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Something I think a number of people consider is what they want to leave to their dependents.
This is a good point - chap in my office who is 62 is only still working to give his daughter a chunk of Money when her baby arrives in the summer..
Not sure how this will pan out with my kids (currently 11 and 14) as we know they've been left significant values in a couple of elderly relatives Wills - so hopefully won't need much from us.. Which is good as they'll be getting the house and very little else!!
Which works well, but how do you capture and accurately categorise spending on credit cards, Paypal, and other sources of spending that are not directly from your current account?
As per footflaps. I only have 1 debit card, no credit cards so easy to track. Paypal is a doddle, just look at transaction history. OK there was some manual fiddling involved which is why it took all day.
It’s surprising how much your outgoings reduce when you stop work
Yep, agree with the posters above, I reckon I pay about £2k a month into mortgage, pension and savings, the missus perhaps twice that.
My wife is a medic and will be forced to reduce hours quite dramatically due to her pension topping out. We are 42 (me) and 45 (her). Plan is to reduce hours / pressure in 10 years time by which point kids should no longer be dependent. We both intend to be fully retired at between 55 - 60, working only through choice, if at all. Project this year is to do some serious financial planning to make that possible.
For the retirees, how long did it take between you realising you could retire and actually doing the deed? Early this year I had an IFA check my sums to confirm that I can now retire (55) and more than cover my outgoings. Before that point my thoughts were that I kinda mostly sometimes enjoy my job and so would stick around for a while longer but try to wind down the hours even further from my current 4 day week. Since then it's started gnawing away at me and every time I deal with a load of crap at work I'm thinking 'why am I bothering with this when I don't need it'. The frequency of that crap also seems to be going up but based on the reaction of others around me at work that is a real (and hopefully temporary) thing rather than just my skewed perception. My current plan is now to stick it out while Covid winds down and see what 'the new normal' is like if/when we start going back to the office, but as it stands I can't see me staying around for the 2+ years I first thought I would.
how long did it take between you realising you could retire and actually doing the deed?
I wasn't even sure I could. I was offered early retirement at 17:30 on a Friday and told I had to make a decision on the Monday morning. My wife convinced me that we'd make a go of it somehow. IIRC that was 6 weeks before my 50th birthday.
When I worked about 1/3 retirees died within 2 years, something like that. Ftse 100 company so spread of employees from head office to drivers. Seem to remember it was something like 1/3 die early, 1/3 avg, 1/3 make 90s.
A mate similar age to me died a few years ago, first non accident mortality, focuses the mind. I just potter about doing a few jobs for other people, really enjoy it as if I don't want to work I don't.
My pensions kick in at 60 so I 've a few years to go, then the state pension at 67. I have aimed to accrue the UK avg salary in retirement so 30k pa, should easily do that with property income, some shares, private and state pension.
I maxed out company pension from first job all the way through.
For the retirees, how long did it take between you realising you could retire and actually doing the deed?
For me it was not so much about the money as the age I was. I did want to go at 58 when my mortgage was clear but my other half insisted i stayed on till at least 60 ( she wanted 65) 60 is the youngest I can take my NHS pension without reduction so I had to wait until I was 60 in the end. I retired the day of my birthday
Surfer, erm yes. 😔
I finally got my shit together to talk to a IFA , after and account friend encouraged me to do so. Soon afterwards, my previous employer , who I had 23 years of service with started making noises about closing down the final salary pension scheme.
Between the discussion with IFA and talking with my wife ( she is older than I am, so it is prudent to assume one of us is likely to not be here in 15 years time, and dubious that both of us will be here in 25 years time), and informing work was 6 months. My employer was wanting to be a global company - and doing everything not to. As I was trying to force it to change, and i was being made a fall guy (despite the growth and programs delivered). So in a terse meeting in Japan, I just told them that i was no longer interested in helping them because they were no longer interested in trying to do what the employed me for!. They were somewhat taken aback - you don't to that in Japan! But they invited me back 4 weeks before I left - and we had a fun 3 days !
Unfortunately I left my employer end of March '20. Covid time.
The only thing I regret is not getting the big piss up before I left.
The first year has been a challenge - and great travel plans have been shelved. Considering that we are both over 60, we are not overly time rich. But we will be able to fit them in over the next few years. "Stay at Home" have meant it was way more boring that expected, but I have a couple of volunteer gigs - and in one of them , I get to launch lifeboats !!
It's better than working
I retired last august, rather than sitting at a PC 8 hours a day I’m having great fun doing diy and riding my ebike.
Spring has sprung and I haven’t had a day off in 2 weeks, decking ripped down, being replaced with stone, new rockery and garden plan, it’s great waking up and doing what you enjoy while you can, I finished at just over 60.
I'm 40 and I would retire tomorrow if I could. There was a decent thread on the financial aspect of it all recently and due to that I've rejigged all my money to avoid tax and send a load to my pension so will hopefully get there closer to 50 than 60 with a tactical house downsize in there at some point.
I reckon I could fill 1000 years of active retirement before I got bored so I wont be working any longer than i absolutely have to
I’m 40 and retirement occupies my mind a lot and motivates me at work. I do have to remind myself not to wish my life away.
I’ve a figure in mind for a pension pot somewhere between 500-700k would be happy days for me. So, head down and either wind down, do a different job later on.
Also saving in s/s ISAs as no access to pension till 57 so might use the ISA to bridge over to the pension.
I’ve always wondered what that feeling must be like as that tipping point comes closer and closer. It seems a long way off for me but a few years of compound growth and contributions things can change quickly. Retirees?
i cycled away from my job today, with a pretty big smile on my face.i have been there 20 years and 12 days exactly. i had go to the stage where i hated going. it made me moody and angry. and dealing with tradesmen over a counter, it came close to taking it outside a few times.
the thought of never having to go back was brilliant.
Just think when you're having a lie in tomorrow that every day could be like this.
Congratulations on your retirement.
I'm very, very jealous.
That sounds like a nice feeling. Anyone else like to share their experience and feelings on the day they retired?
Good on you Ton,I've got 92 shifts MAXIMUM before I finish.
I get on with everyone at work but I won't miss the place.
Enjoy a retirement beer!!
i cycled away from my job today, with a pretty big smile on my face.i have been there 20 years and 12 days exactly. i had go to the stage where i hated going. it made me moody and angry. and dealing with tradesmen over a counter, it came close to taking it outside a few times.
the thought of never having to go back was brilliant.
Good luck
Leaving my place after 27 years on the 31st, good package but not retirement level. Looking forward to a second career hopefully
Congratulations Ton. I hope the sun shines on your ride tomorrow
Nice one ton
Congratulations, Tony.
Enjoy yourselves as best you can.
Re £700k from a house sale at 55.....on this I'd say it would be fairly straightforward to live nicely until you receive state pension. £250k to buy a new home mortgage free. Let us say £50k to buy a new vehicle (if needed) and bits and pieces for the new house. You then have £400k to live off and if you forget totally about any interest it is £2770 a month for 12 years.....or £1500 a month for over 22 years. You'll have no mortgage. No car payments. Just day to day living costs that may well be c£1000 or less pcm.
I retired 6 years ago, at 49. My wife retired 5 years ago also at 49. We had both been on a 30 year fixed contract with final salary pension. We both feel a mixture of good fortune but also good decision making when we were 18/19 and immediately started paying a decent chunk into a pension. We've not moved house repeatedly, not chased flash cars/holidays etc lived a pretty normal life. We now have the ongoing choice as to whether to remain fully retired and enjoy our time or to go back to either part of full time working as we are bored. So far we have not been bored. Up until Covid, we did interesting stuff midweek and stayed at home on weekends to avoid the crowds who only get weekends to do what their social stuff. What covid has shown us is how little we actually need to live without a mortgage, the need to both run a car (we are down to one and quite fancy trying without) travel to work expenses etc etc.
With our kids, we have chosen to give them chunks of money now rather than the lottery of them waiting for us to die and inherits half a house and a bit of cash each. We figured they'd do better with £25k apiece now rather than £125k in perhaps 30 odd years when they're in the mid to late 50s (Or next to nothing if care home life awaits one or both of us)
I'm quite happy to talk 'proper' numbers but with a newish car paid for and no mortgage, we live very nicely (in our terraced house) on less than £1k a month. In 12 yrs we will/should get an extra £970 pcm with state pension...we'll feel like millionaires
After 30yrs working with same company I am hating it, but know nothing else.
I have 6 yrs on mortgage and 7 yrs to 55. I am hoping I can stick it out until then at which point I should have about 400k in my pension pot. I would love to get to around 500k+ so may need to stick it out for a couple of years past 55. Kids will be 20 and 23 when I am 55 so again, depending what they are doing working a few years past 55 may be needed to support them (uni, wedding etc etc). At 55 I would not pack in working all together but take a low paid/stress free job to pay a few bills and keep me going. Counting the days
Thanks dave661350, that was a very interesting post.
I think I just get a bit freaked out now I've just turned 50, reading all the posts about how everyone seems to have massive pension pots when all we'll have is capital from our house. We've got no children to worry about so for me it's just a case of trying to work out exactly when we could at least afford to slow down a bit.
Interesting reading and done food for thought....
My old man worked till he was 64 and now doesn't have the health to enjoy the things he enjoys... Golf, fishing, playing with the grand kids.
My mum stopped at 62 and died at 68. Yay. 😕
I'm 38. Always said I wanted to retire at 55 like my uncle. However, seeing how short life can be and the fact that we're getting older I'm tending toward not entirely jack in working, but slowing down. 1/3 less work, but working/pottering around for longer.
I've no property, but ~300k in various funds /investments. Likely to inherit half parents house plus eventually Plan buy a place for 120k in Italy with space for a workshop for pottering/income.
See how it goes.
I think I just get a bit freaked out now I’ve just turned 50, reading all the posts about how everyone seems to have massive pension pots when all we’ll have is capital from our house.
I am lucky ( took good decisions?) so I have a small NHS pension. I have nothing like the capitol or pension pots of some on this thread. i will just have to cut my cloth accordingly.
A part of the reason I accepted the lowish saley of being an NHS worker was for the pension. I certainly could have earned a lot more elsewhere if I had chosen to
A part of the reason I accepted the lowish saley of being an NHS worker was for the pension. I certainly could have earned a lot more elsewhere if I had chosen to
I also turned down higher paid jobs for the benefit of a better pension. Of course, not everyone has that option.
FWIW, having retired early, so drawing down early and not paying into it full term, my pension is currently paying me around 75% of the UK average salary. I'll also qualify for state pension in a few years. Mortgage is paid off though and no other huge debts to worry about. Wife is still working and likely she'll take early retirement in 3 years or so at which point we will also downsize the house and have a wee bit more capital to save/spend/give to my daughter.
Congrats, Ton
Fortunately I find my work interesting, and always have done, so I see myself going into my 60s hopefully (early 50s now). Likewise a good proportion of my mates and social life has come through work. Absolute worst case I've always thought it can just be 37.5 hrs out of your week plus 5 weeks holiday which leaves plenty of time for other things.
Interested in how many of those on here who retired early did so WITHOUT a final salary pension? Suspect it will become less and less feasible in the future. Slaves!
I had a final salary pension but I transferred it out into a SIPP.
Much more flexibility and many other benefits as well.
Switching out of final-salary pensions is usually not a good idea, no matter how much money is on offer.
Interested in how many of those on here who retired early did so WITHOUT a final salary pension?
The point I made above ( somewhat poorly) was that I chose a lower paying role partly because of the good pension. If I had gone into higher paying work without the final salary pension I could have put a lot more money into a pension pot without effecting my spending power and ended up in a similar situation. Ie instead of earning £30 000 pa and paying 11% in pension contributions if I had earned £40 000 pa and put that extra 10 000 into a pension I would be in a similar situation
In many ways you can view the NHS pension as deferred salery?
Since then it’s started gnawing away at me and every time I deal with a load of crap at work I’m thinking ‘why am I bothering with this when I don’t need it’
This. I am the same and at 56 I feel I am 1 conversation away from leaving my well paid job.
Switching out of final-salary pensions is usually not a good idea, no matter how much money is on offer.
I have a couple and 1 of them is quite small but I would have to pay to get out of it. Of course its a small amount guaranteed for life but I would prefer to put it in my SIPP and draw down on it differently.
The excellent thing about these threads is the education and reminders you get. At the time of Tons first post I got my annual pension statements from Reassure, who have been taking over 3 of my little pensions at 1.15% fee. With the statements comes the advice of moving them to cheaper cost funds, for which last year I tried to call to do so but well, Covid happened an no one answered the phone.
Last week I took action and transferred the smallest into a Vanguard SIPP at 0.15% as a trial for ease/cost/loss, which actioned yesterday. It all went well and I actually gained £250 in the process, so I’ll be moving the two bigger ones into the same SIPP over the next few weeks while the markets are a little suppressed.
Now we’ll have 4 diversified options; HL 100% equity with employer contributions, Vanguard SIPP 60/40 equity and bonds on a Target fund, a pot in a NS&I Premium Bonds, equity in the house with the mortgage gone in 3 years and a couple of ISA’s. At 49 there’s time for all that to grow and more contributions to be made. Yes it could be more aggressive but I’m risk averse.
Although I did bugger all when I was young except begrudgingly listen to people about opening pensions and contributed the least amount that affected my beer money at the time, we have a decent amount to afford our retirement. Hindsight to have saved more is a wonderful thing though, I think I’ve got quite lucky in retrospect to be where i am.
A question which I have an it occurs others may also have. I know I could dig out the answer but it may be useful to ask as there are quite a few in the same boat. I dont want to upset anyone asking questions but TBH if you browse a thread about retirees you are going to reads such stuff..
If I have 4 pensions all with different amounts over my career and I want to take out my maximum tax free cash (to reinvest in ISA's to draw tax free over subsequent years) Lets assume that is £100k I then do the same for part of my SIPP, say another £100k. Do I just contact each one and ask them to send me a cheque??
a cheque?
how quaint 😁
Had to resign at work and fill pension form, money paid by BACS. Tax paid at source and lump sum paid in account, 1st working day after I finished. Tax man thought this was new monthly pay which was fun for a while with HMRC.
I have a couple other smaller private pensions that I haven't cashed in yet, The pru one keeps prompting me to take it for some reason, but its just a case of informing them you would like your money.
In many ways you can view the NHS pension as deferred salery?
Any pension that has company/state contributions is "deferred salary".
OK, perhaps 'in lieu of higher salary' would be a better phrase?
I have a small NHS pension. I have nothing like the capitol or pension pots of some on this thread
You'd probably be surprised how big a pot that pension equates to. If you're buying an annuity at 60 that keeps track with inflation, a grand a month will cost in the region of £450k
I broke cover last week after reading all this. Announced I was going at 50, i was 47 that day so it seemed reasonable notice ! This will be my second retirement, hate me for this but I 'retired' at 34 when i sold my startup. I lasted about a week before i realised it was bloody boring at that age and I started a bunch of new things up. Fast forward 13 years and I I have acquired a wife and child and life has changed. I do an interesting job which is very demanding and relatively stressful, well as stressful as you make it really. In context i'm not saving lives or doing brain surgery so really not that stressful. Anyway, i want to go and do something totally different after 50 on my terms so will do that, i have 12 months notice anyway and a 6 month standown. Ironically post announcing that they've asked me to do an entirely different job because they know I am not 'digging in' for another 10 years ! So thanks all. I look forward to it when it arrives.
Switching out of final-salary pensions is usually not a good idea, no matter how much money is on offer.
Not necessarily. We have both been transferred out for a few years now. Lots of friends have too, many of whom have worked in the pensions industry, or financial services, for many years.
You certainly need to think long and hard, and be very careful about who you speak to, but we've no regrets.
Ref the transferring out thing - I think it depends:
My pension scheme is pretty good, but it is important to me that my OH and my (grown) children benefit from my pension (I've paid into it for 36 years). If I die my OH gets half my pension, and if she dies my children get nothing (if I leave it in the scheme). However if I transfer out then the pot is still there no matter who dies, and the pot stays in the family (and doesn't get absorbed back into the scheme).
So it does depend what your objectives are for your pension, who your beneficiaries might be and what your attitude to stuff is.
I would hate to die at 65 and my pension gets lost (likewise I would hate to still be around at 95 with no pension left). Swings and roundabouts.....
I would hate to die at 65 and my pension gets lost (likewise I would hate to still be around at 95 with no pension left). Swings and roundabouts
I reckon the second option is better
Loving these retirement pension threads. Everyone s situation is different, if your parents died aged 70 cashing in a db pension and enjoying life is probably a decent call, if allowed.
I like to keep my income diversified so as above, state, private, passive income. So many people over the years have advised against pretty much every income source. Truth is, no one really knows but with 4 separate sources maybe 1 will underperform. Db stuff for me is the cornerstone though, its fixed and rises every year.
Main worry I have is the generation who don't own property, where are they going to live in retirement? And lacking the opportunity to trade down.
Switching out of final-salary pensions is usually not a good idea, no matter how much money is on offer.
Some of the offers I have heard, notably in financial services, have been incredibly generous (think more than 40x annual award, compared to 20x for inland revenue). Some of us have not been given the option not to switch, as the scheme is being closed to existing (not new) members.
My offer was over 40 yrs worth. That plus how it's increased inside its investment wrapper means that transferring was a great option for me.
My father is mid 70's and is in the last stages of bone cancer. His advice on the matter was use the flexibility to enjoy more money when you are fit and able enough. They pretty much only spend their state pension nowadays so don't need extra money for things they can no longer do.
This thread had lead to a little further reading and I've just found out ...
If you are planning on retiring at 55 but 55 comes after 2028 you are going to have to wait until you 57 get get your hands on your pension pot.
Damn .... 8 years just moved out to 10 for me.... I'd been getting my head around 8, that time would fly but was long enough to ramp up savings and coincided with both kids being at Uni (hopefully) that seemed perfect timing.
Going to have to re-think, maybe start ramping up ISA contributions to fund those two years ??
Anyone in a similar situation ??
If you have enough money in your pension to fund your retirement earlier than you're allowed to access it and also own property then you could remortgage to cover the intervening years and pay it back once you can access your pension.
If you are planning on retiring at 55 but 55 comes after 2028 you are going to have to wait until you 57 get get your hands on your pension pot.
According to the discussion below about the consultations, it seems that the increase in the minimum pension age may not apply for existing pensions. So fingers crossed you may still be able to retire at 55.
"Protection from the increase in NMPA will only apply to those individuals who have an existing right within their scheme rules at the date of this consultation to take pension benefits before age 57. In other words, a member’s protected pension age will be the age from which they currently have the right to take their benefits."
According to the discussion below about the consultations, it seems that the increase in the minimum pension age may not apply for existing pensions. So fingers crossed you may still be able to retire at 55.
Is that going to apply to SIPPs though?
If you are planning on retiring at 55 but 55 comes after 2028 you are going to have to wait until you 57 get get your hands on your pension pot
Yep saw that a few weeks ago. I'll be 57 7/12 when that rule kicks in. Thank God.
Anyone in a similar situation ??
Was in that situation a few years ago when you could retire at 50, which was my pipedream. When the government upped it to 55 I took out ISA's to fund the 5 years between, but it's difficult to keep your hands off money in ISA's...
Is that going to apply to SIPPs though?
My superficial understanding says yes (as long as it/was started up before the end of this month)
enjoy more money when you are fit and able enough.
in reply the the post above, I was going to ask what you’d need a stash of money for at 95, when realistically you just need and would manage ok with the state pension for your living allowances. Maybe.
You would. Plenty I know get by on state pension alone and are happy enough
If you are planning on retiring at 55 but 55 comes after 2028 you are going to have to wait until you 57 get get your hands on your pension pot.
I'm 55 1 month after the pension date moves to 57......
From reading, it looks like the govt have not yet decided how they will implement the change, whether it will be a cliff edge or a gradual moving of the date depending on exactly when you were born.
Can't wait to retire, but not sure how much money I'll need, probably quite a lot I reckon, I do like my nice things. So I reckon that will be a problem and I'll have to cut back on stuff.
what you’d need a stash of money for at 95
Maybe:
Money for visiting carers
Extra heating
Cleaner
Stair lift
Ramp
Taxis
Care home
Coffin
Yes thanks everyone for these pension threads. They've definitely prompted me to take a closer look at how things could pan out.
I've always put in the maximum matched pension amoint into the company DC schemes but more recently I've been shovelling lots more cash in for the tax breaks.
Anyway, I reckon if I can keep saving at the rate I am, I'll have a tidy enough sum somewhere between age 50 and 55 (so in about 10 years time). Earlier the better obviously!
Have also therefore been wondering how to bridge the gap from potentially 50 to 55 or 57.
I came across this advice elsewhere on a money forum. Anyone done it?
If you have enough money in your pension to fund your retirement earlier than you’re allowed to access it and also own property then you could remortgage to cover the intervening years and pay it back once you can access your pension
I suppose the main thing is you need to borrow enough to fund the time you need, allowing for mortgage repayments and interest payments.
This must be cheaper than taking the tax hit to get money into an ISA to bridge the gap in advance?...but relies on actually being able to get a remortgage...
Is there guidance on what size of pot, accessed from what age, may give what type of annual return ?
Aged 55 here and would like to retire at 60 when kids are through Uni etc. Pension pot currently about £300k and am piling around 17% into it between employer and employee contributions and likely to, by age, 60 have another 300k of inheritance, plus maybe 100k of savings at most.
I have no real concept of what that would equate to as an annual ‘salary equivalent’.
Wife likely to retire at same time, with a meagre NHS pension. We could release a bit by house downsizing, but not much over £100k if even. No mortgage at present.
I remember when I first stared my first “real” job. One of the older guys said “early contributions make the dough rise.”
This really struck a chord with me and I was only 23 so pension contributions was low on my list of spending! I don’t have a huge pot but his advice has helped me 17 years later.
I’m trying not to allow “lifestyle creep” to occur too much and any pay rises I’m trying to syphon into the pension.
I’m also wrestling with paying off a low interest mortgage or paying more into pension. I know the maths says pension but hard to get the head around ignoring debt.
Is there guidance on what size of pot, accessed from what age, may give what type of annual return ?
Aged 55 here and would like to retire at 60 when kids are through Uni etc. Pension pot currently about £300k and am piling around 17% into it between employer and employee contributions and likely to, by age, 60 have another 300k of inheritance, plus maybe 100k of savings at most.
Invested well 5% drawdown should be easily achievable. So 35k per year on 700k pot.
^^^ thats useful, much appreciated indeed
Have also therefore been wondering how to bridge the gap from potentially 50 to 55 or 57.
We sold our house and having a new house built somewhere cheaper and using the proceeds from the sale to fund the gap. We have a business that generates some income and will probably look at some seasonal part-time work. We have no kids, so we can do a draw-down on the house if needed - I’m not leaving anything for the taxman 😆 There won’t be much money for expensive holidays, but we have a campervan and living on a Scottish island.
lump sum paid in account, 1st working day after I finished. Tax man thought this was new monthly pay which was fun for a while with HMRC.
I think this can be avoided by taking a small lump sum to start with and the a month or 2 later thanks the balance.
Reading this thread has very much focussed the mind... 40 here, just dropped my mortgage from 28yrs to 16, but the reality is that that will go up again to 25 or so with an impending house move in the next year or so.
That aside... I do need to sit down and formulate a plan that is going to help me to retire at an age where I can still enjoy my relative youth and mobility (money doesn't motivate me). I already have minimal outgoings beyond the usual mortgage and utility bills, I've got a standing order into a Vanguard ISA (albeit not for very much) and have been trading a little Crypto currency for the last few months (though am acutely aware of the volatility, and am ready to pull my investment out soon leaving just the profit in there to play with going forward), but I don't see how I'd ever get to retire even by my early 60's as it is, let alone any earlier...
Still... I really enjoy my current job, so it could be a lot worse I guess! I certainly don't envy the lifers that are counting down the days to retirement...
It is very simple really:
1. Calculate what income you will need in retirement.
2. Calculate what income you'd get from your pension(s), ISA's and other investments were you to retire right now.
3. If there's a shortfall (and there likely will be) then you have identified the 'gap'.
4. Formulate your plan to close the gap:
- max out your ISA allowances each year (if you can)
- contribute more to you pensions and choose carefully where it's invested (the 'underlying')
- cut back on spending
- sell off any stuff you don't need
- stop buying sh*t you don't really need (or want) because you think it'll make you happier (it won't)
- reassess and adjust your lifestyle/level of outgoings
- investigate cheaper ways to get the exact same stuff you already get (mobile phone plans, monthly broadband subscriptions, car insurance, house insurance, electricity/gas, etc...). We've saved hundreds £££ p/a with zero impact on quality of services.
It's as simple as that really.
The hardest thing is actually implementing the changes necessary to get you there. But once you've started the ball rolling it's surprisingly easy to keep it going 🙂
This is a simple summary. For a more detailed explanation, see a more detailed version in the Retirement - what's it really like? thread.
I think there are a few other tradeoffs to consider. Such as how much time.and money do you want to spend on experiences taken NOW vs. deferring to retirement.
E.g. doing a long around the world trip, or going down to 4 days a week at work
The trade-off there being
Experience now = more time before retirement, probably less money in retirement.
Experience after retirement = risk I might die or get ill before I get there
I’ve always put in the maximum matched pension amount into the company DC schemes but more recently I’ve been shovelling lots more cash in for the tax breaks.
This is still the best tax break available, especially if you are fortunate to be in the 40% tax bracket. The other thing to be aware of is the pension carry over allowance which means any unused amount from your £40k maximum annual pension contributions can be carried forward for up to 3 years. I get my payoff in May so will be putting a fair chunk of it in my pension and will start drawing down next tax year.
I see the government has recently updated their guidance on the transition for accessing pesonal pensions from 55 - 57. As usual the appear to be several nuances associated and they have started a consultation process.
For those wishing to access their pension from 55 and born between 1971-1973 there are some vagueries which I'm struggling to understand. Is there anyone here who can translate the information below? Particularly timely as we've just been informed our DB scheme is closing to future accrual..
So - is it better to push savings / spare income into a pension rather than a savings account?
I am 54, healthy Defined Benefit pension pot (now closed) and a "new" Defined Contribution scheme, and want to stop working at 55 (12 months time). Could save £1000/month but at 0.5% interest in a savings account the savings are not really doing any work.
I’m also wrestling with paying off a low interest mortgage or paying more into pension. I know the maths says pension but hard to get the head around ignoring debt.
Can anyone advise on this question? I’m in the same quandary in that my mortgage doesn’t really end in 3 years, but it’ll be out of a fixed rate period and I have the balance currently sitting in Premium Bonds ready to settle it.
In my view, I’ll be saving the interest at 1.5%, and if I didn’t settle it it’d take another 5 years to conclude. So, my measure is saving 1.5% vs earning 1.5% or more. I don’t see savings accounts being at that rate for a while which for me narrows it down to low risk stocks, with no guarantee it’ll make that much over the period, I could even lose.
So my plan; settle the mortgage and save the interest and put what would have been monthly mortgage payments as a DD into a passive investor account e.g. Vanguard within SIPP wrapper for tax economy.
I’m also wrestling with paying off a low interest mortgage or paying more into pension. I know the maths says pension but hard to get the head around ignoring debt.
Can anyone advise on this question? I’m in the same quandary in that my mortgage doesn’t really end in 3 years, but it’ll be out of a fixed rate period and I have the balance currently sitting in Premium Bonds ready to settle it.
The answer depends on your appetite for risk. On the one hand you have the mortgage, with either a fixed or tracker rate, and which requires regular payments, on the other you have Premium Bonds which aren't guaranteed to provide any return, and certainly not a regular one, or other investments which can rise or fall in value. The safest option is to pay off the mortgage as quickly as possible. The riskiest but potentially highest reward is to pay off the minimum on the mortgage to put everything else it to stocks and shares (via pension, ISA, or a plain trading account).
The thing with a mortgage is that, for me anyway, just knowing it was gone and I owed no one anything was a very lovely feeling indeed and does free the mind to think of other options and things. The piece of mind alone was worth clearing it for me.
Anything you put into pension comes with 40% tax relief. That’s 40% for free. As long as you aren’t exceeding annual / lifetime allowances.
Anything you put into pension comes with 40% tax relief. That’s 40% for free
As long as that is your marginal rate
In my view, I’ll be saving the interest at 1.5%, and if I didn’t settle it it’d take another 5 years to conclude. So, my measure is saving 1.5% vs earning 1.5% or more
I will retire with a mortgage but the interest rate is so low I am happy to take the payments out of my SIPP/ISA rather than pay it off. I would expect to earn a lot more than 1.5% on it.
The thing with a mortgage is that, for me anyway, just knowing it was gone and I owed no one anything was a very lovely feeling indeed and does free the mind to think of other options and things. The piece of mind alone was worth clearing it for me.
If thats the way you feel then you should pay it off.
This came up on the other thread.
I think at first when your LTV is high then it's worth overpaying the mortgage to get yourself access to the better rates, but it gets to a point where there is no real benefit to continuing to do that. On the pension side, if you are paying 40% tax and you can opt for salary sacrifice then instead of paying off £580 of your mortgage with your wages net of tax and NI you can pay £1000 into your pension and probably get a top up too.
As long as your mortgage balance is low enough that a rate increase wont break your cashflow then that's the way to approach it
Anything you put into pension comes with 40% tax relief. That’s 40% for free.
You do gain, but it's more complicated than that. You're taxed when you take it out. If your marginal rate when working is 40%, your marginal rate drawing your pension is likely to be at least 20%. On the other hand, 25% can be tax free.
enough talk of money and all the boring shyte.
today i did what we all want to do when we retire. i rode my bike.
69 glorious miles on nearly empty roads. is it always this quiet midweek ??