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jack dickson
Posted: 20 September 2010 11:43:56(UTC)
#1

Joined: 08/08/2006(UTC)
Posts: 3
In a little under 18 months I will be retiring, though I might reduce my working week to three days instead of fully retiring at once.
My question is what to invest in ? I have stocks and shares, Peps, Isa`s (both cash and stocks and shares). I also have a final salary pension which will give a modest pay out. (Should I take all of the 25% tax free allowance or only part off?). Any advice will be much appreciated.
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John Baker
Posted: 20 September 2010 13:54:31(UTC)
#2

Joined: 18/03/2010(UTC)
Posts: 2
In order to answer that, other questions would need answering, including:

Is the final salary scheme inflation proofed (if, so RPI or CPI)?
Do you consider the pension adequate for day to day living?
Have you obtained a State Pension forecast?
Are you retiring early - how long do you estimate your retirement needs funding for (on a good day!)
What are your plans for retirement - what are the funding implications?

Whilst it is good to canvas lay-opinions, I think you should find a good financial adviser as this is a critical juncture in your financial and general life and you owe it to yourself and any dependents to plan as carefully and professionally as possible.
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dd
Posted: 20 September 2010 13:55:06(UTC)
#3

Joined: 15/09/2010(UTC)
Posts: 281
It is often wise to take all of the 25% TF allowance. It can be used to purchase an annuity if you choose to but you should consult an Independent Financial Adviser who would take into consideration all of your personal circumstances.
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Anonymous Post
Posted: 20 September 2010 13:55:10(UTC)
#4
Anonymous 1 needed this 'Off the Record'

Do you expect legal advice to be free or to have your car serviced for free or a plumber to give free advice?
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Dennis .
Posted: 20 September 2010 13:59:44(UTC)
#5

Joined: 26/12/2007(UTC)
Posts: 1,017
The best advice I have come across on the final salary lump sum question is to do the calculation about how long do you have to live to make up for the lost income and what will you do wth the extra cash anyway? The younger you are (and the healthier), the more likely you are to benefit from extra income. In my wife's case retiring at 60, we worked out that the best option was to take as small a lump sum as possible. There was one other point which is that it is probably in your employer's interest to get you to take the cash lump sum in which case it must by definition be in your interest NOT to (if you see what I mean) but this depends on how much income you lose if you take the extra cash.

As for the rest of your ISAs etc move them into income generating funds is the obvious move.
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David Andrews
Posted: 20 September 2010 14:04:39(UTC)
#6

Joined: 17/07/2009(UTC)
Posts: 69
@Anonymous1

I am a member of several forums where plumbers and mechanics give free - and often detailed - advice.

The OP was asking for advice - not a multi-houred in-depth analysis - and some others have replied with that.
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chazza
Posted: 20 September 2010 14:38:06(UTC)
#7

Joined: 13/08/2010(UTC)
Posts: 606
With many (perhaps all?) 'public sector' pension schemes changing basis of indexation from RPI to CPI, the arguments in favour of taking 25% as cash become much stronger, even - or perhaps especially - if you expect a long life in retirement, as any pension indexed by CPI will fall steadily behind earning and real cost of living. Even if you only get £12 cash for evey £1 of pension surrendered, you only need to earn about 7% + CPI from the cash lump sum, and that, if you invest in a spread of the top-rated ITs or funds, is not a big ask, especially since the fate of shares is likely to be more closely tied to earnings / RPI than is your pension.
And if you take the tax free cash, you have flexibility about when and how you use it.
So, fced, with a similar predicament, that's what I have decided to do.
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Dennis .
Posted: 20 September 2010 14:53:01(UTC)
#8

Joined: 26/12/2007(UTC)
Posts: 1,017
Good point chazza, my wife' case was in April before all the RPI/CPI stuff started, however who is offering yields of a steady 7% + CPI ie about 10% ? This is pretty good going.
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dd
Posted: 20 September 2010 15:05:39(UTC)
#9

Joined: 15/09/2010(UTC)
Posts: 281
"steady" being the operative word!
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Dennis .
Posted: 20 September 2010 15:05:56(UTC)
#10

Joined: 26/12/2007(UTC)
Posts: 1,017
One further point chazza, my own final salary pension (private sector) is currently RPI linked but limited to 3 or 5% maximum uplift depending on when the pension was accrued. One of our pensioners (with too much time on his hands obviously) recently produced a spreadsheet showing how the increases over the last ten or 15 years would have looked using CPI given that these limits were placed on annual RPI uplifts. Surprisingly it showed that there was not a great deal of difference.

You may be lucky and be fully RPI protected (at present) but for those of us with silver rather than gold plating on our pensions it's not such a horror story.
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