Is my pension pot big enough?

[Summer24isRubbish]

I’ve a pension pot of £290/300k and I’m 59 ( and own home £270K)

Unlikely I can add much to it as I’ve a teenage DS and a single parent.

I’d like to retire at 62 …. Can I do it ? I know I need to speak to my FA but I want to hear from Mumsnet what you think ? State pension is 67

My monthly outgoings are £4k but would look to reduce when I retire and DS is out of education to £2.5k probably another 3 years.

Thoughts ?

It depends what your monthly costs are. At 62, obviously you won’t be able to get your state pension yet, so you’d just be relying on your 300k. I think you’d get about 11k or 12k a year with 300k, so possibly around1k a month. Is that enough to cover your bills & costs?

Do you have any other savings ? Can you downsize at all in 3 years time ?

£2.5k per month is quite high outgoings at have at 62. If your mortgage has finished ny then I would say the average monthly outgoings is half of that, ignoring holidays & other large expenditure.

If you go into Drawdown then I'd usually say to look at 4% withdrawals, so on £300k that's £12k pa which would just cover most peoples essential expenditure . With Drawdown the idea is that you can take more out when you need it (between 62 & 67) and then scale it back when you start receiving the State Pension. So in your case you could take out say £20k pa for 5 years & then reduce that down to me like £7k pa once the SP kicks in.

But only you know what you need. Best to discuss all this with your FA.

Even £2.5k outgoings a month is massive.
Mortgage free and our household of 3 has outgoings of £1.5k a month.

If you went the annuity route you would probably get about 3.3% aged 62 single life RPI inflation protected, so about £10k a year. Personally i wouldn’t buy an annuity.

Doesn’t sound possible OP unless you will have other forms of income apart from your pension pot. Income of 1k against outgoings of 2.5k isn’t going to work.
Having said that, you can take 25% of your pension pot as a tax free lump sum (so £80k+) and that could earn you about £4k a year in interest in a fixed rate savings account at the moment. You could also take larger lump sum drawdowns from your remaining pension pot until you get the state pension but obviously it won’t last long then.
I guess it depends on how much you want to retire and how much you can reduce your living expenses.
Other option might be means tested benefits if you only have income of £12k a year.

£4k expenses monthly with no mortgage or rent?

Your monthly outgoings are huge, last years outgoings for us as three adults with a fourth here for weekends only for a year was 28k.

Personally I don't think it's enough . Your monthly outgoings are large and £12k pa does not stretch far at all . Also you may well have large capital expenses as some point eg new car , replace boiler .

If you have no choice you would have to eek it out but as a preference retirement is for doing all the things you want travel , hobbies , socialising etc not scrimping by living on tinned spaghetti and mothers pride .

No it's not enough to support your current life

4k a month and 300k saved works out at about 6 years simple

It's slightly complicated by internet's and stuff

An annuity would give you around 14k for life

That's about a third of what you are spending

Almost certainly not. You say you are unlikely to add to it but surely you are saving through a workplace pension.

I think you’re all telling me what I know ! Gulp

Maybe I look at part-time work ….

I currently earn £65k and I enjoy life ! Hence outgoings of £4k … but that includes holidays and spends etc, supporting DS in education etc

I spend a lot on car / fuel / insurance ( £900) so that’s a big chunk … I can downsize.

Thanks for the input!

Please don't do this.

At retirement you really should speak to a professional. With a Flexi-Access Drawdown plan you should be taking your pension as tax efficiently as possible. This means using the 25% Tax free element alongside the taxable element, using your (current) £12,500 personal allowance to give you £20k pa TAX FREE.

Do not take out your tax-free element and put it into a deposit account that you then could be paying tax on.

Jeez.

Total lack of comprehension on your part @Biggaybear
I wasn’t suggesting any of the options but your genius idea of £20k tax free isn’t much use with outgoings of £30k.

Jeez.

Its all very well people saying speak to a professional. I have over the years when Ive been focusing on it, made attempts to find a FA. Ive gone into that website where they're all listed, made attempts to contact them and each and every time heard nothing

Where do you get one, how do you find one that will respond and work with you

I know nothing about pensions and planning and have an OH who wont address stuff like this so need to bring him along to an appointment to someone. But who?

Can you explain this in more detail?

If OP did this and got 4k a year, she would be under the tax allowance surely, why would she be paying tax?

My recommendation is to spend the next few years paying off debts etc to reduce those outgoings as much as you can.

I retired at 53, we paid off our mortgage the year before and I had around £70k in savings plus a pension of £200k which I transferred to an income scheme the moment I hit 55. So that gives me €12,000 a year which is ample to cover expenses. We bought a house in France in 2021 with our savings and my OH's pension drawdown, and moved here whilst renting out our UK house which also gives us income.

The government are trying to increase the age at which you can access private pensions though so who knows what will happen in the future. I spent a good many years scrimping and saving and doing second jobs to overpay the mortgage which brought the interest and the time spent paying it off down hugely.

Financial advisors are an expensive con. They tend to not be very smart so I wouldn’t trust them with my finances. I’d rather do the research myself, especially these days with info easily available on the internet.

Ignore @Biggaybear, it is nonsense.

If you're outgoings are £4000 because you enjoy the nicer things, can you jot decrease them a bit and out it in your pension? It sounds with pretty minor tweaking you could quite easily increase your pension, and if you're mortgage free, that's where I'd be concentrating

No, she’s right. There’s no benefit at all in taking the tax free part as a lump sum if she’s just going to invest it again and pay tax on the income from it(@soupfiend she wouldn't pay tax if she only had £4k income but she’ll also have the income from the rest of the money plus eventually her state pension).

Much better to have 25% of all her drawings tax free.

That’s true if you assume that the pension pot continues to grow over the time that you are gradually taking the 25% tax free component but that is not necessarily the case as it is dependent on the state of the financial markets.
If the pension pot stays the same or goes down then you would end up with less than taking all the 25% tax free lump sum in one go and investing it elsewhere.

Just to reiterate, I was only listing some options for the OP to cover her outgoings, I wasn’t recommending a particular option over the others.

Im assuming though that OP would ensure that she doesnt have more than 12k coming in a year to keep her under the allowance?

But how do you keep the 25% drawings tax free then, if you have drawn it out, where does it go then?

Try the free government advice line
https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

They cant help me, I have the wrong type of pension.

Well you dont draw it out until you need it. You could put £20k pa into an ISA or into an Investment Bond (which could be tax-efficient depending on your tax status) but generally that's why you dont take out your 25% tax-free allowance if you dont need it as its growing tax free within your pension.

We'll also just have to see what the Budget on Oct 30th brings. Will pensions remain outside an Estate for IHT purposes ? Will any other pension tax allowances change ?

“that's why you dont take out your 25% tax-free allowance if you dont need it as its growing tax free within your pension”

It won’t necessarily be growing as it is vulnerable to the state of the financial
markets.

Also, only 25% of any growth would actually be tax-free as you would pay tax on the rest when you withdrew it, unless your total income is less than the 12.5k threshold.