Pensions

[west didsblue]

Does anyone know the answer to this? My missus is being made redundant in the NHS. She has for a pension statement which says she will get £x/yr at retirement. We are both assuming that this is an assessment based on what’s in her pension pot now (eg she won’t pay anything else in after she is redundant, obviously). Is that right though?

Yes, it will be based on what she has in there now.

If she’s getting a payoff she should be able to put it into her pension and take it out again as part of the 25% tax free lump sum entitlement leaving a better pension and a more sizeable lump sum whilst saving quite a bit in tax.

 

[chris85mcfc]

That's my thinking as same situation.
I've just got a 3% pay rise but just going to put it all in my pension.

Just done the exact same, further compounded (complete luck!) that it's coincided with my 6th year work anniversary which means they will match me at 9% from the previous 6%

 

[Pingu the Penguin]

Yes, it will be based on what she has in there now.

If she’s getting a payoff she should be able to put it into her pension and take it out again as part of the 25% tax free lump sum entitlement leaving a better pension and a more sizeable lump sum whilst saving quite a bit in tax.

Ta mate. She is a good fair way from being able to draw the pension and so is likely going to need the payoff but I will mention that to her. Thanks a lot

 

[west didsblue]

Ta mate. She is a good fair way from being able to draw the pension and so is likely going to need the payoff but I will mention that to her. Thanks a lot

Having said that, the first £30k of a payoff is tax free so she should keep that and think about putting the rest into her pension (assuming the rules haven’t changed recently).

 

[Kompany Car]

This is what I find interesting. When working and having kids at home we easily burn through over 80k pa of household income. So this makes a pot of several hundred k seem not enough.

But many people say its fine. You spend less.

Makes a big difference if you are still paying a mortgage.

You need to factor in that the remaining pension which is not being drawn down will continue to grow, being conservative on average at around 5% per annum. So 500k will give you 25k without touching the capital. You then have state pension which will add another 12k, so thats 37k. Your significant other will get a state pension so assume another 12k. So without including any pension your partner might have you are at 50k, there abouts and not touching the capital. That's not including any company pension your partner may have.

The state pension has a big impact, thats why each time they increase the state pension age it get harder to retire at 60 as you need to bridge the gap, which is likely to erode your capital.

Personally im planning on buying either an annuity (depending on rates) to act as a bridge to state pension age, or setting up a bond ladder.

 

[SilverFox2]

It may be worth contacting an IFA for an hour. Combining them will almost certainly reduce ongoing costs.

In my day an annuity was the only option so I checked the various funds and found one had a generous guaranteed percent so kept that one. The others are as you say best combined to see what options you can get on the Saturday ft offers page.
No doubt things have changed since I retired but my point is check to see if individually they are more valuable than combining.

 

[Saddleworth2]

Makes a big difference if you are still paying a mortgage.

You need to factor in that the remaining pension which is not being drawn down will continue to grow, being conservative on average at around 5% per annum. So 500k will give you 25k without touching the capital. You then have state pension which will add another 12k, so thats 37k. Your significant other will get a state pension so assume another 12k. So without including any pension your partner might have you are at 50k, there abouts and not touching the capital. That's not including any company pension your partner may have.

all true but who the hell wants to work until they are 67 or 68? The average life expectancy in Manchester is 76. Bearing in mind potential ill health, it doesn't give you very long to enjoy your hard earned retirement if the state pension is what you rely on. And thats always assuming you get the full wack. I think its sensible to try and plan for at least 20 years and have a pension provision which accommodates that if its humanly possible.
The other myth is that you spend less as you get older. Given reasonable health, you simply spend on different things - more time for leisure, holidays etc. Although the mortgage might have been repaid (although even that is less sure as lenders are extending the term of mortgages), you still have utilities and motoring, insurance etc etc, all of which are costing more each year (often outstripping inflation significantly).

Having retired about 12 years ago, I can see the mistakes I made in planning for my own retirement and would do things differently if I could go back.

 

[Kompany Car]

Having retired about 12 years ago, I can see the mistakes I made in planning for my own retirement and would do things differently if I could go back.

Interested to know what mistakes you made. Could you have retired earlier than you actually did ?

The point I was trying to make was you can spend some of your capital to retire earlier as its offset when you get to state pension age, you just need to be careful how much and consider sequence risks.

Without going into details, I could jack it all in at 57 and have no worries whatsoever but have always been pretty cautious when it comes to money, probably due to my upbringing.

 

[hampshireblue]

Interested to know what mistakes you made. Could you have retired earlier than you actually did ?

The point I was trying to make was you can spend some of your capital to retire earlier as its offset when you get to state pension age, you just need to be careful how much and consider sequence risks.

Without going into details, I could jack it all in at 57 and have no worries whatsoever but have always been pretty cautious when it comes to money, probably due to my upbringing.

One "mistake" I made was not spreading the 25% tax free part over a bit longer. I did it over 7 years but with hindsight would have gone another couple to keep tax down a bit.

If you go into drawdown at 56/57, as I did, there is a niggling feeling as to whether it will be enough to last 30 years or so. My experience is that it will be, easily, with a drawdown rate of around 4%. I'm very fortunate in that my "pot" is reasonably good, but if you're predicting already you can go at 57 so must yours be. My mantra: if you can afford to retire or go part time-do. You don't know what's round the corner healthwise.

 

[Kompany Car]

One "mistake" I made was not spreading the 25% tax free part over a bit longer. I did it over 7 years but with hindsight would have gone another couple to keep tax down a bit.

If you go into drawdown at 56/57, as I did, there is a niggling feeling as to whether it will be enough to last 30 years or so. My experience is that it will be, easily, with a drawdown rate of around 4%. I'm very fortunate in that my "pot" is reasonably good, but if you're predicting already you can go at 57 so must yours be. My mantra: if you can afford to retire or go part time-do. You don't know what's round the corner healthwise.

Probably reducing my hours at 55 so 2.5yrs time and then see how I feel. If I can escape most of the corporate rubbish and just do things Im interested in I will keep going, if not it will be adiós and I will probably do a bit of consultancy through my own business.

 

[RobMCFC]

Personally im planning on buying either an annuity (depending on rates) to act as a bridge to state pension age, or setting up a bond ladder.

The annuity vs drawdown is an interesting conundrum - the security of a fixed payout versus the potential for more money but with risks.

Obviously, it depends on the annuity rates at the time, but part of me is thinking that I'll buy an annuity to give me a guaranteed £4 or 5K to add to my state pension but keep most of it in drawdown.

 

[denislawsbackheel]

Just explain the last sentence please.

When the pension freedoms came in my Mrs was not a tax payer so I paid into a pension for her the maximum you outlined. Got the tax relief.
Because she was not a tax payer she could withdraw the lot tax free.
We rinsed and repeated until she got her state pension.
From what I recall by doing that the regulations were that if her circumstances had changed and she started working she could not subsequently put more than around £4K in to a pension each year.

 

[Saddleworth2]

Interested to know what mistakes you made. Could you have retired earlier than you actually did ?

The point I was trying to make was you can spend some of your capital to retire earlier as its offset when you get to state pension age, you just need to be careful how much and consider sequence risks.

Without going into details, I could jack it all in at 57 and have no worries whatsoever but have always been pretty cautious when it comes to money, probably due to my upbringing.

I retired at 56, had a financial plan, defined benefit pension. Looking back, I probably went a couple of years too early and should have put another whack of salary and bonuses aside. The biggest mistake was underestimating what you are going to spend. I would be more realistic about spending on holidays, pleasure activities, house improvements and maintenance (I’m currently looking at a £40k bill for repairs for example). Whatever you think you will need, in reality you need more. That’s the biggest learning. Don’t get me wrong, I’m not pleading poverty and I have packed a great deal into these 12 years that I wouldn’t have experienced if I’d worked on including seeing a great deal more of my grandkids growing up.

 

[flook]

When the pension freedoms came in my Mrs was not a tax payer so I paid into a pension for her the maximum you outlined. Got the tax relief.
Because she was not a tax payer she could withdraw the lot tax free.
We rinsed and repeated until she got her state pension.
From what I recall by doing that the regulations were that if her circumstances had changed and she started working she could not subsequently put more than around £4K in to a pension each year.

This is interesting but a little confusing, I packed in work at 58 having taken a different route with saving for my later life. I have a cash ISA and a S&S ISA which will provide for me (subject to the world blowing up and doing a Trump) so I have no tax liability whatsoever at this point (as I have no taxable income not having reached state pension age yet)

When I asked a pension provider could I pay £2880 into a SIPP and get the tax relief I was told no as I hadn't paid any tax that year to get the relief on. From what has been said is that wrong?

Similarly my wife has no income other than state pension, so can I do the same for her? All sounds a bit like free money for no reason to me and any government aren't known for their generosity in that respect

 

[denislawsbackheel]

Yes.
You can pay into a pension even if you have no income.
You were wrongly advised.
I know, we did it.

Tax relief on pension contributions | Low Incomes Tax Reform Group

Most people get a government top-up to their pension savings in the form of tax relief on their contributions. The way it is given depends on what

www.litrg.org.uk

You can even open a pension for a baby.

 

[flook]

Yes.
You can pay into a pension even if you have no income.
You were wrongly advised.
I know, we did it.

Tax relief on pension contributions | Low Incomes Tax Reform Group

Most people get a government top-up to their pension savings in the form of tax relief on their contributions. The way it is given depends on what

www.litrg.org.uk

You can even open a pension for a baby.

Thanks, seems I need to do some digging then, looks like a simple way to make 1400 quid a year.

So in a nutshell, I open a SIPP, pay in £2880, Kier gives me £720 and I can draw that down whenever and in whatever amount I wish?

 

[hampshireblue]

Thanks, seems I need to do some digging then, looks like a simple way to make 1400 quid a year.

So in a nutshell, I open a SIPP, pay in £2880, Kier gives me £720 and I can draw that down whenever and in whatever amount I wish?

Yes you can.

 

[sky tot]

Can anyone recommend a good IFA local to Stockport area ? My wife and I both have pensions maturing in 2026 . I’m self employed and have 1 private pension and my wife has 3 pensions . Don’t think I have enough in mine yet to retire (60yr old) but need a financial plan .

 

[Blue Maverick]

Interested to know what mistakes you made. Could you have retired earlier than you actually did ?

The point I was trying to make was you can spend some of your capital to retire earlier as its offset when you get to state pension age, you just need to be careful how much and consider sequence risks.

Without going into details, I could jack it all in at 57 and have no worries whatsoever but have always been pretty cautious when it comes to money, probably due to my upbringing.

If you can go at 57 do it, look at what happened to Jota and countless others, there’s a famous actor just died of cancer at 56, Michael Madsen another actor at 63! I’m lucky with my pension it lasts until the day I drop then the wife benefits from it. I’ve been retired nearly 3 years I’m 56, I’ve nit regretted it once and you won’t, I’ve actually got 3 times more disposable income now!I’m not taking multiple holidays a year or living the high life but then I never did, I like you was brought up by parents who were cautious and had little so I’m careful either way my cash, my gran said you’ll never be rich but you’ll never be poor and she was right and I’m hapoy with that. In 11 years I’ll get my state pension ok I’ll be 67 but I’ll be on about £35k a year in total, then I’ll be be smashing Benidorm every couple of months ;)

 

[East Level 2]

I'm 68, getting the state pension, and on a drawdown pension with a pot value of £350k. It's all very low risk and should last around 23 years allowing for 2% inflation.
I have an IFA who does a review every year and also administers any changes I want to make such as taking a lump sum or altering the monthly draw down. I can't remember the fee he currently takes, but what would be a typical figure for this advice from an IFA.