My Top Ten Pension Questions

As I approach 55, and the first opportunity to take my Defined Contribution pension, I keep going back to the same questions about pensions that I feel I should either find out more about, or make a decision on. I’ve listed them here, not necessarily looking for answers, just trying to get them out my system:

Do I take my DC pot at 55, even if I don’t retire then?

This is so I can get my hands on the 25% tax free sum, before the Government come in and reduce it. When it comes to pensions we almost all take it as read that the endless tinkering on this potential cash cow by whichever bunch of inadequates happen to be in power will just never stop. But why? Why can’t they leave us in peace and let us do our sums against a background of stable assumptions?

If I do take my 25% cash Lump Sum, do I “recycle” it back into personal SIPPs to get some tax relief?

This is where pensions begin to get complicated – even when you’re trying to keep it simple. There’s also a “moral and ethical” aspect to doing this which, frankly, as long as I’m not breaking the law, I’ll consider for all of two seconds before I do it. My bigger problem, I feel, will be “Can I be bothered”? working it all out and then taking the necessary administrative steps. Which leads me to my next question:

Do I get Professional Pensions Advice?

Can I get it for free, is my rejoinder to that one. Isn’t all relevant information available on the internet anyway? Of course – but how much of it is “fake news”? There seem to be so many shades of pension options that I’m never sure if what I’m reading applies exactly to me. It’s like when the newspapers do those tables of how the budget will affect you, and they pick about six different groups – singles, married couples, pensioners, students and so on – estimating their incomes and expenditures. Never once  in history has any one of these sub-groups applied exactly to my situation.

Assuming I take my DC pension at 55, and my cash free lump sum, how much then do I drawdown?

Firstly, what are the damn rules on drawdown? What’s the minimum I can take a year? What’s the maximum? Will I still be working? Is it beneficial to continue working? Should I go part time? If so, what’s the most tax efficient approach?

Am I in danger, when taking all my pensions into account, of exceeding the Life Time Allowance?

Absolutely no idea. I’ve taken the “protection” available, although I’m not quite sure what this means. I can’t seem to get an estimation of what my Defined Benefit pot is worth, or will be worth when I decide to take it. I’ve written three times to the provider to get some guidance only to eventually be informed of a sum of money that I’m due per annum. But is that if I took it at “normal retirement age”? And is it in today’s money? No lump sum options are given either. I used to get a really clear statement every year about this pension. Now I have to write and then wait two months for a rubbish response.

How much will I need to live comfortably in retirement anyway?

Well, I’ve come to answer on this one. It’s: How long is a piece of string?

What’s the best Spreadsheet to estimate (a) what my pensions will be worth and (b) how I might take them over thirty years?

An easier question might be how many spreadsheets do I have trying to work through these scenarios? I’m only certain that it’s too many. I do have a “definitive” effort sitting on Google Docs, but that only serves as the model that I compare all the others to. It will also only be “definitive” until I find one that I think surpasses it (i.e. gives me a better outcome).

Will the State Pension be means tested by the time I get there?

If there’s anything that the last General Election taught us it was that if you mess with Pensioners benefits they will vote you out of office. They won’t even give up on a free bus pass, for Gawd’s Sake, so no, I predict that this isn’t about to happen anytime soon.

What are the rules when it comes to pensions and inheritance?

Answering this question means I have to contemplate the fact of my own death. Which I currently refuse to do.

Haven’t I anything better to do with my time?

This is always my final pension question after hours of wrestling with the above ones.


Working (for a) Living

It’s been a tough week. Yes, for lots of reasons, but I’m not going to be talking about politics here, nor terrorism, nor the horror and scandal of what happened at the Grenfell Tower in London. No, I’m not discussing those, but suffice to say they help put the worries and troubles of my own little world into perspective. So many others have so much more to worry about than I do.

Having said that, it now seems almost pathetic to state that the reason I’ve found this a tough week has been because it’s been really quiet at work, and I find that difficult to deal with. We all know people who can turn up to work, have one task to complete in the day and then find a multitude of ways to not complete it. That’s not me, I’m afraid, and I’d guess for the majority of FIRE adherents that’s not you either. If I turn up at work at 0900 with one task to do, I’ve usually completed it by 0901 and am looking for the next one. We are the type of people who set goals, take action, push out into the world and make changes in the hope that these will help us attain our ambitions. We’re doers, whether that’s in the world of work or leisure. We fill our days and we’re happiest when we get to the end of the day, pour ourselves a beer, a glass of wine or a cup of tea and reflect on what we’ve managed to achieve in the waking hours.

I reflected on this when one of my recently early-retired golfing buddies mentioned that he’d “Never been busier” since quitting work. He then added, “I’ve just not had time to be bored, not like you were when you were retired.”

Well, I’m sorry, but if I ever did say I was “bored” in my year out, that’s not what I meant. I wish I had been just “bored” because I could have fixed that in a millisecond. There are endless enjoyable ways to fill empty hours – take a walk, read a book, splurge on a Box Set, listen to podcasts, cook, bake, go for a swim, go to the pub, practice your golf…..on and on the list can go. Boredom? Of course there were times when I would admit that I was at a loose end, but it was never a major problem. It could be rectified.

No, filling the hours wasn’t an issue. For me, the problem was filling the hours with things that were, in my mind, constructive. What I was looking for in my retired days was “fulfillment” and, as those days stretched on, that became increasingly hard to find.

It’s funny, because my attitude to this changed over time. In the first month or two of my retirement I was ecstatic about having the ability to take ninety minutes to walk into town from home and reward myself with a nice cup of coffee and a read of the paper in a favourite cafe bar once I’d arrived. I’d listen to podcasts as I walked in and reveled in having the time to think about what I was learning, maybe heading to the library later in the afternoon to find a book on a subject that had whetted my interest. It was fantastic. At first. But, as my diary attests to, nine months in and I was moaning that this self-same activity was a total waste of time and was doing my head in. What was it achieving? How was I growing? What was I contributing? If I was learning things, how was I applying them? Really, what was I doing with my time?

Perhaps this was a legacy of the near thirty years of working life I’d had up to that point. It was never going to be easy to readjust. I thought that in acknowledging this situation I’d find a way to cope with it. The thing was that I expected to come to terms with lazy days over time, that I’d grow to ever more appreciate them and the finer things in life that my career had prevented me from enjoying. But that wasn’t the case. If anything, the feeling that I wasn’t achieving anything concrete with my days began to torment me and I realised that, at the bottom of it, I was missing work.

Was this a bad thing? I came across an interesting TED talk this week, where Mike Rowe laments the way manual work has been demeaned in today’s society. I could argue the same for many white collar jobs too. There’s a cliche that “Nobody on their deathbed ever stated ‘I wish I’d spent more time at the office’”, but in my retirement I found myself thinking that I wished I could spend at least SOME more of my time in the office! “You don’t know what you’ve got ‘til it’s gone” – another cliche that has an element of truth to it, but that’s not the whole truth either.

So yes, I’ve had a quiet week at work and I’ve found it tough, but it has not been as tough as having a quiet week at home. That’s one of the things I discovered in my early retirement and, for the moment, is something that that I’m happy to have rectified through finding a job.

Home Thoughts

It’s the eve of the General Election and it seems to me that there are two groups of voters that all the parties have to attract and woo – the young and the old. I like to tell myself that I’m the squeezed middle, but have to admit that I’m heading toward the latter camp much faster than I’m comfortable with, and thus I know where my sympathies selfishly lie.

That’s not to say I don’t relate to the predicament young people today find themselves in, I just don’t understand why more of them don’t seem to recognise it? Or, if they do, don’t seem to be overtly bothered with the debt ridden future that faces the majority of them.

While the young probably figure that the future will work itself out and live a bit more for the moment, the nearer I approach pensionable age (which I’m taking as 55) the more I find myself pondering the future and trying to work out the detail. What steps do I have to take to fully realise the next two, or hopefully three, decades of life that might be left for me to really enjoy?

For those of you who’ve managed to plough your way through self-improvement tomes, there’s a trick or technique they often encourage you to employ to help you work out your values and what’s important to you in life. What you have to do is vividly imagine your own funeral service and focus on what your close family, friends and possibly colleagues might want to say about you in a eulogy. What would you want them to say?

I’ve played with this technique over the years, but I’m a bit like Woody Allen when it comes to my own death – I’ve no intention of being there when it actually happens. And, on the occasional time when I have actually had a serious attempt at imagining this situation, I can’t say I found any blinding insights. I didn’t imagine anyone getting up and saying, “He had a fantastic house that we all envied, with that red Ferrari parked in front of it. And wow, I see he’s still wearing that Rolex Oyster there, lying in the casket.” (Actually I can’t imagine anyone picturing that at their own funeral, except maybe Piers Morgan.) What most of us probably think about are people extolling our social connections, the deep friendships we had, the importance we placed on being close to our loved ones.

Another thing I don’t imagine many people thinking about is their funeral taking place on some distant shore. I have a few friends who are currently enjoying the expat life in Hong Kong, Dubai, Spain, the Philippines and so on. I’m sure none of them have any intention of dying in these countries though, because all of them, when I’ve asked, are imagining retirement to a serene Scottish shore, or a rose covered English cottage with the village pub a stone’s throw away. Where, of course, everybody knows your name. Which begs the question of why they left in the first place, but we all know the answer to that, don’t we? Unless they’re running away from something, it’s usually money, or an improved life they think money can buy, that they’re running toward. Fair enough, I say, I’ve been tempted to do the same myself over the years – but I’ve never imagined anything but my own retirement here in Britain.

It strikes me that the young know and appreciate the value of friendships and community every bit as much as the old. I don’t think you ever forge as strong bonds with anyone as you did when you were young. If you’re lucky, and work at it, you’ll keep those friendships with you for a lifetime and you’ll always feel your heart warm a little bit when you walk the streets of your old home town.

So, given that the young and old seem to have a surer sense of what’s important to them, it’s a bit sad that the election focuses so much on the monetary side of life – tuition fees, tax bombs, the cost of social care, whether or not you’ll receive a free bus pass. Yes, those things are important, but when they exclude everything else then we all end up poorer because of it.