Can we retire please? How much money do you really need need?

[Captain Pants]

I don't know if it's been mentioned already but you can also claim "marriage allowance" from the tax man if the higher earner (incl. pension payments) is still a basic rate tax payer. It is only £250 per year but "every little helps" and is very easy to claim online. Also you can back date it to prior years

AnnK, MASSIVE THANK YOU to you for this info. Set me thinking that it probably applied to me so applied online (very simple) and about a week later got a cheque for £899! Brilliant advice on here and excellent service from HM Revenue and customs. Tax code adjusted so will continue to benefit in future years.

 

[Bluemanc100]

Anybody on the forum prepared to offer some free advice? I have circa £100k in private pensions that were frozen in March last year when I took statutory redundancy. I am already receiving a forces pension and my wife has an NHS pension. We also receive rental income from a property to supplement the pensions and live on these funds now.

I am unsure whether to take the private pensions as drawdown or as an annuity.. With no protection or index linking, once I've taken the £25k tax free amount I would receive circa £233 per month on the annuity but I am not sure whether to just draw down an annual amount instead and pay the tax on the element that is over my allowance until my state pension pays out in 10 years time (I am 57).

I am also contemplating selling the property in Chester which we receive rental income on some time between now and state pension age but that will depend on Sue's Lymphoma... if we decide to go mad and take a world tour for example we might sell but at present it's vastly out performing what the capital would make in the bank in terms of rental income.

Any thoughts? I really won't hold it against you...

 

[carolyn]

It’s always a big dilemma. I retired at 55 and have my NHS pension. I also have a chunk in a pot that was originally to buy an annuity to top it up until the rules changed. It’s an AVC.
Nick retired at 60 and has a private pension so we are lucky and have plenty to live on. We haven’t reached state pension age yet.

Getting back to the lump sum, annuities are no longer thought of as a good buy as they die with you. Most financial advisors seem to say that for people like us who have plenty to live on it’s worth leaving them to grow and then perhaps drawing out chunks when you need it “flexible draw down”. Mine is still going up nicely each year, I don’t want it anywhere risky now.

Obviously you get 25% tax free each time you take a chunk but the rest is taxed at 20% (or more) and might put you into another tax bracket as well if you take too big a chunk. We plan on using ours to help the children with house buying.

Hope this is a bit of use.

 

[Captain Yoghurtpot]

Personally, I would suggest an IFA and not a discussion on here, but that is only my personal opinion, not in anyway derogatory to your situation and circumstances, but purely from a security and personal viewpoint.
I too, am in a very similar boat, retirement and pensionwise exploring, but will trust my IFA, for now.
Hope that helps, it is a very tricky guessing game.

 

[Bluemanc100]

Personally, I would suggest an IFA and not a discussion on here, but that is only my personal opinion, not in anyway derogatory to your situation and circumstances, but purely from a security and personal viewpoint.
I too, am in a very similar boat, retirement and pensionwise exploring, but will trust my IFA, for now.
Hope that helps, it is a very tricky guessing game.

I realise an IFA is the way to go but I wan't after a discussion where I shared any details.. just free thoughts..

The extra income isn't going to make us rich, I just feel undecided on what to do

Thanks for the reply though

^{_{Subscribers  do not see these advertisements}}

 

[Deneb]

I agree you should seek professional advice, rather than relying on opinions on a forum.

FWIW however, do you need a level income from an annuity for the rest of your life? You have a state pension to factor in to your future income, that should be subject to annual increases in payment. Annuities are generally regarded as poor value at present, unless you have specific situations that might make them favourable.

Do you need to take money from your private pension now, but won't need to take the same level of income from it when your state pension comes into payment (to bridge the gap)? If so, consider the options of taking uncrystallised lump sums from your private pension as required until SPA, or you might wish to crystallise the whole pot to withdraw the PCLS, whilst leaving the balance invested.

There are other options, and we don't know your full circumstances, so professional advice will undoubtedly help you, particularly if you don't understand all of the various options open to you for taking withdrawals from a private pension. What I decided and feel was best for me may be wholly unsuitable for you and your circumstances.

 

[ShaKen]

Anybody on the forum prepared to offer some free advice? I have circa £100k in private pensions that were frozen in March last year when I took statutory redundancy. I am already receiving a forces pension and my wife has an NHS pension. We also receive rental income from a property to supplement the pensions and live on these funds now.

I am unsure whether to take the private pensions as drawdown or as an annuity.. With no protection or index linking, once I've taken the £25k tax free amount I would receive circa £233 per month on the annuity but I am not sure whether to just draw down an annual amount instead and pay the tax on the element that is over my allowance until my state pension pays out in 10 years time (I am 57).

I am also contemplating selling the property in Chester which we receive rental income on some time between now and state pension age but that will depend on Sue's Lymphoma... if we decide to go mad and take a world tour for example we might sell but at present it's vastly out performing what the capital would make in the bank in terms of rental income.

Any thoughts? I really won't hold it against you...

I use a website / service called RetireEasy (monthly subscription that you can cancel anytime) that allows you to do a Lifetime cash flow analysis.

In simple words, you enter in what you have (pensions, savings, assets, income) and what you spend now (your fixed and variable costs such as utilities, rent, food etc) and what you intend to spend in the future and it will tell you when and if you’ll run out of money.

You can then adjust the numbers to do what if’s e.g. what if I downsized the house, or bought a new car, or went an expensive holiday.

It has been extremely useful to me in my planning and is recommend by Which? etc.

Also you can set up a free advice with PensionWise (government service) which guides you through the options in general covering off the pluses and minuses of the different pension access methods (annuity vs flexible access drawdown etc).

 

[EuroTrotters]

I’ve been looking at this. Just need a small base (1 bedroom bungalow with ample parking in a quiet area ).

spend summers touring and the winter at our house in Spain.

It’s finding the small bolt hole with parking in a nice area that’s the hard bit.

 

[Tony50]

Drawdown has worked for me, and you can draw out more money than Annuity but, I keep an eye on Capital and I have been careful how much I take out at reviews I never take the Maximum , I have slightly less than you , but due to Stockmarket fall I have stopped pension and rely on Old Age pensions for wife and me , we do break into savings sometimes , another thing with Drawdown you can transfer it to wife , and then siblings , but a Financial Advisor will confirm this. we also intend to enjoy life without going mad , money is for spending , my children have good jobs , and at 44 and 47 years old if they have not made it well !!, hopefully when we Peg out they might still have a little left to them ,like a Bungalow sale proceeds , that's if we don't finish up in a Home . the town where we live is "God's waiting room " . Go for it , we don't know what's around the corner, Good Luck.

 

[dabhand]

Don’t take the annuity, if you just spent the same amount it would take about 36 years to exhaust the 100k and that’s with no investment gains, mathematically if you didn’t draw in your capital, by the time you fully retire your pot would probably double. Obviously a lot more to consider but it’s a no brainier imho.

^{_{Subscribers  do not see these advertisements}}

 

[MC 55 FUN]

From experience, I 'd suggest that a '' pot '' of circa £500k is the bare minimum to ensure a reasonably comfortable retirement of 20 years minimum duration.

£500k sounds a lot, without taking a 25% tax free lump sum, in reality will only be providing a pension of circa £25k per annum if you're lucky & inflation will reduce the buying power of £25k p.a. unless the policy is linked to inflation.

 

[Garfields]

Personally I like the idea of the drawdown as you can control that
2020 our spending was well down and didn't need anything above pension

If you are likely to have a rush of blood to the head and spend it all on fast cars and motorhomes you may want to lock it up in something long term

 

[Camdoon]

I realise an IFA is the way to go but I wan't after a discussion where I shared any details.. just free thoughts..

The extra income isn't going to make us rich, I just feel undecided on what to do

Thanks for the reply though

There is a pensions thread in the Money Savings Expert forum which will give you more things to consider and where no-one will know you or ever meet you.
Even if you go and see an IFA some of the first things they will look for:
How much you need to live on in the short and long term.
You can then work out how that pans out with your pensions post State Pension Age.
Start whacking the info into a simple spreadsheet.
You then need to look at the impact of one of you preceding the other.
You can then work back from there.
Are you never going to work again?
You need to think about your attitude to risk?
If you are selling your property can you minimise any Capital Gains.

 

[MichaelT]

You draw 4% of an increasing pot, you're drawing less from it than it has grown. That's the whole point, your pot grows quicker than the money you draw off.

If your pot were 500k, you'd draw 20k. But the start point next year would be 515k, so your 4% would be of a higher number during the next year - which would account for inflation.

Self sustaining and index linked, but with a high starting figure.

But if you have a sudden drop like we did when the pandemic hit your pot could drop by 30% or more!!

 

[Tony50]

I would add I retired at 59 and am now 75 , and never touched a reasonable investment , wife has no private pension at all

^{_{Subscribers  do not see these advertisements}}

 

[Bluemanc100]

There is a pensions thread in the Money Savings Expert forum which will give you more things to consider and where no-one will know you or ever meet you.
Even if you go and see an IFA some of the first things they will look for:
How much you need to live on in the short and long term.
You can then work out how that pans out with your pensions post State Pension Age.
Start whacking the info into a simple spreadsheet.
You then need to look at the impact of one of you preceding the other.
You can then work back from there.
Are you never going to work again?
You need to think about your attitude to risk?
If you are selling your property can you minimise any Capital Gains.

I don't think I'll work again but you never know what's round the corner.. But thanks for the tips...

 

[Stoosal]

See independent financial adviser. Go with a clear idea/plan of what it is you want and how much outgoings you realistically need to cover. Retirement may be more expensive than you think! Depends what plans you have, what lifestyle you want to have and is it realistically affordable.
Take into account those longer term costs. For example this year we had to get work done on our roof at circa £2000. This year we need to replace patio doors and in the next few years some windows will need replacing. Also things like changing vehicles which are big money items. It’s these kind of things which are easily overlooked as some tend to look at simple monthly revenue items eg groceries, insurance, heating and so on.
Best advice is to write everything down and be brutal in what you want to spend (and when) to ensure realistic figures. Advisor will then give options on best way to achieve ie monthly income or lump sum amounts when needed at planned stages?
Whatever way you go it’s still better than working!

 

[Bluemanc100]

From experience, I 'd suggest that a '' pot '' of circa £500k is the bare minimum to ensure a reasonably comfortable retirement of 20 years minimum duration.

£500k sounds a lot, without taking a 25% tax free lump sum, in reality will only be providing a pension of circa £25k per annum if you're lucky & inflation will reduce the buying power of £25k p.a. unless the policy is linked to inflation.

The pot I have in private pensions is really only a top up as we are lucky enough to have the Royal Air Force and NHS pensions plus our rental income so I am now leaning toward leaving the pot where it is and drawing it down...

 

[Bluemanc100]

I agree you should seek professional advice, rather than relying on opinions on a forum.

FWIW however, do you need a level income from an annuity for the rest of your life? You have a state pension to factor in to your future income, that should be subject to annual increases in payment. Annuities are generally regarded as poor value at present, unless you have specific situations that might make them favourable.

Do you need to take money from your private pension now, but won't need to take the same level of income from it when your state pension comes into payment (to bridge the gap)? If so, consider the options of taking uncrystallised lump sums from your private pension as required until SPA, or you might wish to crystallise the whole pot to withdraw the PCLS, whilst leaving the balance invested.

There are other options, and we don't know your full circumstances, so professional advice will undoubtedly help you, particularly if you don't understand all of the various options open to you for taking withdrawals from a private pension. What I decided and feel was best for me may be wholly unsuitable for you and your circumstances.

I will consider advice but to answer some questions I don't need the extra income from an annuity right now as it's only around £230 per month and I believe we can manage until my state pension kicks in with what we get so the drawdown might be the best option. The motorhome is sitting paid for and when I stopped working we bought a good car outright so the only possible outlay in the next few years is maybe a kitchen unless we move. We've already paid for the two boys weddings so I would say we'll be OK

Again, thanks for the advice above

 

[berni109]

Professional advice! It's the only way which you know already.
You need to plan out your future wants and needs and factor in your medical issues to arrive at joint life expectancy.
Plan to spend most of it while fit and healthy and can enjoy it together (u never know what's just around the corner) but leave enough to get you through your decrepitude.
Enough in the bank to pay your funeral costs is about all you need to worry about.

^{_{Subscribers  do not see these advertisements}}

 

[dabhand]

All points are valid even if some are a bit irrelevant concerning your situation and yes, shock horror, your pot could go down 30%....and then shoot back up by 60%! I’ve been investing for over 40 years, have experienced three major drawdowns, one of over 30% the longest it’s taken to get back to where you were is 5 years (and then substantial growth). As I said, if you just left it as cash (which I don’t recommend) you’d be 93 by the time you’d spent it at £233 a month. And fwiw i would invest for growth as opposed to income and spend the gain as and when you require it, good luck

 

[Stealaway]

Leave every thing as it is for now.
See how you go on living on your pensions and rent. It sounds plenty to me when you have few outgoings.
You didn't say if you have another house, mortgage paid or you are renting.
You can live cheap, you don't need to buy expensive holidays or new cars when you have a MoHo.
10 years may seem like a long time but it will soon pass - unfortunately.
Consider moving the pension into a SIPP but leave the private pension as a drawdown safety net for buying a new MoHo occasionally or a retirement cruise come the day

 

[Deneb]

I will consider advice but to answer some questions I don't need the extra income from an annuity right now as it's only around £230 per month and I believe we can manage until my state pension kicks in with what we get so the drawdown might be the best option. The motorhome is sitting paid for and when I stopped working we bought a good car outright so the only possible outlay in the next few years is maybe a kitchen unless we move. We've already paid for the two boys weddings so I would say we'll be OK

Again, thanks for the advice above

If you don't need it, it may be better left to grow where it is, but think about your future financial position should you subsequently wish to make withdrawals. I will be a higher rate tax payer once I start receiving my state pension. I don't need any of my private pensions to live on, but I am drawing down as much as I can each year without going into the higher rate bracket, and re-investing it in S&S ISAs to limit future tax liability should I want access to the funds at some future time. If I leave it in the pension, the additional tax on withdrawal will largely negate the benefit of having contributed to it in the first place.

 

[The Wino]

Anybody on the forum prepared to offer some free advice? I have circa £100k in private pensions that were frozen in March last year when I took statutory redundancy. I am already receiving a forces pension and my wife has an NHS pension. We also receive rental income from a property to supplement the pensions and live on these funds now.

I am unsure whether to take the private pensions as drawdown or as an annuity.. With no protection or index linking, once I've taken the £25k tax free amount I would receive circa £233 per month on the annuity but I am not sure whether to just draw down an annual amount instead and pay the tax on the element that is over my allowance until my state pension pays out in 10 years time (I am 57).

I am also contemplating selling the property in Chester which we receive rental income on some time between now and state pension age but that will depend on Sue's Lymphoma... if we decide to go mad and take a world tour for example we might sell but at present it's vastly out performing what the capital would make in the bank in terms of rental income.

Any thoughts? I really won't hold it against you...

I too think an IFA is the best idea. We are in a different position with no occupational pensions but 3 investment properties and savings/ personal pensions. What the IFA did was use retirement planning software to project our money through retirement up to the age of 100 ( there's hoping) it showed our drawings over the years with the rental incomes reduction in capital state pensions etc and the best way to treat the drawings from an income tax/ IHT point of view.
The big thing for us is the effect of inflation over the years and trying to counter that in a relatively low risk way. I was 56 at the time so even 3% inflation makes a big difference.
The software had a beach umbrella you could drag to your retirement age and a skull and crossbones for your PHC time you could then see the drawings/savings etc over the years clicking on a year shows the remaining pot. By altering drawings you can see the effect on how things pan out.
We sold our business 4 years ago since then our pot has hardly reduced we live mainly off the rental incomes and I work part-time. I think our biggest problem is going to be getting used to spending rather than saving which is what the IFA said.

 

[The Wino]

If you don't need it, it may be better left to grow where it is, but think about your future financial position should you subsequently wish to make withdrawals. I will be a higher rate tax payer once I start receiving my state pension. I don't need any of my private pensions to live on, but I am drawing down as much as I can each year without going into the higher rate bracket, and re-investing it in S&S ISAs to limit future tax liability should I want access to the funds at some future time. If I leave it in the pension, the additional tax on withdrawal will largely negate the benefit of having contributed to it in the first place.

If IHT could be a concern you could be better leaving it in the private pension.

^{_{Subscribers  do not see these advertisements}}

 

[MC 55 FUN]

Getting back to the lump sum, annuities are no longer thought of as a good buy as they die with you.

Not all annuities die with the holder, my private / personal pension taken in 2014 aged 55 when rates were at 5% , pays my partner 50% for the rest of her life upon my demise.

 

[alanalmoff]

Help. We are looking for some real world advice on if we are near or have already reached the point of retirement.
I have 8 years to pension age the better half has 2 years and both of us have had enough of being beholden to work. The better half has a few issues we feel its time to enjoy life.

Being very lucky to have paid the mortgage and the motorhome and the bills are just everyday stuff from having a property. We don't really want to full time so having done the maths I think we can do it

Ive broken everything down that we can think of insurances, services to car and motorhome, gas electric etc multiplied and divided and computer says yes it can be done. Just.
Happy days.
But the question is? Is there an amount, a real world figure people have found they require. A couple we saw a few weeks back said friends of them had set a target of £15000 per year to live off and only spent £13000. This seems to match our figures. So is this figure realistic? Do you already live on a smaller budget?
New decade new life Any advice is helpful

Not the answer to your question, but I packed in work five years early, losing 20% pension but it's the best thing that I have done. Eight years rv'ing, working camp grounds a bit, then MH'ing. At 60 I was fit, now 77, fairly fit, but the confidence has gone down hill some along with the memory, what I'am saying, retire as soon as you can nearly afford to, best of good luck !!!

 

[Vipar]

Our total income from pensions and investments is £22,000pa we get by,but we are non drinkers and we don’t got out for meals. Yes we watch our pennies,we enjoy life,and being together is the icing on the cake. When it’s on special at Lidl

 

[carolyn]

Not all annuities die with the holder, my private / personal pension taken in 2014 aged 55 when rates were at 5% , pays my partner 50% for the rest of her life upon my demise.

Sorry, you are absolutely right. I was thinking about when I looked at them again recently and I had forgotten that I discounted that option as it was worse value. I know they can be an OK idea especially if the company offers enhanced options if you are in poor health. Exactly why IFA are a good option rather than us amateurs!

 

[Cheshirecat57]

From experience, I 'd suggest that a '' pot '' of circa £500k is the bare minimum to ensure a reasonably comfortable retirement of 20 years minimum duration.

£500k sounds a lot, without taking a 25% tax free lump sum, in reality will only be providing a pension of circa £25k per annum if you're lucky & inflation will reduce the buying power of £25k p.a. unless the policy is linked to inflation.

Sate pension is north of £13k per couple

There is no way on gods earth i "NEED" £38k a year to enjoy life

If you have that, then very well done

^{_{Subscribers  do not see these advertisements}}