Pension planning

[IanD]

And if there are any younger guns on here, I would like to suggest you look into opening a stocks and shares ISA, best advice I ever had as a kid

I invested £12,000 inheritance at 19 years old, and just choose 20 random mutual funds from hargreaves & lansdown and put £600 in each of them.

my average return for the last 9 years has been 8%-15%

the compound interest in the real shit, at current protections that £12,000 will be worth around £450,000 - £500,000 at 55 years old. the hardest part was not touching it! not even for a house deposit.

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

[Re-sign Carl Dale]

I think you need to make this a sticky Mike, I'm sure many will look it up in the future. It sounds like I'm in the same boat as many with 4 different company schemes. I'll look to retire in the next 2~3 years but need to understand the numbers as I got shifted from 65 to 66 (not as bad as my wife who moved from 60-67!)

Speak to an IFA who specialises in retirement planning and who does proper “cash flow modelling” would be my suggestion.

We run various “what if” scenarios for our clients to help establish what their retirement may look like - it’s never going to be spot on, but is a really valuable guide to help make decisions.

My experience is that many people worry about whether that can afford to retire, when in reality they will end up at age 90 with too much money but not enough time to enjoy it.

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

Best thing or worst thing?? Trying to time the market will end in tears ... I’d be struggling to find a diversified portfolio that ISN’T higher not than after Brexit (assuming you mean the Brexit vote in 2016 - not sure if anything about Brexit has happened since then!)

[az city]

Did you work p/t and not pay enough NICs in a financial year to qualify? What sort of contract were you on....classed as self-employed? Best get back to the employer and check your pay slips from the period involved.

HE = higher education.

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

What's a "people's pension"?

I have another question on NICs - I looked at my record and for the period I was in HE I have missing years. That doesn't seem fair/correct. Anyone any idea on this?

That doesn’t seem correct. I’m not an expert on state pension, but you should get credits for years in HE and when you take time off to bring up kids (whoever gets the family allowance should get credits)

Recommend querying this

PS people’s pension is the name for one of the common new style company automatic enrollment pensions

[Swiss Peter]

Speak to an IFA who specialises in retirement planning and who does proper “cash flow modelling” would be my suggestion.

We run various “what if” scenarios for our clients to help establish what their retirement may look like - it’s never going to be spot on, but is a really valuable guide to help make decisions.

My experience is that many people worry about whether that can afford to retire, when in reality they will end up at age 90 with too much money but not enough time to enjoy it.

Yes, my IFA did all of this and I found it incredibly helpful. The answer to the question as to whether I should cash in my final salary changed depending on whether I was looking to meet my future needs (in which case it was really very borderline), or to build in the flexibility to be able to fully exploit future earning potential. I opted for the latter but I don't underestimate the risks around how the market could pan out.

Bottom line - as you say - get yourself a really good IFA.

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

Yes, my IFA did all of this and I found it incredibly helpful. The answer to the question as to whether I should cash in my final salary changed depending on whether I was looking to meet my future needs (in which case it was really very borderline), or to build in the flexibility to be able to fully exploit future earning potential. I opted for the latter but I don't underestimate the risks around how the market could pan out.

Bottom line - as you say - get yourself a really good IFA.

Good to hear. There are a few good ones about! Like my things, it’s the minority that give the rest of us a bad name.

[Poolerblue]

I had a final salary pension and I retired early

I was very pleasantly surprised with my transfer value compared to my guaranteed income I would get every month from my final salary pension.

Like other people have said I too would have had to live until I was 95 to get the same amount as my transfer value amount (even when taking into account my annual incremental pension increases)

I used a Financial Advisor and transferred the whole amount out into a personal drawdown pension (This advise is not cheap but it is very, very thorough and highlights the potential downsides)

I have invested my “pot” in a number of medium/long term investments i.e shares, bonds, government gilts etc I also put 15% in cash

I also took some but not all of my tax free lump sum and used it to pay off the last of my mortgage bought some premium bonds and also had a couple of really decent holidays

My wife did the same with her final salary pension

We both work part time and in March of each year we draw down £12,500 less what we have earned in our jobs to make use of our personal tax allowance so we don’t pay any tax or NI

It works for us, although I’m sure it won’t be the best advise for everyone as they is no guaranteed monthly pension that you would get from a final salary scheme

It did get a bit “hairy” over the last few months when the stock market went into free fall but as I had spread my risk I have virtually got all my pot back to pre lockdown levels. I had some excellent advice from my FA over the last few months

Hope this helps

[IanD]

Best thing or worst thing?? Trying to time the market will end in tears ... I’d be struggling to find a diversified portfolio that ISN’T higher not than after Brexit (assuming you mean the Brexit vote in 2016 - not sure if anything about Brexit has happened since then!)

Approaching my official retirement age I was overexposed in my Free Standing AVC to FTSE 100. After the Brexit vote it added 10% to the value, so I sold out into cash (largely) and the FTSE is still well under where I sold out. Yes, I could have made some more by hanging on but when large numbers are involved (and our financial futures), I'm happy to stick to cash and drawdown in such a way that I pay hardly any tax..£5 this year! Meanwhile, I've taken a punt on shares in What3Words. But that's another story.

[IanD]

HE = higher education.

You can work in HE and still be classed as self-employed. Visiting lecturer, for example. I'd check your pay slips and see if the employer was paying your NI contributions. My last employer (an academy) failed to pay the Treasury £2million in teacher pension contributions. Its possible, you were classed as self-employed and you weren't told. Especially if you never had a contract. Saves dodgy organisations coughing up NI contributions. If you can prove you paid NI for the missing years then get on to HMRC ASAP.

[az city]

You can work in HE and still be classed as self-employed. Visiting lecturer, for example. I'd check your pay slips and see if the employer was paying your NI contributions. My last employer (an academy) failed to pay the Treasury £2million in teacher pension contributions. Its possible, you were classed as self-employed and you weren't told. Especially if you never had a contract. Saves dodgy organisations coughing up NI contributions. If you can prove you paid NI for the missing years then get on to HMRC ASAP.

Thanks for the response.

I had grants/scholarships for 6 years so I don't think that counts as income. I never got payslips just cheques. I did some trawling around on the internet and all is lost for me it seems. No NIC credits for my HE years. Whereas if I'd sat on my arse and claimed benefits for the same period I 'd have full NICs.

NI systems everywhere seem crazy complicated and idiosyncratic. I'm now qualified for both a US and UK state pension. I get the UK one in full but the US is reduced for every GBP I get from the UK. Why? It's bonkers. Unless that is if I take a federal job for a couple of years.

[life on mars]

Hmmm ... yes and no.

'Recycling' your tax free lump sum back into a pension to get tax relief again is prohibited by HMRC. (Any pension has a declaration that you need to sign to confirm that your contributions haven't come from a pension lump sum).

However there's nothing stopping you living off that lump sum, and moving money from your own personal savings into a people's pension or similar.

you should be charging for this advise 👍

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

you should be charging for this advise 👍

I am! I’ve been PM-ing everyone with my invoice, but keep getting no response 😂

[Michael Morris]

Thanks so much for all the advice, discussion and personal experiences.

Shows just how much of a situation this is and how important it is.

Can I ask about Pension Bee. I'd never noticed their ads until my ears pricked up today when they came on the TV. Seems to be an all in one app based pension solution. I guess going forward this will be a regular thing. Transfer all pensions into an app?

[Michael Morris]

I am! I’ve been PM-ing everyone with my invoice, but keep getting no response ��

Really appreciate the contributions today. I think it's raised a situation many of use are in. Cheers

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

Thanks so much for all the advice, discussion and personal experiences.

Shows just how much of a situation this is and how important it is.

Can I ask about Pension Bee. I'd never noticed their ads until my ears pricked up today when they came on the TV. Seems to be an all in one app based pension solution. I guess going forward this will be a regular thing. Transfer all pensions into an app?

PensionBee are a relatively new player and there is no advice - the investment selection is what’s known as robo-advice. Pretty low costs, however other companies have tried it before and ended up going bust as the Model wasn’t profitable.

Should be fine for smaller pension pots ( values of 20-30k where it wouldn’t be viable to pay for advice) or where no at-retirement advice is needed. For anything larger (or anyone with more compex needs) then an experienced DIY investor or a half-decent IFA should be able to do a better job.

I tend to get concerned when the likes of PensionBee or Hargreaves advertise promoting transferring pensions without advice - you need to be confident of what you are giving up, and that there are no valuable guarantees or really well performing funds that you are giving up.

[Gofer Blue]

I have just picked up this thread so my ha’porth of advice comes a bit late and there has already been a lot of useful contributions. Just before I retired the boss of the small consultancy company where I worked brought in an IFA to have a chat with the staff about pension planning. It was fortuitous timing for me as it turned out. To cut a long story short I went for an income drawdown pension plan as annuities had become very poor value for money.

The positives are that this scheme is very flexible. You can take as little as you need in the way of pension (you can still work at the same time if you want), the whole pension fund is transferable to your spouse in the event of your death and it can even be bequeathed to your children (subject to usual taxation rules). The downside is that the pension pot is invested in the stock markets which can be very volatile e.g. in the immediate aftermath of the COVID pandemic almost £40K was wiped off the value of my portfolio. (It has partially recovered now, only (!) £15K down). These are exceptional times though and it must be remembered that these are long-term investments. I have been retired for about 15 years and the investments have grown by more than the amounts I withdraw every year so I am happy.

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

I have just picked up this thread so my ha’porth of advice comes a bit late and there has already been a lot of useful contributions. Just before I retired the boss of the small consultancy company where I worked brought in an IFA to have a chat with the staff about pension planning. It was fortuitous timing for me as it turned out. To cut a long story short I went for an income drawdown pension plan as annuities had become very poor value for money.

The positives are that this scheme is very flexible. You can take as little as you need in the way of pension (you can still work at the same time if you want), the whole pension fund is transferable to your spouse in the event of your death and it can even be bequeathed to your children (subject to usual taxation rules). The downside is that the pension pot is invested in the stock markets which can be very volatile e.g. in the immediate aftermath of the COVID pandemic almost £40K was wiped off the value of my portfolio. (It has partially recovered now, only (!) £15K down). These are exceptional times though and it must be remembered that these are long-term investments. I have been retired for about 15 years and the investments have grown by more than the amounts I withdraw every year so I am happy.

Great that you got the opportunity for advice via work. I run retirement courses for staff at a few Universities and they are always really well received. It’s the sign of a caring employer.

Income Drawdown is the route where probably 90% of my clients go down - suitable if they have the capacity to tolerate investment fluctuations, both financially and emotionally!

The last 10 or so years for investments have been generally really good ... the next couple of years could be more interesting, although the trajectory is always up if you can leave it long enough.

A key approach is to have a strategy of not being forced to sell during a period temporary decline - I always recommend that a cash / very cautious buffer within a pension fund is held. This is exclusively there to pay income and cover charges for a couple of years. This means that you don’t need to worry about the short term fluctuations we’ve seen over the last few months as the only part that is exposed to these, won’t be needing to be touched for a while.

[Rock_Flock_of_Five]

It can take a month or two for your online record to be updated. Tip: give HMRC a ring a couple of weeks after paying your NIC to check payment has been credited to your account. When it comes to the HMRC voice-activated "in a few words tell us why you have rung us today" say nothing. Keep saying nothing to any further questions until the one about "is it you you are ringing about" ( or something like that). Say "yes" and you will get straight through to an HMRC advisor.

I love this board, that's just the advice I was looking for!
I was feeling a little uncomfortable about making a further lump-sum payment without any acknowledgement that they had received my first payment.
I was logging into my Government Gateway account almost every day in the hope it would be updated and show the payment.

I'm going to do exactly what you suggested concerning their voice automated process.

Cheers for that!

[az city]

Great that you got the opportunity for advice via work. I run retirement courses for staff at a few Universities and they are always really well received. It’s the sign of a caring employer.

Income Drawdown is the route where probably 90% of my clients go down - suitable if they have the capacity to tolerate investment fluctuations, both financially and emotionally!

The last 10 or so years for investments have been generally really good ... the next couple of years could be more interesting, although the trajectory is always up if you can leave it long enough.

A key approach is to have a strategy of not being forced to sell during a period temporary decline - I always recommend that a cash / very cautious buffer within a pension fund is held. This is exclusively there to pay income and cover charges for a couple of years. This means that you don’t need to worry about the short term fluctuations we’ve seen over the last few months as the only part that is exposed to these, won’t be needing to be touched for a while.

Don't pension schemes have "safe" (money market/cash) investment options to prevent loss post the start of draw-down in the UK? In the US you can choose a "safe" option that pays a low but certain interest rate at any time rather than holding assets in volatile funds.

[IanD]

Don't pension schemes have "safe" (money market/cash) investment options to prevent loss post the start of draw-down in the UK? In the US you can choose a "safe" option that pays a low but certain interest rate at any time rather than holding assets in volatile funds.

Mine does. Higher upfront costs means I can switch between cash and shares at no cost. Worth checking the Ts and Cs of any pension to see what the options (and possible charges for switching between cash/shares) are. No interest paid on my cash at the moment. Not a problem. If you organise yourself enough and can drawdown over several years, effectively you have no tax to pay. It's the equivelant of 20% bank interest for basic rate taxpayers in England. HMRC have been excellent at refunding tax paid on drawdown from my FSAVC. HMRC paperwork can all be done online these days. Very efficient. This assumes you dont work/have another pension to pay tax on/have other income. Some would argue that following City up and down the country is "work". Its certainly hard going sometimes!

[IanD]

I love this board, that's just the advice I was looking for!
I was feeling a little uncomfortable about making a further lump-sum payment without any acknowledgement that they had received my first payment.
I was logging into my Government Gateway account almost every day in the hope it would be updated and show the payment.

I'm going to do exactly what you suggested concerning their voice automated process.

Cheers for that!

I found out that tip the hard way. These voice-activated answering systems are a pain and HMRCs is the worst.
Shouting into the phone "I just want to talk to someone" makes it sound like you have rung the Samaritans!
BTW...your 16 digit reference for voluntary NICs (presuming you paid NICs by BACS) can be reused year after year as it is unique to you. All this for an extra £4 or £5 a week on getting a state pension. But it is for life.

[Rock_Flock_of_Five]

I found out that tip the hard way. These voice-activated answering systems are a pain and HMRCs is the worst.
Shouting into the phone "I just want to talk to someone" makes it sound like you have rung the Samaritans!
BTW...your 16 digit reference for voluntary NICs (presuming you paid NICs by BACS) can be reused year after year as it is unique to you. All this for an extra £4 or £5 a week on getting a state pension. But it is for life.

You're right - that HMRC voice-activated 'service' is certainly one of, if not THE, most annoying I have come across.

Unfortunately for me, being in China means my pension isn't index linked. There might be a way around that, I really don't know...

[blue matt]

just checked my state pension, looks like i have 18 more years to pay 12 more years NIC payments , then i am entitled to £175 a week which i believe is the current max state pension

Ive been SE'ed for close to 30 years, so just pay what the HMRC tell me to at the end of the year, these are the NIC i need to pay to continue with building my years up ( as above ) ? ? ?

[Rock_Flock_of_Five]

just checked my state pension, looks like i have 18 more years to pay 12 more years NIC payments , then i am entitled to £175 a week which i believe is the current max state pension

Ive been SE'ed for close to 30 years, so just pay what the HMRC tell me to at the end of the year, these are the NIC i need to pay to continue with building my years up ( as above ) ? ? ?

I think they allow you to go back as far as 6 years to repay missed years. I was procrastinating a few years back, at a time when it was 300GBP for me to make up missing years - now it is 795GBP a year!
As you probably know, you need a total of 35 years for a full state pension.