Pensions….how much is enough?

So here’s the deal….

I’m 57. Gill’s 52. We’re on a break. No, not on a Ross & Rachel Friends break. A work break. Early retirement. A hiatus. A mature gap year.

And that’s the thing…we’re not really sure ourselves yet how long this intermission might last.

How come?

Pensions. How the *&^% do we know if we’ve got enough to get us through however long we need to get through, in the lifestyle and financial comfort that we’d like to get through it in?

We’ve been lucky – and sensible – enough to stash away some savings in a tax-efficient SIPP for the last 15 years, alongside paying off the mortgage. Largely thanks to what I earned and learned working for The Motley Fool and, Gill’s hard work building up South Minster Kitchens, and using Hargreaves Lansdown’s excellent guidance and online platform to manage our pension savings. And not having children made a huge financial difference. And being teetotal and never going out, obviously.

Until fairly recently, your pension choices were limited, but clearer. Work until 65 for men, 60 for women. Start collecting your state pension from the Post Office every week (along with those really nice mint humbugs), and additionally – if you were lucky – get a monthly, fixed pension from where you worked for 40 years. And oh yes, it probably increased every year automatically, in line with inflation. And that occupational pension scheme income would probably have been a function of your final salary before retirement, rather than a measure of  how much your actual contributions ( personal and employer) had grown to. Not that I’m bitter, or anything.

Ah, how simple things were. Like having only 3 or 4 TV channels to choose from. Or deciding whether to go for a bottle of Liebfraumilch, or that exciting new slightly fizzy Lambrusco wine.

The recent changes to pensions have added flexibility and complexity to that simple – but outdated – view of pensions in retirement. And the further changes proposed by the current government to take effect in April 2015 will provide even more flexibility.

But here’s the quandary Gill and I have to wrestle with now…

  • we’ve got a defined contribution (aka money purchase) pension pot
  • we just missed out on the defined benefit (aka final salary) pension scheme era, giving a decent fixed inflation-linked income for life and certainty over your financial future in retirement
  • I won’t start collecting my state pension until 2023, when I’m 66. Gill will have to wait even longer, until 2029, when she’s 67.  And there’s every chance the dates will be pushed back even further before we get there. If we get there…
  • I’m over 55 so I can take 25% out of my own pension pot now, free of tax. Very nice, but without a current income for either of us that one-off lump sum will have to put food on the table, pay the council tax, and finance any of the fun stuff that we’d like to do while we decide what to do with the rest of our ageing lives
  • we could take an annuity from our current private pension pots. But because of  the prevailing global financial position and interest rate environment, annuity rates have been running at, or near, historic lows
  • for £100,000 saved in a defined contribution pension pot, I’d get roughly £400 a month or £4,800 a year, if I were to swap the remainder of my pension pot for an annuity now – ie an annual return of 4.8%, before tax. And that’s NOT inflation proofed and Gill would get NOTHING after I’ve popped my slightly older clogs
  • it gets worse. I’d only get an annuity income of around £200 a month or £2,400 a year now for £100,000 of pension savings – ie 2.4% return before tax, if I want to protect against the risk of inflation eroding my income and ensure Gill gets 50% of that meagre annuity income once I’ve snuffed it
  • so simplistically that would mean I would have to stick around a long time to make sure I got my money back from the annuity provider to whom I “sold” the pension pot

The only advantage of an annuity that I can see at these levels of return is certainty. You’ll know exactly what your income is for as long as you stay above ground.

Fortunately there is now an alternative. It’s called income drawdown. How does it work?

  • you leave your defined contribution/money purchase pension funds invested, without buying a fixed income annuity
  • you can take out a flexible income, based on what you need and subject at the moment to certain statutory limits (to make sure you don’t spend it all too quickly on fripperies and throw yourself on the mercy of the state too soon…but these restrictions could be lifted next April, and you would then be able to spend the lot on fripperies  and throw yourself on the mercy of the state)
  • the main risk of going into income drawdown is that your pension pot remains invested, so it is subject to market fluctuations – depending how you decide to leave it invested – and your income is not guaranteed

The other great unknown for an income drawdown pension is life expectancy. How long have you got left? The current risk adjusted life expectancy for me is 84, so let’s say another 27 years…..possibly more if I stay really fit and cut out that regular Friday night curry. And let’s say Gill lives to 86, that’s another 34 years for her…maybe closer to 40 if she’s anything like her Nan.

Can we really eke out our current pension pots for that long?

Despite the risks, I think I still find the income drawdown route more attractive than taking out an annuity. It puts quite a burden on you to make the right investment decisions, and not spend beyond your pensioned means, but at least it’s flexible and largely in your control. It is your hard-earned money, after all, and the current government’s attempts to recognise that are to be applauded.

I’ve highlighted some of the decision-making quandaries above, but I’ve still only really scratched the surface of things to think about in making such an important decision.

Why not take a mixture of guaranteed annuity and flexible drawdown income? What are all the other tax considerations, based on current legislation and also after the proposed changes due in April 2015? And what happens to our remaining pension pots, once we’ve both shuffled off our mortal coils, in any of these very different scenarios?

And there’s much, much more to ponder…but the greatest unknown remains the question of life expectancy. How galling would it be for us both to kick the bucket in 5 years time – tragically both crashing on the rocks during a cliff diving competition in Mexico – having taken out an annuity, so that the insurance company enjoys the fruits of our long labours more than we have?

Or if we go the income drawdown route and, thanks to healthy Madonna-like macrobiotic diets and staying fitter than a bunch of butchers’ dogs, both get telegrams from King William….but have run out of pension pot dosh at some time in our energetic 90s?

And there’s the rub. There are just too many variables to be able to make an absolutely correct decision NOW. Unless of course, you know that you’re definitely going to fall off your perch at 9 o’clock on Saturday night, just after Strictly, on 24th October 2026. Then you can really plan ahead, and cut your pension cloth accordingly.

I’ll write again on this mystical subject of pensions and let you know which options we follow, but for now I hope this article has at least highlighted some of the considerations we – and others – face approaching those allegedly golden years of retirement….

“You can always alter and adapt your plan….provided you have one.”
Manoj Arora, From the Rat Race to Financial Freedom

Book review – Charlotte Street by Danny Wallace

I’ve just finished one of those books where you’ve become so engaged – emotionally invested as the psycho-babblers might say – that you’re in a quandary over how to read the last 100 pages.

You’ve come to love the characters so much that you’ve finagled yourself into the narrative too. Well, they won’t notice, will they….?

You want to luxuriate in that booky pleasure and become one of their inner circle of off-the-wall friends….but at the same time you really want to know how the quirky plot will get resolved.

Welcome to the fun and immersive world of Charlotte Street, Danny Wallace’s first novel, published in 2012.

It’s all about a man who one night helps a girl. Just for a second. And there’s a moment between them. But then it’s over. She disappears. But in his hands, he realises he’s still got something of hers…

Her disposable camera. So what should he do? Develop the film? Or forget about her? He develops the film. Of course he does. And he looks at her photos. And that’s when he spots something very unusual indeed…

That’s the official synopsis, lifted from Danny’s website. But it’s really more about the characters than the plot. Well, the plot is clever and funny….but as you turn the 400 pages you live and enjoy, sometimes suffer, the characters’ lives with them long before the clever, funny plot resolves itself.

The narrator and central character is Jason Priestley. No, not the Beverley Hills 90210 Jason Priestley, as Danny’s Jason frequently has to explain.

He’s been a knob. He has a shot at redemption, but blows it. Several times. He gives up hope. He redeems himself just in time. He regains hope.

But wow, the story is weaved brilliantly around that over simplified summary of Jason’s character using some original plot development techniques and a motley crew of friends and passing acquaintances.

I get the feeling Danny is clever and funny. One of his writing techniques is clever and funny repetition…like always mentioning that Jason lives with his best mate Dev on the Caledonian Road, above a videogame shop between a Polish newsagents and that place that everyone thought was a brothel, but wasn’t.

But it’s a heartwarming, emotional, witty, sad, insightful novel that I know you’ll enjoy too.

And yes, it’s also very clever and very funny.

Craster, Northumberland…..a new favourite place

Close your eyes and think of your favourite place….

Sitting on a bench in the Jardins des Tuileries in Paris spring sunshine, dozing under the welcome shade of a plane tree after a long, liquid lunch and too many moules? Strolling along a deserted Connemara beach, weak winter sun inevitably losing the battle against the wicked westerly wind? Your local café,  a haven of strong coffee,  comforting cakes and friendly faces?

We’ve just returned from a week in Northumberland and I can definitely add Craster to my own list.

Tucked away on the coastal Area of Outstanding National Beauty, between Amble in the south and Bamburgh in the north, it’s a tiny harbourside community punching way above its fragile weight.

Arriving as we did, past the beguiling hilltop remains of 14th century Dunstanburgh Castle and a long stretch of dramatic wave-pounded and gull-strewn shoreline, seemed to accentuate its remote attractiveness. As if you’ve finally managed to get a first date with the aloof girl who everyone at school fancies.

The harbour pulls focus, a combination of Local Hero and French Lieutenant’s Woman and photogenic enough to have its own starring roles in film and TV productions.

This is the source of the royally famous Craster kippers, thanks to generations of hardy fishermen who brave the ocean swell constantly waving a defiant fist at the harbour entrance.

Explore the village and you’ll stumble across L. Robson & Sons, smoking the fishermens’ kippery catches since 1906; the seafood restaurant attached to the smokehouse and offering a gull’s eye view of the harbour and, beyond, to Dunstanburgh castle; the cosy Shoreline Café, dispensing landlubbery food, coffee and cakes; The Mick Oxley Gallery, for artwork inspired by the constantly changing coastal landscape, the artist reflecting the moods, light and textures of this unique Northumbrian location.

And then drop into The Jolly Fisherman pub as we did, to cement Craster as one of our own special destinations. You know those rare days when everything just seems to fall into place, when you glow with smug satisfaction that maybe, just maybe, life isn’t so bad after all? Eating their famous fresh crab sandwiches and kipper paté with toasted sourdough bread, washed down with neighbourly Yorkshire Masham Black Sheep ale, and overlooking the simultaneously angry and friendly swelling sea was definitely one of those days.

We will return to Craster, and hopefully stay in one of its weathered cottages so that we can uncover more secrets of this idyllic community and its thrilling coastline in even more leisurely fashion.

J01_0312 Craster harbour.JPG

Bella Italia

Grazie, Alex Polizzi.

I stumbled across the final episode of her Secret Italy series on TV last week. This piece was on Puglia in the south, the heel of Italy’s endlessly fascinating boot.

The concept of the series is Alex reconnecting with her own roots, as part of the venerable Forte family.

Her first language was Italian, but she has been brought up largely in the UK. My own connection with that bellissimo country is more tenuous, but she helped to remind me of the places I’ve already been lucky enough to enjoy visiting, and those still on the list for my retirement years. And also kick me into a more structured approach to learning the beautifully demonstrative Italian language, as animated as a Roman rush hour.

My father used to work in the travel industry, and I could only have been 5 or 6 when he secured tickets for a posh cruise around the Mediterranean. We enjoyed a few days stopover in Rome, in an August heatwave, and brief trips to Pompeii and Capri. I was too young to appreciate the history, beauty and passion of this romantic country, but the seeds had been sown in my youthful soul.

Fast forward many years and the love affair was ignited when Gill and I spent a week walking in the majestic Dolomite mountains. Part Italian, part German and part Ladino, this area is an intoxicating miscela of cultures, language and food. The following week touring round Tuscany was almost an anti-climax, although it sounds folle to dismiss the living museums of Florence, Pisa and Siena so heartlessly.

We found the quieter Lucca more rewarding, sipping chilled glasses of Prosecco in the Piazza dell’Anfiteatro as dusk brought to life the locals in the multi-tiered ancient properties encircling the elliptical plaza, like the opening scene in an epic production at the Globe.

Trips to the beguiling islands of Sicily and, more recently, to Sardinia – both with their own distinct history and culture – continued the affair. And back on the mainland, another epic twin-centred Italian vacanza cemented the relationship for ever: a few days in Rome, my first time back there since the 1960s and now in a more bearable temperature; and a week in the Majella mountains and national park in Abruzzo, an unspoiled eastern province with hilltop villages unchanged for centuries and seaside resorts, with the clear Adriatic lapping at its broad, sandy beaches.

A couple of skiing holidays, in the tax-free Livigno domain and the vast Sella Ronda area back in the Dolomites, didn’t provide another full-on Italian affair. But it’s still rewarding to find a tiny piste-side trattoria serving a secret recipe home-made pasta special for lunch, or gargle with a throat-stripping grappa before bedtime….and know that the country’s traditions will endure for longer than I’ll be around to enjoy them.

So where’s next? The rugged Ligurian coastline; Le Marche, Abruzzo’s quieter northern neighbour; the tourist mecca of the Italian Lakes; stay in an Apulian trullo; and visit biblical Matera, in Basilicata, thanks to Alex Polizzi’s own love affair with this ancient community etched into its rocky surroundings, and saved in the 1980s from its poverty-stricken ghost-town status.

And I’d like to immerse myself somewhere in this bellissimo country to learn their language properly. To engage fully with Italians on the merits of this year’s Montepulciano vintage, or who will win the Scudettonow there’s a worthy ambition for retirement.

Bravo bella Italia…e grazie Alex Polizzi.

Oslo – Norway’s cultured capital

The naked baby’s eyes are scrunched in frustration, small fists clenched tightly into knuckled balls, one bare foot raised in readiness for an impetuous stamp.


Welcome to the surreal world of Vigeland’s Sculpture Park in Oslo.

Sinnataggen – The Angry Boy – is one of the most iconic of 212 bronze and granite life-size pieces created by Norway’s revered sculptor, Gustav Vigeland, and permanently on display at Frogner Park on the fringes of the city.

The government reached a deal with the artist in the 1920s to allocate over 80 acres of land to house his work. Today locals and visitors can enjoy the fruits of 40 years of Gustav’s labour, whimsical imagination melded with artistic brilliance.

As well as distraught infants you’ll discover adolescent girls, fornicating couples, pregnant women and stooping old couples. For one of Vigeland’s major themes is the Circle Of Life, brought thrillingly to life by these tactile statues reaching up into the park’s wide Norwegian skies.

Move through the park’s four distinct zones to experience Gustav’s full gamut of emotional intent. Stop at the imposing installation of a giant, muscular man juggling three babies on his bulging forearms and drop-kicking another with his right foot. Interpret it as you will.

The natural conclusion to the sculpted journey is also the highest point in the park. Monolitten – The Monolith – comprises 121 intertwined human figures rising 46 feet and carved from a single piece of granite. It represents man’s desire to become closer to the spiritual world, human forms embracing each other as if being carried towards salvation. Apparently.

Oslo was the final point on our whistle-stop tour of Norway, courtesy of Great Railway Journeys.

We’d enjoyed the Hanseatic history and fishy heaven of Bergen on the west coast, and the calm oasis of Flåm – appropriately meaning little place between steep mountains  – nestled deep in a tributary of Sognefjord, the world’s longest and deepest fjord.

But Oslo had taken us by surprise, a vibrant and cultural terminus for our trip where you can stumble on museums, art and sculpture at every turn.

Once you’ve overdosed on Vigeland’s scary imagination, follow in the footsteps – literally – of Norway’s greatest writer, the enigmatic Henrik Ibsen.

Ironically his creative output was largely generated during 27 years of self-imposed exile in southern Europe. Here he felt released from the claustrophobic strait-jacket of Norwegian life that he so subtly dramatised in emotional, literary soap operas like The Doll’s House and Hedda Gabler.

Ibsen retired to Oslo in 1895 and walked every day from his home at Arbins gate 1 to the nearby Grand Cafe on Karl Johan Street. Today the route is mapped out on the pavements, etched with some of his dramatic words leading the way.

A bronze statue of him watches over the National Theatre building, opened in 1899 and now a living laboratory for endless reinterpretations and deconstructions of his greatest work. And his old apartment building has been turned into an engrossing museum, giving an insight into his life and angst-ridden characters.

Sure, Norway is a land of natural wonders….but if you end up in Oslo prepare to be equally awed by the cultural output of the country’s very human treasures.

Malaysian memories

Malaysian Memories

My 74 year-old father sprinted barefoot across the hot sand before being hoisted high into the hazy Malaysian sky.

As the speedboat made a languid turn back towards the Batu Ferringhi beaches of northern Penang, he could see south and east – beyond the island – to the mainland coast.

He had completed his National Service here, at RAF Butterworth, 55 years ago and I had brought him back, in search of some of those indelible memories.

We visited his old camp, now a base for the Australian Air Force. Security was understandably tight, and our pleas for the veteran radar operator to explore fell on deaf Aussie ears.

We could access the beach where the flimsy wooden barracks – bashas –  had been erected amongst whispering palm trees, and where young local dhobi wallahs Trixie and Girlie washed the shy young man’s kit. But the huts were long gone. A pervasive sense of decay now inhabited this area, where the south-east London teenager had quickly grown up.

Dad and best mate Rusty would hop onto the ferry for frequent R&R visits to Penang. More than 50 years later, we based ourselves on the island for the nostalgic return. No bashas now though. We stayed at the exquisitely restored late 19th century Cheong Fatt Tze mansion on Lebuh Leith, a refined street on the outskirts of its gritty capital,  Georgetown. The contrast could not have been more stark.

Penang constantly evokes the history of colourful Malaysia. On every Georgetown corner there are reminders of its multi-layered colonial past. Decaying Chinese architecture and ramshackle market stalls; the entrancing smells of chilli-laden Indian curries and more aromatic local laksa; Sir Francis Light’s statue and the cannon pointing towards the mainland a constant nudge of British influence.

We revisited some of the places Dad recalled, but they had faded along with some of the memories. Instead we derived simple pleasure from eating humble street food, sipping the same Tiger beers that Dad and Rusty had shared, exploring the intoxicating markets and concluding that the past is probably best left undisturbed.

Danger – Italian

1975. I was an immature 17 year-old grammar school boy on a German exchange trip to Koblenz.

Abba’s SOS invaded my hangover, as did Detlef’s older. wiser and smug brother. He’d predicted I would get horribly drunk exploring the local Rhein & Moselle vineyards. He was right.

Thanks to youthful mental absorption and maverick teacher Mr Clapham, I found German surprisingly easy to learn. Its structure and logic made sense. Mr Clapham’s recipe – repetition with a dash of fear and a large pinch of inspiration – was a perfect mixture.

My teenage adventure continued after saying Auf Wiedersehen to Detlef, his gloating brother and Abba. I jumped on a fast train heading south, hoping it would pass through Avignon where I would meet up with my family for a holiday on the French Riviera. C’est la vie, eh?

The Italian phrase È pericoloso sporgersi plastered all over the train has stuck indelibly in my mind all these years, much more than its German or French equivalents.

Ne pas se pencher au dehors.

Nicht hinauslehnen.

It is dangerous to lean out.

Somehow the intoxicating Italian words flow more romantically, the syllables merging together like two lovers in a Napolitan doorway.

Fast forward and it’s sadly clear my sponge-like language ability has withered on the ageing vine. I’m trying to learn Italian but it’s not easy. Too many distractions. Not enough motivation. No Mr Clapham.

Perhaps I need to go on an Italian exchange trip, drink loads of Chianti and listen to some Europop?


Coffee culture

Until fairly recently a coffee experience meant either a cup of bland Nescafé instant at home or, if lucky enough to be eating out at a posh restaurant, an equally innocuous outpouring from a toughened glass percolating machine.

Vive la révolution.

Fast forward 30 years and England has become a nation of coffee-drinking afficionados, seeking out a sophisticated Guatemalan & Brazilian blend for the early morning espresso hit rather than reaching for the Kenco. And tea is becoming as passé as Berni Inns and Liebfraumilch.

We are falling out of love with the cuppa after a dramatic fall in sales of tea bags.  In 2013 volume sales of tea were down by more than 6 per cent in the previous 12 months, almost double a 3 per cent fall in the previous year.

Experts say it appears Britons are ditching the traditional cuppa for the more fashionable cappuccino, given staggering sales growth at high street chains such as Costa Coffee and the success of coffee makers such as Nespresso.

My own conversion has continued apace over the last couple of years, and I made it a personal mission to try out as many as possible of the new independent artisan coffee shops springing up all over London, on my way into work each morning.

I became a regular at places like Carter Lane Coffee House (molto Italiano vibe), Fix on Whitecross Street (good coffee, but service a bit too cool for school),  and Timberyard on Old Street (good coffee, great service, free use of iPads).

This new breed of coffee shop provides much, much more than just a caffeine fix, and a far richer experience than the uniformity of corporate Costas, Neros & Starbucks.

Now I’ve given up work, I’m grateful that friend & neighbour Simon Ware shares my addiction. He’s recently acquired a gleaming new Italian espresso machine of his own and introduced me today to his local Surrey dealers, sorry…. suppliers – Redber roasters, based in Merrow on the outskirts of Guildford.

South African Graham Jones and Slovakian Petra Suchova have an obvious passion for real coffee, sourced from around the globe:  We have two main missions, firstly it is to convert the nation from instant coffee to enjoying fresh roasted coffee. Secondly there are so many different and wonderful origin and estate coffees out there to enjoy. We want it to be like walking into a sweet shop or a wine shop or a cheese shop. You are spoilt for choice. All these different coffees have different tastes, some you will like, some you might not and that’s fine. The point is to learn about them and try them. You decide which ones you like the most and then enjoy!

Graham JonesPetronela Suchova

I walked out with 125g of a Papua New Guinean Kenta, a medium-dark roast with musky and complex aromas matched by the rustic earthy flavoured tones.

I’ll let you know what I think. But I reckon it’s safe to assume it will taste a whole lot better than the one served up by the Berni Inn in 1981, just after the black forest gateau…..

Pride – movie review

Saw Pride on a soggy Wednesday evening in Guildford. Went in feeling autumnal, came out feeling positively spring-heeled.

Reviews have likened it to Made in Dagenham, The Full Monty or Billy Elliot, feel-good movies which dramatise historical events or periods, and sugar-coat them with audience-pleasing tweaks.

Pride tells the story of a group of anarchic lesbians & gays in London in the 1980s who end up supporting the miners’ strike and befriending a battle-hardened Welsh community. A classic tale of overcoming prejudice and surviving adversity.  Eventually.

A great cast, capturing the social history of the era well, and with an excellent soundtrack….go and see it if you haven’t already. And prepare to laugh and cry in equal measure.

Book review – The Rosie Project

I’m currently in the middle of reading The Rosie Project by Graeme Simsion.

The narrator and main character, Don Tillman, is a brilliant 39 year-old genetics professor looking to settle down. But he’s never had a second date with a woman.

He’s on the Aspergic side of logical, and can’t help committing social gaffes. A serial gaffer. Unwittingly blunt. Socially inept.

With the help of his philandering colleague Gene, Don uses his considerable intellect and persuasive logic to devise The Wife Project, a scientific approach to finding his perfect mate. The resulting questionnaire is sent out to qualifying candidates, leading to some entertaining, and inevitably unsuccessful, dates.

Gene throws a wildcard, Rosie, into the Project and despite clearly being the world’s most incompatible woman for our logical professor, he’s soon using his genetic knowledge to help identify Rosie’s biological father in a picaresque journey and subliminal desire to stay in contact with this most inappropriate female of the species.

I’m about halfway through and I’m enjoying the direction of travel…..emotions are not rational, love is illogical, science is not a good method of selecting a wife. I suspect and hope Don and Rosie find love because of, rather than despite, their obvious incompatibility.

So when does logic outweigh emotion? Should you ever make decisions for the right reason, rather than out of instinct or gut feeling?

Of course you should. Just not where love is involved.

My brother introduced me to Gill when they were working together back in 1996. Logically (that word again) we probably didn’t have much in common, but there was some sort of chemistry and we married within a year of meeting.

Gill is incredibly practical. I’m not. As I write this, Gill is creating an arbour as part of her redesign of the garden.  She will do most DIY in the house. I’ll read, or learn Italian or plan our next trip while Gill is making curtains, playing the guitar or baking cakes. Gill’s family background is very different to mine. I’m tidy, but – how best to put this – that’s not Gill’s strong suit.

If I had sent Don’s Wife Project questionnaire to Gill, we would probably never have had that drink at The Old Emporium in Fleet. Fortunately we did and, amongst the outward incompatibility, we’ve happily found loads of areas of common interest over the years……travelling, walking, skiing, theatre, dance, cinema, cake eating. And plenty more.

And love.

I really hope Don and Rosie reach the same conclusion.

Not dead yet! Make the most of your post-work years