Mid-year financial review

I took two half days off work this week to tackle our finances. A lot of things have happened at once and I needed some solid time to review and organise things.

Savings

I've been trying to find places for our savings with good interest rates now our Coventry Building Society Regular Savers have matured. To compound this, I received a letter from Tesco letting me know they are ditching their current accounts in November. I've been using our account as a savings account, as it was offering 3% on balances up to £3,000, although we kept a lot more in there. This dropped last year to 1% and continues to fall so I have to find a home for those savings. 

Some of the accounts with the best rates are for existing customers, others are only for people living in a specific postcode. Some that look ok will only take very small maximum deposit limits and so are not worth the hassle of setting them up. 

We already have Stock and Shares ISAs which we use those specifically for investing for my retirement, and I don't want to reduce our annual limits by opening up a cash ISA.

I've looked at premium bonds but I actually don't like the lottery aspect of it. According to MSE's premium bond calculator I could be looking at about £75 in prizes for the amount I would buy, but that is obviously based on chance. I could get more but it is statistically likely I will get less.

I've never been keen on tying my money up for a fixed term, in case we have an emergency and need the money, but I'm slowly coming round to the idea as some of the better rates on the market are fixed term accounts. 

After much research the only options that suits my specific requirements are a 12-month fixed term account with Oak North Bank for 1.23% interest and/or a regular savings account with Coventry Building Society at 1.05%. That's a lower interest rate than last year but it allows larger monthly deposits so is simpler to maintain, and crucially, I can still access the latter if I need it. 

-oOo-

Retirement accounts

Once that decision was made I turned my attention to Martin's accounts. His SIPP is being transferred to Vanguard from BestInvest, as the latter's drawdown costs were far too expensive. I'm looking to keep that invested for the rest of the year and start drawdown after April next year. Our aim is to keep Martin's income under the Personal Allowance of £12,570, which we won't be able to do this year due to him working his last two months in the new financial year. Once we add in his occupational pension the SIPP will put him over. 

However, I noticed last week that his monthly pension statement stated HMRC has given him a Basic Rate tax code, which is not correct and means he is being taxed at 20%, despite only having a small pension as income. That tax code is often given to people who have pensions and are still working. So, we rang up HMRC, talked through the issue with them and they have now changed the tax code to account for this. He should now get a refund on the tax taken from his pension since June and a refund of the tax he paid during April and May while working. 

-oOo-

Credit cards

Finally credit cards. One of my 0% rate promotions is coming to an end in September. If you've read my blog for a while you'll know I favour putting larger spends on these cards, paying back a set amount and keeping my savings earning interest. It's a technique called stoozing. Because I have savings I can pay off the debt at any time if I need to so I don't feel burdened by it, but I get the luxury of repaying it at my leisure over time. The card repayments come from our income every month so my savings and investments can sit there untouched from one year to the next. 

After searching the market, I found a Marks and Spencer card that offers 0% interest for 20 months and was successful with my application. The car we bought last week was purchased using our normal household credit card to get the buyer's protection, and originally I was going to use a combination of my bonus and savings for that but I've decided not to so that balance will shortly be transferred onto the Marks and Spencer card. I'll then set up a regular payment every month and just forget about it. We will be renewing our mortgage deal in a couple of years and so I'll clear the balance three months before our new deal. 

There is another technique to saving/making money using credit cards but it's not as easy as it used to be so I don't do it. It's called a Super Balance Transfer or Money Transfer. Basically, you get a card with a 0% interest rate on money transfers and a low fee, then do a money advance off the card, up to the credit limit you've been given, into your current account. You're effectively taking a cash advance from your card. You can then put the cash into a savings account and get the interest. This is not so easy to do as it was 10 years ago. Back in the day there were very little, if any fees, for cash advances and huge savings interest so it was quite lucrative, but credit card lenders didn't like people doing it so changed their terms and conditions, the fees have increased massively (lowest is currently 3%), and savings interest rates are low.

You can still do it, but you need a special Money Transfer credit card but really it is too much faff for no reward so I stick to the stoozing. The only way I would change my mind is if we had a recession and the price of the funds in my pension and ISAs dropped significantly, making it worthwhile to buy the lower priced units in anticipation of the day they increase in value. I've done that before during a market dip, using savings though not money transfers. 

It's still good to have that possibility in my back pocket. I may need to use every means available to me if I'm to retire early. 

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Steel Kitten

Hedges and giving up the daily grind

Last Tuesday I made myself a fresh coffee, settled into my work chair, grabbed my planner and began my usual routine of daily organisation. There was a 'ping' from my phone and a calendar reminder came up - 'Hedges by 1st March'. My schedule for the week suddenly went out the window. 

I had completely forgotten that our boundary hedges had to be cut before the cut-off date of 1st March so we don't disrupt the nesting activity of the birds. It's in our deeds to do the hedges so the farmer can get his combine harvester into the field to cut the crops in the autumn. A hasty Zoom call to my boss and I managed to secure Wednesday and Thursday off work to try and get the bulk of the cutting done. 

Luckily I didn't have to do as much as I feared. We had cut back some overgrown laurel bushes at the front of the property in October so people could walk on the grass strip and not in the road. Also one side of the smallholding has very little hedge and more trees so that rarely needs anything, just big branches once in a while if they look like they'll catch the combine's cab as it passes. The area I needed to cover was actually only on two sides of the smallholding. All told, I had approx 160m horizontal cutting on the outside and 55m on the inside, and 80 metres of vertical cutting to take down the height. That's a lot of cutting. 

Wednesday was horrendous - high winds and 35mph gusts don't work well against with hedge trimmers and chainsaws but I managed to get some done. Cracked on again the next day and by 4pm I had manage to get about 80% of what I needed to do. I finally completed the task on Sunday in just a strappy top as it was so hot in the afternoon! All told, it took me approximately 14 hours.

I had a few dramas along the way. I have a small electric chainsaw, nice and light for a small person like me, but occasionally the chain jumps off so I have to put it back on. 

Luckily it's simple to do. 

So, over the next few weeks I'll finalise the hedge trimming all over the property, save the big stuff for the fire and the non-thorny stuff for kindling, then the rest goes on the growing pile in the paddock for a nice man with an industrial chipper to come late April to reduce it to a lovely pile of wood chip to rot down. 

The cats have loved the sunny weather this weekend. Prior to that the high wind meant they spent a lot of time indoors next to me. Baldrick wants to burrow and prefers to sleep like a toddler under a blanket...

...Missy just wants to snuggle...

And Georgie? He's just being an old cat with dementia, an overactive thyroid and arthritis. We keep him warm, medicated, and well fed and try not to get annoyed when he goes for a head rub and then bites us.

*****

I alluded to some big news in my previous post and now I have my hedging whinge out the way I shall tell you.

Martin will be retiring this year. 

Two major things have happened which has accelerated our plans for his retirement two years ahead of schedule.

1) We've found out that Martin can take some of his pension now. I hadn't appreciated that with every change of pension scheme Royal Mail made they dedicated the old fund to specific retirement milestones that can be taken without affecting the other bits. So the Final Salary scheme that closed in 2008 make up his Age 60 benefits while the Defined Contribution pension that ran from 2009 to 2018 make up his age 60 benefits. The current Defined Contribution pension accumulates and is used to pay out his 25% lump sum if he wants it (and we do). My widow's pension if he dies is the same whether we take the lump sum or not so I want to take it now and stash the cash because with COVID who knows what the future holds. So, there's a lump sum payment plus pension income to come from March. 

2) One of Martin's aunts has died, leaving a small legacy to him. It amounts to replacement salary and what we would be putting away into pensions over the next two years so Martin could retire at 62. 

We rolled around the house in a bit of a daze for a week, before sitting down and coming up with a plan of attack for the next few months. Then we found out that Royal Mail is running another round of early voluntary redundancies in his offer this spring, and if he is able to he will be applying. He has 27 years with Royal Mail and is the exact age that Royal Mail likes to try and 'ease' out 'lifers' of the business in favour of hiring younger, cheaper staff on poor employment contracts. Cue more wandering around in a daze.

I hope he gets it. The thought he could be retired and sitting on the patio by the summer makes me feel so happy for him. 

In the meantime, I'm number crunching and budgeting. All the money will be tucked away securely, and there will be very little spare money from our new income for any luxuries because I intend to go hell for leather pumping up my pensions and savings to get me ready to retire. I want to stop work sometime between 55-58 years old, at whatever point I can get the numbers to work out, so Martin and I can go and do some travelling while he is still young enough. 

Scary and exhilarating times ahead!

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Steel Kitten

Pensions: you never have it all worked out

I've spent a lot of time over the last few weeks relaxing. So while this post is about pensions, the photos are about how I've attempted to mimic the cats and de-stress, and I am typing this post in approximately the same position as Fleagle above. It feels good. I have an idleness deficit I need to address :)

Anyway, Martin and I started our retirement plan about 10 years ago and we're over the halfway point in terms of time; we have four more years before Martin retires and 9 years before I do. We are not, however, over the halfway point in terms of money. I'm pretty sure we'll be on track until Martin retires, but after that things are now looking a bit squeaky. I always knew money would be a little tight after he stops work but I wanted to ensure we had the whole property updated before then and that's where some of the issues are.

After you retire you only have a set amount of money to live off so there may not enough in the budget to do big updates plus it's in my mind that if Martin and I decide to convert our barns and downsize to them, we will have to either rent or sell off this property, and it will need to be in good condition either way. In addition to all of this, we still have to make progress on the restoring our classic car projects. These add up to a tidy chunk of money in our retirement one day (fingers' crossed!) but not if they sit there rotting gently away year after year. Now summer is here, Martin is getting excited about the possibility of doing another restoration but as ever, money is the perennial issue.

(while that box doesn't look comfy, Georgie was so relaxed he dropped off to sleep for two hours.) So, we've sat down and had a look at things again. He's going to thin out some of the project cars we have to release cash to do others. Fortuitously, some of that cash will come back into our joint account, as a lot of the project cars were originally bought with joint money, but it will be temporarily diverted into our emergency fund for now until we find out what is happening with Brexit. As I've said before, my job relies on being able to access a pot of cash held by the European Union so that may be off limits after Brexit. If I'm going to be made redundant, I don't want to be caught on the hop without cash reserves.

But the gap between what we need and what we would have after Martin retired has been bothering me so I decided to go through everything to do with the pensions with fresh eyes, thinking maybe something would jump out. I was sorting through some old leaflets and pamphlets from Royal Mail about the pension and impending changes and my eyes spotted something I hadn't seen before. There was a small section on flexible pensions. Our plan has always been to leave Martin's pension in place to grow until he is 65,  because he would miss out on the growth for the those last few years if he took it, however, after reading the bit on flexible pensions and researching on the internet, it seems that Martin can take part of his pension at 60 and part at 65. What Martin built up prior to 2008 in his final salary pension makes up the 'retire at 60' part (NRA60) and the new scheme he was put into after 2008 is the 'retire at 65' part (NRA65). I thought they were all in one pot but they are both are separate. I fundamentally misunderstood how his pension worked.

I'm assuming that the NRA60 part of the pension is moved into safer funds that don't have a lot of risk, but also don't produce much return so he wouldn't be missing out on much by taking the NRA60 bit when he supposed to. So, he could take the 'retire at 60' part and keep on working until 62, which means we would have surplus income that could go straight into his self-invested pension, giving that a boost to the tune of about £5k + 20% tax relief each year.

I was pretty shocked I hadn't seen that before. That plugs the gap that had opened up between 62 and 65 and makes things look a lot less squeaky. Of course many a slip could happen before then - the government could introduce all sorts of silliness to throw us off course, but for now it looks like we're back on track.

It's been a good week :)

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Steel Kitten