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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