Possible retirement

[mids2019]

So we are a couple......92K income (plus cb and pip mobility).

My NHS pension is worth 480K from an actuarial point of view (17K at 60 and probably bother 17K at 67). My partner's s and s pensions are worth 300K and have 500K in equity. We have a 450K house with no mortgage. There is also a 50K to 90K tax free layout from the NHS pension at 60.

The question is when you would consider partial or full retirement? We are 50 and looking long term thinking 60 as this gives time for the long term investments to grow as well as the pensions. Does 60 sound reasonable?

Are you both forecast to receive full State Pension at 67?

What is the "£500k in equity"?

How much does your lifestyle cost today, and how might that differ in retirement?

Are you both in good health or is there anything that might mean you wouldn't live longer than average life expectancy?

You need to figure out how much you need per year. You can't plan without that.

When you say £500k in equity do you mean your partner owns equities outside of a pension wrapper or he has some BtLs?

What is your forecast NHS pension if you work to 67?

Most importantly, what do you want to do in retirement? If your plan is to sit at home in a jumper watching tv all day your costs will be very different to someone who wants to do lots of travel.

Is the NHS pension a prediction if you continue to contribute, or what it’s worth now? That makes a big difference. Obviously as it’s a DB pension it’s going to increase anyway whereas the DC pension will decrease the longer you are retired.
It all boils down to what financial position do you want to be in when you do retire? I’m retired (still work 2 days though) and our combined income is half what it was pre retirement, but we actually manage very well and are quite happy with our financial situation.

Id aim for 60 in your shoes.

thanks for all your replies.

The 500K is in stocks and shares ISAs and is being managed. We are looking at disinvesting at 60? My pension will give 17K guaranteed at 60 (whilst still working?) then will go up to around or above 34K at 67 (state regiment age). (Defined benfits)
The 300K is on a stocks and shares pension and is being managed with defined contributions.

Good question about quality of life in recruitment as we do enjoy a bit of travel.

Also forgot to mention the kids (sorry) 12 and 14.

You don’t need someone managing your S&S ISA. Just put it in a global tracker and leave it alone. You’re currently paying someone money that should be yours, with zero effort required. Studies have shown that something like 85% of managed funds perform less well than a global tracker. You are chucking money down the drain there.

As PPs have said, you’re in a good position and could retire now if you wanted - it just depends what income you want.

Im not sure what you mean by deinvest at 60 - do you mean pull all your money out in one go?! Surely you just draw down a small percentage each year to live on? E.g If you draw down 4% annually on a £1 million portfolio that will give you about £3k a month and the rest continues to grow, probably at a faster rate than 4% if you put it in a tracker yourself and stop giving a chunk of your growth to whoever is managing your fund!

If you are happy to live on £30kpy for the rest of your life, quit now. If you want £100kpy you need to continue. Without your proposed outgoings, it's an impossible question.

I have a spreadsheet which has a row per year, with annual outgoings per year and income (earned, DB pension, dividends, SP). Then the whole pot of investments (ISAs, savings and DC pensions). The shortfall in outgoings is deducted from the pot. I can then see roughly how long our pot might last. I can fiddle with the outgoings, up and down. Sounds like you need something like this.

Btw, it's not usually wise to disinvest S&S ISAs all at once and you don't need your whole pot to be in cash at 60. I like to have about 5 years of my (shortfall) in cash savings but am happy for the balance to remain in the stock market.

We have about 65K in premium bonds as well

Given your current income that sounds a huge drop in living standards

you could choose to live today on what you think you will have in retirement, or what you think you will need in retirement - and stuff the rest into your pension to hope you get there

a spreadsheet is a real help / don’t forget one offs like replacing a kitchen or bathroom in the next 30 to 40 years as well as boilers and cars

make an allowance for inflation

I quick rule of thumb is to add up all your non-property financial assets and put it into a annuity quote engine as if you are 60 today. That will give you a pre-tax income in todays money from these. Obviously your investments will grow before then but so will the cost of living, but it will be a rough estimate

My pension will give 17K guaranteed at 60 (whilst still working?) then will go up to around or above 34K at 67

The NHS pension doesn't go up, except by inflation, once you start drawing it. If you take the reduced amount at 60, it stays at that amount (inflation adjusted) for life.

Do you mean you would have £17K pa at 60 in the 1995 scheme? If you do, then take it at 60 (it will not increase) either by 'retire and return' or partial retirement. Don't take it before 60 though, you would loose a lot.
Leave the rest in the 2015 scheme until normal retirement age.

Thanks

The biggie is do you think your DC will go to university?

I would assume the OP has a combination of accrued service in both the old and new NHS pension schemes - The old one - where benefits previously accrued can be accessed at 60; then moved onto the new one - which can't be accessed without penalty until her SPA. They can be taken separately at the relevant ages - so at age 60 and then 67.

OP - Just thought I'd mention a few things you might not have necessarily thought of....
It sounds as if you have a large pension pot of S&S investments between you. If having some certainty in your monthly income from these is a priority into the future, do remember to investigate the option of annuity rates when the time comes.
Though they very much fell out of favour in past years due to the dire rates of return, they have made something of a comeback due to rising interest and bond rates.

You don't have to use all of your investments, it's possible to buy annuities that link to inflation, and also provide survivor's spousal benefits.
You might also look into fixed term annuities, in which a lump sum is returned after the fixed term to be reinvested elsewhere - this might prove useful for the period between retirement (say 60) and SPA.

Although it's easy to obtain online quotes to get an idea of returns, a specialist broker would find you the best rate product, and tailor it to individual circumstances (- for instance age, or health conditions might boost the rates).

For tax efficiencies and inheritance planning, you might also look into investment bonds. It's a type of insurance investment from which you can withdraw an income with specific tax advantages for you and your heirs. They can be quite complex to navigate, so it would depend on your individual circumstances.

I'm not advising that either of these products would be suitable for you and your partner, but it's always worth looking at options when the time comes for retirement.

www.moneyhelper.org.uk/en/savings/investing/what-are-investment-bonds