Use workplace pension first, then ISAs for diversification

A couple of questions this week about having too big a pension fund, plus a great question on platform choice where Rog and Pete discuss their own experiences.

Shownotes: https://meaningfulmoney.tv/QA31

01:58 Question 1

Hi, really enjoying the podcast. Started by watching your YouTube videos and still like getting the notifications of your new content.

I have a question regarding early retirement, before pensions are available.

I'm 50 and my wife is 52 and we would like to retire now. We have a mix of DB and DC pensions that will be sufficient for our retirement. She can start taking her pensions at 55 and I'll start at 57.

We have a savings pot outside of pensions of £700k in a mixture of investment funds (ISA being maxed yearly) that we would like to live on between now and our pensions becoming available.

Based on £5000 per month to live on, we would need to withdraw £60000 in year 1, year 2 and year 3. After that, we would need to withdraw £32500 in year 4, year 5, year 6 and year 7.

Based on these figures and your experience of the expected interest we should gain over the period if our pot is sensibly invested, what are your thoughts on how low the pot will drop to over the first 7 years and how long would the amount we spent take to recover to the original value of the pot?

Many thanks, Adam

10:39 Question 2

Hi Pete and Roger,

Thank you both for all of the content and guidance – it has really helped me build my confidence in planning my finances.

How much is too much in a pension? I'm 42 years old and have always prioritised pensions as a relatively high earner. I'm now in a position where I have a fairly healthy £530k in my pension, and wondering if I need to throttle back the contributions soon? If I take an assumed 5% growth rate, I'm on target for a £1m pot by age 55 without any more contributions (my access age is protected at 55). Should I just pay in enough to get employer match - I get 7% employer contributions for my 5%? My employer offers salary sacrifice, so as an additional rate taxpayer, I benefit from 47% relief (the employer savings are not shared unfortunately). I do already manage to fill my S&S ISA every year and have an adequate emergency fund, so really it's a question of pension vs GIA at this point. My concern is that I may have to pay 40% tax on withdrawals on the way out, so I might be better to keep the money accessible and support an early retirement before pension access age. What is the maximum pension pot size to target at age 55? – what do you think?

Many thanks and keep up the good work, Steve

15:55 Question 3

Hi Pete and Roger,

Thank you for all you do!

My mum is 63 and retired a few years ago. She has a DC pension, which she won't need to take until she's around 68 as they currently live off my dad's income.

Her pension has been in the default fund, which automatically de-risks as she approaches retirement age. We only recently learned that this default fund probably isn't ideal for her circumstances, when I discovered your podcast and forwarded some episodes to her!

She doesn't intend to buy an annuity, so what can she do with her pension pot at this late stage to stop it being entirely de-risked and losing value as she gets older? She plans to start taking an income from it in around 5 years time.

Many thanks in advance! Kathryn

22:23 Question 4

Hi Roger and Pete,

Listening to your podcast has me feeling like a money ninja - ready to conquer my finances one episode at a time!

Here`s my question:

My workplace pension match is 3% and I also I contribute 3% - it`s auto enrolment and a DC pension.

I would like to put 15% in my retirement, but can`t find any advice on how to best do that – do I just up my contribution into my workplace pension to 15% and that`s that, or do I also open a SIPP and GIA and split between all three?

What do people usually do? :D

Thanks so much – Leah

27:22 Question 5

Hi Pete and Roger

Been a fan of your podcast for a long time and have put some of the lessons from yourself and others into practice since I was 19, now 46 . Regularly saving and investing as much as possible by way of ISA , high interest accounts etc

I have been able to build a decent portfolio over the years

My question is regarding the most efficient platform for Stock and Shares ISA regarding fees. In the past I had an FA and the ongoing fees I always felt eroded investment gains and switched to Hargreaves Lansdown.

I have a mix between individual shares/funds and trackers totalling £210k with Hargreaves Lansdown.

I have heard about other cheaper platforms such as AJ Bell Trading 212 and wondered if your opinion would be to move over to something cheaper with an in specie transfer.

I remember well the financial crisis and Lost money with the bank ICESAVE, only saved by the then PM Gordon browns decision to reimburse. So although I am attracted , once bitten twice shy for lesser know companies.

My end goal is to scale back or stop work mid 50's

For fullness of info , Pension DC £240k , Cash Isa £30k, House Paid off in Full £550k, Trust £50k No debt , No loans, 2 kids well looked after.

Keep up the good work , that regular saving and diligent invest has worked really well over the long term .. thanks in advance and keep up the great work.

regards Blair

36:11 Question 6

Hi Pete, Roger and Nick!

My question is: when should you stop making additional pension contributions over and above those matching contributions from your employer?

I am 43 and have amassed £450k in defined contribution pensions. For the past few years I have been topping up my contributions to the maximum £60k. But given that I still have 15 years until I will be able to access my pension, I assume with standard growth rates I will have amassed a significant sum even without the extra contributions (the extra is about £33k).

I plan to withdraw approx £50k per year (up to the high rate income tax band) so assuming a 4% withdrawal rate I would need £1.25m at age 58.

Should I just stop contributing the extra now and instead make contributions to my wife's SIPP instead? She has a salary sacrifice pension via work and has headroom to pay more into that pension or a SIPP.

I am at the 62% marginal income tax/NI rate but my wife is a basic rate tax payer. I don't love the idea of paying 62% tax but only getting 28% tax relief (via salary sacrifice) if I do this!

Many thanks, John