rather than keeping it in cash.
    • LateStarter
    • By LateStarter 17th Apr 19, 2:30 PM
    • 226 Posts
    • 243 Thanks
    LateStarter
    I think you need to turn your question around.

    Rather than "hoping to retire at 62/63", the question is "when can I afford to retire with the level of income in retirement which I require".

    This will depend on what your pension provision looks like.

    It is worth putting some numbers into pension calculators, if you haven't done this already.

    Over a 9-10 year period it is definitely likely that you'd be better off investing spare money rather than keeping it in cash.
    Originally posted by steampowered
    Thanks for all the advice and suggestions so far everyone, I really think life would be so much harder without this forum.

    Sorry I should probably have been clearer, the 62/63 age is when I think I can afford to retire. It's largely based on a spreadsheet of expenses for the last 2 years, with a 10% buffer and a few very broad assumptions, run through various scenarios. For now I'm using 5% portfolio growth, 3% inflation and 3% drawdown as a baseline. I'll obviously have to do a 'Reality' update at least once a year, but I'm trying not to micro-manage it - it's more about making the correct big decisions now.

    FWIW, retirement age is 67, on track for full SP. In 2019 values, the goal is 21k pa during retirement. So I need 5 years of full-funding, and a drawdown of about 12.5 k once SP kicks in. Am I missing anything?
    • LateStarter
    • By LateStarter 18th Apr 19, 10:39 AM
    • 226 Posts
    • 243 Thanks
    LateStarter
    For Sal Sac benefits it's worth keeping on fighting HR. Using a SIPP your 80 becomes 85 when you get it out - a 6.5% gain that can be easily gobbled up by fees and bad rates. With Sal Sac,even below the 40% band, your 68 becomes 85 (more if the employer shares their savings) for a 25% gain. Park your cash in a savings account or ISA until HR get their fingers out.
    Originally posted by Triumph13

    Well I took up my case with HR/Finance this morning, and was rebuffed completely. "Company policy" does not allow salary sacrifice above 18%, as "corporate want to limit their financial exposure". As the company is now contributing 6% this keeps it below the "group directive" of 25%. Seems the finance people were not incompetent after all - just following orders and not telling me. I did ask why I wasn't told. "Oh it's in the latest addendum to the employee manual".

    I assume this is how it is and I have no comeback here, as salary sacrifice is totally at the employer's discretion? I really am getting fed up of work. Ah well, here comes another spreadsheet.
    Last edited by LateStarter; 18-04-2019 at 10:40 AM. Reason: typo
    • crv1963
    • By crv1963 18th Apr 19, 11:25 AM
    • 787 Posts
    • 1,810 Thanks
    crv1963
    Well I took up my case with HR/Finance this morning, and was rebuffed completely. "Company policy" does not allow salary sacrifice above 18%, as "corporate want to limit their financial exposure". As the company is now contributing 6% this keeps it below the "group directive" of 25%. Seems the finance people were not incompetent after all - just following orders and not telling me. I did ask why I wasn't told. "Oh it's in the latest addendum to the employee manual".

    I assume this is how it is and I have no comeback here, as salary sacrifice is totally at the employer's discretion? I really am getting fed up of work. Ah well, here comes another spreadsheet.
    Originally posted by LateStarter
    Then you now need to sort an alternative pension to put your additional savings into. At least you'll still get the uplift from taxman, if not the NI savings.

    We have two DC pension pots for Mrs CRV- DC pot 1- has been saved for years and will be drawn down on retirement at around 3.5% so hopefully last her lifetime and pot 2 a SIPP which will be drawn down to zero over the 10 years age 57-67 at a rate of 8.5k pa or equal to her expected SP, pot will be exhausted when SP kicks in, but her income will always be at or just below her PA.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • pensionpawn
    • By pensionpawn 18th Apr 19, 1:06 PM
    • 152 Posts
    • 100 Thanks
    pensionpawn
    Well I took up my case with HR/Finance this morning, and was rebuffed completely. "Company policy" does not allow salary sacrifice above 18%, as "corporate want to limit their financial exposure". As the company is now contributing 6% this keeps it below the "group directive" of 25%. Seems the finance people were not incompetent after all - just following orders and not telling me. I did ask why I wasn't told. "Oh it's in the latest addendum to the employee manual".

    I assume this is how it is and I have no comeback here, as salary sacrifice is totally at the employer's discretion? I really am getting fed up of work. Ah well, here comes another spreadsheet.
    Originally posted by LateStarter
    My wife's company match her contributions to 10%, which is good. However we wanted to contribute more via SS however they said that had to be done via AVC. However I believe from my colleagues that my company will SS down to minimum wage. Makes you wonder why there's no consistency?
    • pensionpawn
    • By pensionpawn 18th Apr 19, 1:21 PM
    • 152 Posts
    • 100 Thanks
    pensionpawn
    Thanks for all the advice and suggestions so far everyone, I really think life would be so much harder without this forum.

    Sorry I should probably have been clearer, the 62/63 age is when I think I can afford to retire. It's largely based on a spreadsheet of expenses for the last 2 years, with a 10% buffer and a few very broad assumptions, run through various scenarios. For now I'm using 5% portfolio growth, 3% inflation and 3% drawdown as a baseline. I'll obviously have to do a 'Reality' update at least once a year, but I'm trying not to micro-manage it - it's more about making the correct big decisions now.

    FWIW, retirement age is 67, on track for full SP. In 2019 values, the goal is 21k pa during retirement. So I need 5 years of full-funding, and a drawdown of about 12.5 k once SP kicks in. Am I missing anything?
    Originally posted by LateStarter
    Is your portfolio actually growing at just 5%? Maybe you are being too conservative and 7%-8% reflects actual growth better? Why 3% drawdown? Is this because you want to maintain your pot size? If so, why? If that is not an issue then perhaps you can take out more. Will you end up with a pension which is unnecessarily large (paying sizeable tax on drawdown) and working too long for it. Would you prefer to retire earlier?

    Just food for thought...
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