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took a redundancy last yr
Im 54 and ive got a 182k pension pot and another seperate 32k pot
no debt and mortgage paid ,have my dads old house( paid) rented out £500 p.month
no kids
If i dont withdraw the 182k pot i can get 8k a year annuity
do not know what to do with the 32k pot ?
is it best to
A. put both pots together ,182k+32k= 214k ,and drawdown ?
would i be guarannteed a 4% return in a low risk ?
Or do i take 8k a year inflation proof with 6k a year rent then what do i do with the 32 k pot ?
i have enough savings not to touch any of these for 3 years
or do i use the 32k and leave the 182k pot and in 4 years see how much my annuity has gone up to,ive been told my anuity is low because i would be taking it at 55 and if i can wait 4/5 yr i should see a good increase in my annuity,is this right?
my heads busted 1 person says drawdown the other says anninuity
my outgoings inc fuel food etc are 800 p /month
It's interesting stuff. At 3% the estimate is 16 years of comfy life, at 5% it's 26 years.
And then drawing the 25% and reducing expected yearly income gets me 21 years, at 3% growth.
Of course this is also relying on state pension kicking in after 6 years.
My feedback thread is here.
used to be much higher. No one inherits the pension pot, which may suit you, do you want to leave cash to someone?
make sure you check your pension forecast now on the HMRC site, you need to log in
you may need more years of NI, but possibly not if you've worked 30 years+
2 options are:
take tax-free lump sum cash now or later + take drawdown of £10k a year
or take a combined lump sum every year, incl some tax-free
If you combine the pension pots, you often get a free gift for moving it, and then possibly reduced fees for one larger pot, depends on their thresholds, annual fees are lower at certain thresholds, could be £250k, not sure
Hargreaves Lansdown and Fidelity via Cavendish online were the best deals I found a while back
beware that sometimes HMRC try to charge NI on rental income, if you have no other job and don't use a letting agent
(but for 30 years, sorry for the typo)
https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php
1.5% is high too. For pure investment advice, you need to aim lower. Also, you need to think if your investment manager can get preferential fund charges (which will save you money) or if they do their own funds (which will again result in lower or no fund charges).
But the crucial thing that you are paying for is the ability and increased likelihood of the growth rate being continued.
Could an amateur get a consistent 5% net of charge return over 20 years? Unlikely. Could a good financial manager? Likely. That is the service you pay for: the crucial element is getting a good adviser, and not as you say, one that simply picks the top funds - that's money for old rope.
Another thing to factor into fees is including tax management and estate planning. You can get all that plus investment management for about 1.2%. Depending on your income and size of investment, that will save you much more than it costs. Way more.
point was the long term cost of management fees and % based advice
Last flyer I got from HL said "free 1 hour of advice in Jan and Feb" (normally £500 over phone, £1500 in person), but small print said costs still include 1% to 2% fee on sum advised, so that's up to £8k on a £400k pension pot. What on earth are they doing that justifies that? surely that's one month's wage for a senior manager?
2% fee is shocking.
But yeah, incremental impact of even a small percentage fee is significant, but good advice isn't cheap, nor should it be. You are right to point out that not all advisers are worth the time of day. Key is getting the right one, and not just any old bloke or firm.
Feels like I just found £3K on the door mat!
Supportact said: [my style is] probably more an accumulation of limitations and bad habits than a 'style'.
I too have a preserved final salary pension, and I know, more or less to the penny, and have always been able to work out (to the penny) exactly what it would pay out because the calculation is based on my salary at the time of leaving (a known, fixed amount), the period of time between leaving and taking the pension (again, fixed assuming that I take it as soon as I can) and the annual increments (again, fixed as it’s defined as the higher of “x”% or RPI inflation, and it will always be the “x”% amount.
Effectively, no variables. It’s a fixed calculation.
How did the uplift arise @RandallFlagg ?
I asked for some information with some email questions last year and got this reply (email cut & paste), see if you can make sense of the reply....good luck!
here are the questions I asked:
Hi Derek,
"I refer to your emails to Derek dated 2 March 2019 and 23 March 2019. Please accept our apologies for the delay in replying to you.
Please find below answers to your queries:
1. When you retire at your Normal Retirement Date (NRD), your pension will be increased as follows:
a. your GMP (Guarantee Minimum Pension) will be increased in line with the percentage rise in the Consumer Prices Index (CPI) up to a maximum of 3% per annum (ie when the CPI is higher than 3%, your GMP (all Post 88) will be increased by 3% );
b. your pension in excess of GMP accrued prior to 1 January 1997 will not increase; and
c. your pension accrued from 1 January 1997 will be increased in line with the percentage rise in Retail Prices Index (RPI) up to a maximum of 5% per annum (ie when the RPI is higher than 5% your post 01.01.1997 pension will be increased by 5%).
2. If you take retirement benefits before your NRD/GMP age of 65, your pension in payment will be increased as follows:
a. Your pension accrued prior to 1 January 1997 (including your GMP pension) will not increase;
b. Your pension accrued from 1 January 1997 will be increased in line with the percentage rise in RPI up to a maximum of 5% per annum.
When you reach age 65, your GMP elements will be split from your pre-1997 pension and increase in line with the percentage rise in CPI up to a maximum of 3% per annum.
3. The maximum tax free lump sum cash (PCLS) at retirement (early/normal/late) is calculated as follows:
PCLS = (Pension at Retirement x 20)/(3+20/commutation factor)
Early retirement factors currently in use by the Plan are:
Years early
10
9
8
7
6
5
4
3
2
1
0
ERF
0.46
0.50
0.53
0.58
0.62
0.67
0.72
0.78
0.85
0.92
1.00
Please note that your deferred benefits belong to Barber benefits which can be taken early at age 60 without any early retirement deductions.
The commutation factor applied in the calculation is provided by the scheme actuary and is based on your age at retirement. The commutation factors for male members currently in use by the Plan are as follows:
Age
55
56
57
58
59
60
61
62
63
64
65
Increasing Pension
22.1
21.6
21.1
20.6
20.1
19.6
19.1
18.7
18.2
17.7
17.3
Non-increasing
14.3
14.1
13.9
13.7
13.5
13.3
13.1
12.9
12.7
12.5
12.3
Please note that all the factors are subject to change at any time by the Trustees with advice from the Plan actuary without prior notice to members.
4. The Plan has not updated the member booklet since July 1997.
5. The pension freedom rules changes in 2015 would not have any impact on your benefits under the Plan as you do not have an AVC (Additional Voluntary Contributions) policy under the Plan.
6. We will provide you with an early retirement projection to age 55 by post shortly."
Mine works slightly differently in the calculation of the annual increase due to the difference between the guaranteed amount and where RPI inflation has been since I left the scheme - ie there is no variability and shouldn’t be for the foreseeable.
It was a ridiculously generous scheme, the benefits of which I’m looking forward to receiving in a few years time ...
Been looking into the pension recycling issue a bit more, I was aware of it but not really dug down into the details. This could well impact my plans and require me to take a different tack.
I have been planning to take a tax free lump sum of £35K from my final salary pension at 55 while still working and contributing to my current defined contribution pension. At age 55 we'll be debt free and have a lot more disposable cash and the tax free lump sum is planned to be used to do some house renovations, estimated at £20K and I would put the rest into a stocks and shares ISA.
Purely co-incidentally, as the mortgare is done that year, I then planned to start significantly increasing pension contributions in 2023 by salary sacrifice.
Although I could prove with receipts and ISA deposit statements that the tax free sum did not get directly recycled and go into the pension, having that money available could be seen as facilitating the increase in subsequent salary sacrifice contributions in 2023 onwards.
I need to rework my planning to either not increase the salary sacrifice contributions and take the salary and put in the iSA (losing the 40% + 13.8% tax benefits) or defer taking the lump sum. Needs to crunch some numbers.
I may have to revert to start the extra pension contributions now instead of paying the mortgage off, gainging the tax & NI benefits and pay the balance of mortgage off with a lump sum from DC pension when I do strat taking it. It means I won't be debt free at 55 and have the mortgage debt hanging as a risk if I lost this job.
It's hard work this financial planning for retirement! But I do enjoy playing with spreadsheets.