The Lemon Fool

Jon277 wrote:Are you sure you have a full pension coming? I thought you needed 35 years for that... unless you started at 17 and never stopped until 52?

Good question and the answer is yes, according to my 2022 forecast I have:

36 years of full contributions
14 years to contribute before 5 April 2036
1 year when you did not contribute enough

I started paying National Insurance in 1985/1986 tax year, born in 69 and have never been out of work although I did get NI credits during my 4 year degree at University. This will give me the current full State Pension of: 185.15 per week.

It's one of the reasons I waited until I was 52 to retire.

I'm 50 and I only have to contribute this current year and I'm at the max. The 35-years-or-GTFO thing is only for those starting their "pensions journey" after 5 April 2016 or whatever the date was (plus I actually did pay it or have it credited ever since 1987/8, missing only two years in my late teens when my dodgy employer wasn't paying anything over despite making deductions).

My deep-seated psychological issues around money are spinning like a buttered cat array lately. On the one hand, I have an unexpected amount of freelance coming in and that, plus the fact that I decided not to travel until the whole Covid/disruptions thing sorts itself out, makes me relaxed because my bank balance is increasing and for the first time ever I don't feel like that's money I "owe" to my future self. On the other hand, my pensions/investments have dropped by £115k since 6 April, which dwarfs the few grand coming in here or there from the freelance. So my future self might be a bit shafted. The question is, how much is "a bit" likely to be, and - since it's not going to make the difference between eating or not - do I care enough to step in at the expense of my options today?

Sorry Darka I don't have anything helpful to say! I think I'm pretty much saying the same as you and everyone else.

I was having a bit of a moment the other day when I was reading about double-digit inflation and price caps and recession, at the same time as crystallising chunky pension losses (albeit only while I moved provider), and found myself thinking: wait, am I going to need to go back to work? That's what reading the news without the calming effect of dozens of people in the office not caring a damn does to you! Actually, our plans - that's mine and yours - were stress-tested to still work out fine in a variety of scenarios, and we're still well within that range today. We aren't the sort of people who go full-steam ahead with "dream big!" plans which could only ever work provided nothing at all goes even slightly wrong at any point. So we'll be fine whatever.

My conclusion, in the end, was that my portfolio will make its own money (this is the flip-side of my comment above about market movements making my earned income look like chicken-feed), and that the reason I'm invested is precisely because I have faith that it will all work out in the end. I'm no longer fussed about saving more. What I am struggling with though is starting to spend before I end up saving by default!

https://www.newscientist.com/article/mg ... ide%20down.

" THE BUTTERED cat array we featured on 19 October is still in the experimental stage. However, several readers have suggested modifications to the original proposal. The idea builds on the principle that a falling cat always lands feet downwards, while a falling slice of toast lands buttered-side down. Strap a slice of toast to the back of a cat, and …"

Just in case , like me, you were wondering!

Snakey wrote:My conclusion, in the end, was that my portfolio will make its own money (this is the flip-side of my comment above about market movements making my earned income look like chicken-feed), and that the reason I'm invested is precisely because I have faith that it will all work out in the end. I'm no longer fussed about saving more. What I am struggling with though is starting to spend before I end up saving by default!

Thanks Snakey,

That's helpful and I think it's where I will end up, whilst keeping an eye on things just in case.

Darka wrote:I just going out for a swim in the sea shortly

Darka the Otter.

But seriously: you have plenty of capital, and heaps of surplus income and expect to have more. Hurray.

I second the advice to enjoy travelling and so forth while you are still young.

I also suggest that it might be wise to spend some of your surplus on insurance - for instance health insurance designed to cover you for the sort of costs that would rattle even someone as well off as you are.

What else? As you have a policy of not wanting to leave unspent capital you might like to keep an eye on annuity rates; index-linked annuities obvs. Buying a series of annuities over the next twenty years might be a good way of locking in ample income in a way that will eventually spare you the hassle of managing your investments when you are old, or of sparing your widow that hassle.

Kantwebefriends wrote:

Darka wrote:I just going out for a swim in the sea shortly

Darka the Otter.

The object of the exercise is not to run out of income rather than maximise gains.

(I’m 15 years into retirement having stopped at 49)

Spending is somewhat sporadic but averages around 2 ½ % which roughly equates to the portfolio income at present.

Clearly a different portfolio could give a much higher income and I could have a significant income surplus or a different portfolio might produce an income below the spending level and an income deficit. ( it has in the past )

I ignore the income produced from the portfolio, virtually all is reinvested, I take spending from cash reserves , occasional sales etc.

If I invested in a series of Investment Trusts that produced 5% or 1% would that really change what I should spend ?

Might be interesting to know what Darka’s portfolio yields to know whether the income surplus is availed to be spent or would be prudent to reserve.

I imagine my spending is less than I could spend but spending more just for the sake doesn’t seem sensible.

However we have just spend the equivalent of a years income on a new car…. (As I said spending is sporadic !!! )

Hariseldon58 wrote:The object of the exercise is not to run out of income rather than maximise gains.

(I’m 15 years into retirement having stopped at 49)

Spending is somewhat sporadic but averages around 2 ½ % which roughly equates to the portfolio income at present.

Clearly a different portfolio could give a much higher income and I could have a significant income surplus or a different portfolio might produce an income below the spending level and an income deficit. ( it has in the past )

I ignore the income produced from the portfolio, virtually all is reinvested, I take spending from cash reserves , occasional sales etc.

If I invested in a series of Investment Trusts that produced 5% or 1% would that really change what I should spend ?

Might be interesting to know what Darka’s portfolio yields to know whether the income surplus is availed to be spent or would be prudent to reserve.

I imagine my spending is less than I could spend but spending more just for the sake doesn’t seem sensible.

However we have just spend the equivalent of a years income on a new car…. (As I said spending is sporadic !!! )

Thanks Hariseldon58,

Current yield is 4.85% (if I ignore any cash in the portfolio), otherwise if I include all cash (including reserves) then the yield is 4.53%.
That included my SIPP which I can't access yet.

I have a mixture of IT's (growth/income/growth+income) and some remaining individual shares which I'm gradually moving into IT's for a more stable (hopefully) income.

Jon277 wrote:Are you sure you have a full pension coming? I thought you needed 35 years for that... unless you started at 17 and never stopped until 52?

Well, if not he could look to topping it up - class 2 contributions of course. viewtopic.php?t=17424

Darka wrote:

Hariseldon58 wrote:The object of the exercise is not to run out of income rather than maximise gains.

(I’m 15 years into retirement having stopped at 49)

Spending is somewhat sporadic but averages around 2 ½ % which roughly equates to the portfolio income at present.

Clearly a different portfolio could give a much higher income and I could have a significant income surplus or a different portfolio might produce an income below the spending level and an income deficit. ( it has in the past )

I ignore the income produced from the portfolio, virtually all is reinvested, I take spending from cash reserves , occasional sales etc.

If I invested in a series of Investment Trusts that produced 5% or 1% would that really change what I should spend ?

Might be interesting to know what Darka’s portfolio yields to know whether the income surplus is availed to be spent or would be prudent to reserve.

I imagine my spending is less than I could spend but spending more just for the sake doesn’t seem sensible.

However we have just spend the equivalent of a years income on a new car…. (As I said spending is sporadic !!! )

Thanks Hariseldon58,

Current yield is 4.85% (if I ignore any cash in the portfolio), otherwise if I include all cash (including reserves) then the yield is 4.53%.
That included my SIPP which I can't access yet.

I have a mixture of IT's (growth/income/growth+income) and some remaining individual shares which I'm gradually moving into IT's for a more stable (hopefully) income.

My take would be to reinvest the surplus, live life to the full, your not likely to benefit from ‘overspending’ just for the sake of it.

You got to where you are by living to your own rules, well done.

Darka wrote:I started paying National Insurance in 1985/1986 tax year, born in 69 and have never been out of work although I did get NI credits during my 4 year degree at University. This will give me the current full State Pension of: 185.15 per week.

It's one of the reasons I waited until I was 52 to retire.

Interesing that you received credits during time at university. In my case my university years show as "Year is not full" i.e. no credit. I did receive credits for 3 years prior to uni. while I was still at school but I thought uni. years didn't count. Were you working during that time ?

y0rkiebar wrote:

Darka wrote:I started paying National Insurance in 1985/1986 tax year, born in 69 and have never been out of work although I did get NI credits during my 4 year degree at University. This will give me the current full State Pension of: 185.15 per week.

It's one of the reasons I waited until I was 52 to retire.

Interesing that you received credits during time at university. In my case my university years show as "Year is not full" i.e. no credit. I did receive credits for 3 years prior to uni. while I was still at school but I thought uni. years didn't count. Were you working during that time ?

I did a 4 year degree with a paid industrial role for the 3rd year, but other than that no I didn't work those other 3 years so not sure why I got the full credit for those.

Edit: I did work for a Bank for a very short while before entering Uni in my first year, so that could have helped credit that one year.

I didn't go through the normal application process for Uni, I just asked to join the course and had a quick interview with them.

Darka wrote:

Jon277 wrote:Are you sure you have a full pension coming? I thought you needed 35 years for that... unless you started at 17 and never stopped until 52?

Good question and the answer is yes, according to my 2022 forecast I have:

36 years of full contributions
14 years to contribute before 5 April 2036
1 year when you did not contribute enough

I started paying National Insurance in 1985/1986 tax year, born in 69 and have never been out of work although I did get NI credits during my 4 year degree at University. This will give me the current full State Pension of: 185.15 per week.

It's one of the reasons I waited until I was 52 to retire.

Do make sure you have taken into account any reduction applied for contracting out (if you did contact out), whilst I have far more than 35 years I still need another couple to claw back the reduction for being contacted out from the mid 80s until contracting out ended.

Charlottesquare wrote:

Darka wrote:
According to my 2022 forecast I have:

36 years of full contributions
14 years to contribute before 5 April 2036
1 year when you did not contribute enough

I started paying National Insurance in 1985/1986 tax year, born in 69 and have never been out of work although I did get NI credits during my 4 year degree at University. This will give me the current full State Pension of: 185.15 per week.

It's one of the reasons I waited until I was 52 to retire.

Do make sure you have taken into account any reduction applied for contracting out (if you did contact out), whilst I have far more than 35 years I still need another couple to claw back the reduction for being contacted out from the mid 80s until contracting out ended.

As an interested observer of this thread, can I ask if that's not covered by the online state-pension forecast, or does the online forecast not include the potential for any associated contracting-out reductions?

If it doesn't - how is that potential impact actually quantified?

Cheers,

Itsallaguess

Itsallaguess wrote:
As an interested observer of this thread, can I ask if that's not covered by the online state-pension forecast, or does the online forecast not include the potential for any associated contracting-out reductions?

Itsallaguess

The online forecast did take into account my contracted out element. I enquired if I could "top up" to bring my OAP up to the max but was advised that it wasn't possible to "top up" the contracted out element, so my OAP is slightly reduced.

On the upside, the forecast showed my wife was short of some years. A very good advisor guided us to a report which showed the least cost years to "top up" and she has max OAP.

So swings and roundabouts I suppose.

Itsallaguess wrote:

Charlottesquare wrote:

Darka wrote:
According to my 2022 forecast I have:

36 years of full contributions
14 years to contribute before 5 April 2036
1 year when you did not contribute enough

I started paying National Insurance in 1985/1986 tax year, born in 69 and have never been out of work although I did get NI credits during my 4 year degree at University. This will give me the current full State Pension of: 185.15 per week.

It's one of the reasons I waited until I was 52 to retire.

Do make sure you have taken into account any reduction applied for contracting out (if you did contact out), whilst I have far more than 35 years I still need another couple to claw back the reduction for being contacted out from the mid 80s until contracting out ended.

As an interested observer of this thread, can I ask if that's not covered by the online state-pension forecast, or does the online forecast not include the potential for any associated contracting-out reductions?

If it doesn't - how is that potential impact actually quantified?

Cheers,

Itsallaguess

I would have hoped that the forecast takes this into account, but now I'm not so sure.

Any idea how we can check this?

Isn't all this taken into account when the original starting amount was calculated in 2016, so the forecast we see is based on that and so should be correct?

I find the state forecast confusing with regard to the contracted out (COPE) element. In my case the forecast says I've reached the maximum available state pension but mentions a COPE amount. I take this to mean I'll get the full state pension + extra income from the COPE element via the personal pension my contracted out ££ was invested in. Is this correct ?

y0rkiebar wrote:I find the state forecast confusing with regard to the contracted out (COPE) element. In my case the forecast says I've reached the maximum available state pension but mentions a COPE amount. I take this to mean I'll get the full state pension + extra income from the COPE element via the personal pension my contracted out ££ was invested in. Is this correct ?

I'm not an expert but I believe so.

The COPE element is an estimation of the amount you will receive from the Private Pension that your contracted out payments could/would have gone to.

The amount of State Pension you get should be the quoted value on the forecast, you essentially ignore the COPE amount as it was just used to calculate your starting amount.

Yes, that's my understanding too. The state forecast could be clearer in this area IMO.