December 2014 Update

December's update is here.

The running total for my savings and investments for the year  is over £19,000 which feels like something of an achievement. :-) (Although some of this is down to the fact that I now know exactly what we've got whereas previously the figures were quite hazy). Let's hope 2015 goes just as well.

Next year I intend to try to spilt out my pensions from my ISA and record them separately. They have very different purposes and time scales, so I'm coming to realise that it isn't helpful to combine them for asset allocation purposes.

All in all I'm very pleased with how things have gone since March when I first started to actively manage my savings and investments with the goal of joining my husband as soon as possible after he retires in 2015. I have no intention of struggling out to work for another 11 years until my pension becomes payable at 66. Those years are precious and my job is not as satisfying as it once was.

It has been a steep (but enjoyable) learning curve. Our ISAs are finally sitting with a low cost broker where they can be managed easily online, I am now paying into a SIPP to help fund the years before I can access my LGPS pension, we have started to manage our rental property ourselves for a fraction of the cost and well defined targets have been set and a clear asset allocation devised. It has been a very productive year.

I started this blog to record my progress towards early retirement and entertain myself along the way. What I didn't expect was the extra bonus of the support, sympathy and good advice from fellow bloggers and readers along the way. Much appreciated. :-)

I would just like to take this opportunity to say thank you to everyone out there and wish you a very, very Happy New Year.

Christmas Rights, Wrongs and Wishes

What I got right this Christmas:

• Took care not to spend more than would be appreciated on things that would not be appreciated - for example I still bought the traditional selection boxes for my (grown-up) sons but went with Cadbury's instead of my usual Hotel Chocolat. I know (and appreciate) the difference but they don't seem to, or if they do, they don't seem to care.

• Enjoyed the maturing of my 6% M&S Regular Saver just in time for present buying. I need to use a fair chunk of it to pay off the balance on my interest free credit card but there is almost £700 left over. I don't suppose M&S knew they were running my Christmas Club for me. I won't be setting up another for next year as the credit card is almost through its interest free period so I'll be paying it off in full each month rather than saving the money and taking the interest, but it turned out very handy this year both for the interest (around £94 ) and the extra savings I gathered painlessly along the way.

• Made a present pledge with my husband to spend no more than £50 and kept it. Time will tell if he did too, but there are only two small parcels under the tree so I'm hopeful. Last year we spent far too much on things that have only been used a few times (an expensive food mixer and electronic cheese grater I bought spring to mind).

What I got wrong this Christmas:

• Messed up my Secret Santa gift buying for work as I had a crisis of conscience and decided I really couldn't give the first item I bought and so ended up buying another. I'm very annoyed with myself about this. I can't even re-use the first one as there is absolutely no-one I can give it to.

• Got clobbered (again) by Christmas clobber. This happens every year, the "seduced by the sparkly Christmas party dress" syndrome. I always intend to wear something I already have and add some new accessories etc but I get into the shops and all my good intentions go to pot. I bought an expensive, sparkly outfit that I will probably get to wear once more and which will then find its way to the back of the wardrobe with all the rest of the glitter. But next year will be different ...

• Paid through the nose for my Ocado delivery. My delivery this week will cost £9.99!! And to add insult to injury it is all stuff that I could have ordered last week and made use of the free delivery that comes with my SmartPass. The list includes essentials so it can't be left till after the festivities - notably 6 bottles of Cava for the family Boxing Day get together (on offer so I clawed a bit back there).

Next year I hope to do better. The key, as usual, is planning. 

But for now I'm just going to enjoy the festivities, food, family and friends. I hope you do the same. 

A Very Happy Christmas to Everyone 

"Peace on Earth, Goodwill to Men" 

Should I Buy Commodities?

I currently have around £4,200 sitting as cash in my S&S ISA which I'm looking to re-allocate and now seems a pretty good time to do it. My portfolio doesn't hold any commodity shares directly, only via the exposure I have via my general equity funds, so this is an area I could potentially use for a little further diversification.

In addition some of the bloggers I read are currently buying commodities - or waiting for the funds so that they can do so, so this does seem to be where the sensible (and knowledgeable) money is going at this point in time. However I'm anything but knowledgeable regarding this kind of asset and I know I shouldn't be buying anything I don't understand. The main question I have being why are the stocks currently so cheap and what is likely to have an influence on their price in the future.

So I did a little research and  reading which was more than a little depressing about the current state of the global economy and the part played by the price of the raw materials needed to build growth, but which did suggest that buying now would quite likely be a good move. That's so long as growth does pick up next year and doesn't halt completely, in which case no-one would be needing the raw materials needed to build, or make anything. However the WTO is cautiously forecasting a rebound next year which gave me the confidence I needed to think about this further.

So what to buy? I was tempted by Billlton as the research done by other bloggers is very convincing (thanks especially to FI UK on Financial Independance UK and Huw on Financially Free by 40)  but I haven't yet taken the plunge and bought any shares in individual companies and I'm not sure that doing so is the way I want to go at the moment, so I decided to look for a more general access point. Following up a comment made by diy Investor UK on Huw's post (thanks again) I took a look at a couple of investment funds - Blackrock Commodities Income with a yield of  7.25%, trading at premium to NAV of 4.9, charges 1.08% and BlackRock World Mining which is trading at a discount to nav of -7.55% with a yield of 7.20% and charges of 1.42% (and which incidentally has almost 10% invested in Billiton).

What about the passive choice of a tracker/ETF? I did find a Global DB-X tracker  available at 0.45% charges inside my ISA on Interactive Investor which might do the job - far less volatility than the Investment Trusts and with lower charges but 0% dividend yield and it hasn't done at all well when compared to the sector over the last 3 years. I'm afraid I wasn't tempted.

My decision - I'm going to take a risk and go with the Blackrock Mining Investment Trust. My reasoning being that it is trading at a good discount, the fund managers have been around for a long time and so have a lot of experience in the area and, although it has had a bad year, according to MoneyObserver and  some other sources, this blip is due to a particular set of circumstances and is not likely to be terminal. The high charges are a bit of a downer, but I have also read that they may be reduced in an attempt to lure investors back in and the yield at 7.20% does a fair bit to offset them.

Decision made. I've just bought £1,500. Let's see how things go.

Knowing When to Sell

This week I flexed my developing investing muscles in a new direction. I forced myself to sell something that was doing very well and it was much harder than I expected.

My reasoning process was sound (I think), the fund (Axa Framlington Biotech) has risen over 20% in the 8 weeks I have held it and I can't see it continuing to rise steeply for much longer (it actually dropped 1.66% the day after I sold). Even if it does continue to gain I had definitely started to feel that it was time to take some profit so I sold £500 worth, which was about the amount my investment had gained since I bought it. However, my emotions played havoc with my common sense in a "But what if you sell and it goes up more - you'll be sorry then won't you?" kind of way which was unforeseen and I didn't like. It smacked too much of unreasoning greed. I steadfastly refused to listen to my inner "kid in a sweetie shop" and pressed "Sell". For this reason I will consider this a successful sale even if the finances don't turn out to maximum advantage, because I've now proved to myself that I am very aware of the part emotions play in investing and I am capable of overriding them. I felt the greed and did it anyway.

The downturn in October actually caused me far less angst, maybe because hanging on when things are dropping is far easier than deciding when to sell when things are going up. Inactivity is always easier than action (or so I find anyway). Selling something that has been more or less standing still (as my CIS UK Growth fund has been doing for the last year or so) was also easy to do. But giving up something that is rising steeply (surely the time to do just that?) was a different matter altogether. I almost (but not quite :-)) hope I don't have to do it too often.

In all the reading I have done as a novice investor, the subject of when to sell is one on which I haven't actually found a great deal of help. But we all have to do it don't we? No matter how good we are at the long-term "buy and hold" strategy at some point we are all going to need to take the money out. Steep growth (i.e .growth at a high rate over a short period of time) will surely be mirrored by steep falls. If this averages out to excellent long term growth does this mean that the best strategy is still always buy and hold, even though it must also depend on when you want to realise the profit? What is the best way to manage very volatile funds/markets?

This is something of a testing time for me as I am pretty new to investing and I had been congratulating myself that I had weathered the (admittedly somewhat modest) downturns in my riskier funds without feeling too much pain. However I wasn't prepared for this side of the volatility coin. I've only been watching and actively managing my investments since March and haven't seen anything much in the way of gains so the way this particular fund has behaved has taken me by surprise.  I've realised that I didn't (and still don't) have a strategy for dealing with this situation.

My sale this week was actually more a test of resolve over emotion than a move dictated by financial planning and although I still believe I did the right thing, I would like to be more sure and have the reasoning to back it up. As ever I'm probably searching for a non-existent perfect recipe, but any tips, or links to reading on this, would be very welcome.

Setting Targets for the Final Push

November 2015 will see my husband draw his last ever wage before retirement. So the next 12 months are the last opportunity for me to save and invest substantial amounts of money.

From next Dec until the day I retire we will only have about £350 to invest per month - that is around 25% of what we are currently putting away. I intend to continue to pay £50 in to my LGPS AVC (this can't be taken until I take my my pension which I intend to do at 63 but it can all be taken as part of the tax free lump sum so I think it's worth it) and also continue paying £45 into my CIS FSAVC until such time as I transfer it into my SIPP (not sure when this will be yet). The rest will go into my SIPP.

By the time we both have our defined benefit and state pensions in payment, along with our rental income, we will be up to around £37,000 which is more than enough to maintain our current standard of living. So it is only the years between when I retire and when I get my LGPS pension at 63 that I need to worry about. I have estimated that the minimum income I require each year to take the household total up to the £28,500 we need (with £32,000 being a more comfortable target) is £12,500 until 2018 when my husband draws state pension and £6,800 from then till I draw my LGPS. The sooner I have enough to cover this, the sooner I can retire. But, of course, the sooner I retire, the more I need to cover.

The equation's quite tricky but after some deliberation I've come up with the following conclusions/key facts:

• The earliest date I can hope to stop working is March 2016. This may happen if the offer of voluntary redundancy/early retirement materialises next year.

• I could only really take this up if my redundancy pay would be around £20,000 (as expected) and/or my pension would become payable immediately as part of the deal.

• Without the help of redundancy payments I would need around £80,000 saved in my personal pensions to leave at this date. The bottom line is that we do already have this in our combined funds, but our overall plan includes leaving our S&S ISA capital alone in case we need it for care fees etc so I'm avoiding bringing that and our £20,000 cash emergency fund into the equation. (Although I am allowing myself to figure 3% dividends from the ISA as being available to top up our income).

• Currently my personal pension stands at £24,600 and I am paying a total of £845 per month into it (made up to £1,057 by HMRC). By March 2016 this can only be expected to have grown to about £40,000 which won't be enough no matter how I cook the books.

• By March 2017 (the date at which I would realistically like to retire) my personal pension should have increased to around £45,000 (given the reduction in contributions in a year's time). At this point I will need £67,500. So I am short by £22,500 before I figure in ISA dividends. Taking those into account at around £2,000 per year, I am still £10,500 short. (I need £55,500 in total).

• If I reduce my ISA payment from £300 to £100 per month I could increase my monthly payment into my personal pension for the next 12 months to £1,045 (£1,300 after tax credit). In addition to the reduced contributions (£250/£300 per month) for the remaining 16 months to March 2017 I should have £48,000 which still leaves me £7,500 short.

• I need to reduce spending enough to be able to up my pension payments to around £1400 per month for the next 12 months or I need to be prepared to reduce our emergency fund to £10,000, or a combination of both to cover the shortfall.

These facts give me the following targets for the next 12 months

1. Save at least £1045 per month in my SIPP/FSAVC 
2. Save £100 per month in my ISA
3. Look at spending very carefully - try to cut back by at least £100 per month to allocate for boosting pension even further.
4. Cross fingers and hope the markets don't dive :-) 

The final push is on.

November 2014 Update

November update here.

It was good to see the bounce back this month as all that red was looking a little depressing.

I have been practising a little market timing, hanging on and waiting to sell another £10,000 of my CIS UK Growth fund until it came back up to the price that it has been hovering around for most of the year. This fund has beaten the UK All Share index over the last 3 years so it does feel a little strange to be cutting down on it, but my portfolio is so unbalanced and having so much in one UK based fund is not such a good idea so I went ahead with my plan and sold when the price was right.

I must admit that I struggled with what to spend the money on. I read up on where those in the know (is there such a thing?) think the value is and the consensus seems to be that Europe, Japan, emerging markets (and to some extent the UK) are not over expensive so I split the money between my trackers and Investment Trusts in those areas. (ermine has just put up a great post on this subject which confirmed what I had gone with which cheered me up). I also put another £1000 into my Global Clean Energy tracker.

However, I didn't manage to re-distribute all the money and still have £3,000 sitting there in cash which I need to do something with. I've missed the 23rd of the month which is Interactive Investor's day for regular payments when trades only cost £1.50 and I only have £12 commission credit left, so I'm loath to pay £10 per trade and spread it around. This means I either have to put it all in one place or leave it till next month when inspiration might have hit about what to buy.

I've still got very cold feet about a US tracker which is what my masterplan says I should be buying but maybe I really did ought to bite the bullet on this - see below for current asset allocation which still looks very unbalanced in favour of the UK despite the fact that I've halved my UK Growth fund and been buying elsewhere. Must try harder :-)

Asset Classes	Total(%)
UK Equities	34.3
Money Market	18.8
UK Corporate Fixed Interest	7
US Equities	4.9
Property Shares	3.6
Europe ex UK Equities	2.1
Japanese Equities	1.9
Commodity & Energy	1.9
German Equities	1
Other Holdings	24.5

What would the end (of profit) look like?

Scenario 1 - Climate Change. Ever since the IPPC climate change report last month I have been pondering on the much quoted tenet that we can trust in the markets to continue to provide growth, despite the occasional small or large setback, until the point at which we will have much more to worry about than the state of our investments. That is , until the political, economic and social fabric of the world breaks down and all hell is let loose. This "fact" is generally meant to be reassuring, in a "don't worry, it won't happen yet" kind of way. I tend to think this is an over optimist view of the situation. Things are getting pretty bad and nothing much is being done.

Scenario 2 - The Blight of Inequality. My thoughts on How Rich Are You on C4 this week were "thank goodness these facts and ideas have made it out into the public domain, shame it had to be done in such a simplistic way, but at least it's a start". The trouble is that solutions seem few and far between. On the surface the problem is not one that should worry those of us who are lucky enough to be able to take advantage of the shift from labour to capital, that is those of us with money in the system, but the real issue affects us all. That issue is social unrest and fragmentation, the failure of the state and the further breakdown of social justice. How would wealth feel in an increasingly "nasty" and unbalanced society. Not my idea of the good (profitable) life.

Scenario 3 - The "Interstellar" effect. I saw this much hyped film at the weekend and then read this review of it this morning which crystallised my unease about its slant as regards climate change but also its more general message. We are suffering from a similar type of political defeatism in the UK at the moment. There is very little strength of purpose, imagination or moral fibre in the messages being given by main stream politicians who seem to live in fear of saying the wrong thing rather than be shouting out the right things (I exclude the Greens from this). The fear of making choices because they may be unpopular is not what we need from politicians and, in the case of some issues, things are fast reaching (and may have passed) the tipping point.



Depressing mid-week thoughts I'm afraid, but we live in dangerous times.

Talking to the Taxman about Rental Income

Getting the tax sorted on our studio flat rental has always been a real pain. Don't get me wrong, I have no problem with paying what I owe, especially on rental income as it's not even earned, but I do object to the waste of time trying to find out what we need to do and when we need to do it. Especially as this seems to depend on the personal viewpoint of the officer on the other end of the phone, rather than a properly defined process.

Because our income from the flat is a fairly small amount and we split it between the two of us, we are below the threshold for needing to fill in a self assessment form (£10,000 net pre deductions and/or £2,500 net after allowable deductions). This is good news on one hand as we don't have to worry about the forms, but bad from another as sometimes (depending on the tax officer we happen to speak to that year) we end up having to do the work of supplying all the documentation anyway, along with an accompanying letter. This takes more time than filling in the form would have done and has been known to generate months of letters back and forth as they ask supplementary questions, eventually deciding we don't owe them anything anyway.

Up until this year that is. We paid the mortgage off last December and so no longer have the mortgage interest as an expense to offset against the tax. In tax year 2014/15 we are actually making a profit! Along with the fact that our letting agent expenses have shrunk enormously this year and we have gained control of the whole process, this means that I finally feel that the flat is a reliable asset in our income strategy. It is a very good feeling.

We phoned up the tax office this week and gave our estimates for how much profit we think we will make this year having offset the allowable expenses (letting fees, service charge, 10% wear and tear and the costs for the maintenance we've carried out). We were both lucky and got through to officers who were prepared to take the figures over the phone and simply adjust our PAYE codes so the job was done there and then.
Fingers crossed for next year.

October 2014 Update.

Portfolio update here.

 It's been a rollercoaster of a month that finished on a high - apparently due to action taken by the Bank of Japan to stimulate the economy. My portfolio certainly looks a lot better for it.

In other news I am feeling very pleased with myself for two reasons:

 1) Making such a success of ditching our letting agent and finding a new tenant with only 6 days lost revenue between rentals. I have OpenRent to thank for this and am driving everyone bonkers singing the praises of their service which I really can't believe only cost us £49. I'm still pinching myself.

 2) Fixing my broken Chromebook myself rather than taking the easy route and buying another. I took out the screen from the one with the scrambled OS which died last week and couldn't be revived and put it into the one with the cracked screen I dropped last year. The whole thing was as easy as pie (aided by an instructional video on YouTube) but, I'm ashamed to say, not the kind of thing I would usually attempt. A good lesson to learn. Along with "Be more careful with your ChromeBook" .

Letting Alone (with the help of OpenRent)

Our first DIY tenant moves in today and I'm amazed at how quickly we found someone and how easy it all was.

A little while ago I wrote about how much of our very modest rental income was seeping away into the coffers of the high street letting agent we were paying to do a (not very good job) of managing our rental. When our tenant recently gave notice to quit I took the opportunity to research online letting agents and learn about what was involved in using one. I was amazed at the difference in prices. (My previous post gives the figures.) As my husband is now semi-retired and I only work 4 days a week we have more time to spare so we decided to give it a go, do the work ourselves and terminated the contract with our existing agents.

It did feel a little scary at first as the letting arena is full of legal requirements and the whole process of finding a tenant, taking references and lodging a deposit was something we had previously left up to the agent but I can honestly say that OpenRent made it very easy.

Following registration the website guides you through every stage. The interface is very clean and uncluttered, and the language used is basic English without any unnecessary legal jargon. You can contact them via phone, chat and mail and the couple of times that we got in touch the responses were prompt and helpful. But for the most part we didn't need any individual help from them as the portal did all the hard work of telling us what was happening next and sending us automated mails and texts reporting on progress. Whoever designed the site did an excellent job, the workflow behind it is very efficient, seems to work effortlessly and is focused on keeping the customer informed at every stage. Very impressive.

Our advert (including pictures) was up on Zoopla and Gumtree within several hours and we started getting automated requests for viewings the next morning. This part of the process was a little tricky as we had so many requests so quickly that if it hadn't been for the portal we could have easily got things mixed up. OpenRent do not give out your contact details, so potential tenants make all their enquiries via the site, the enquiries are then recorded on the  "Your Lettings" bit of the site and also passed onto you via text and email. This means that you always have a clear record of who got in touch, the time and date they did so and their e-mail and phone number so that you can get back to them.

We had 10 viewing requests in 3 days but actually ended up accepting an offer from the first (and only) person who we showed round the flat. Once a tenant makes an offer and you accept it OpenRent suspend your advert and the process of referencing begins. You have the choice of "Quick" (24 hour, credit check plus CC ) or "Full" referencing (3 - 5 working days, includes employer and last landlord reference). We went for the full and sat back and waited whilst Openrent did all the work. Admittedly this did actually take 6 working days because the previous landlord needed chasing but once the references were in we were mailed a full report which included the advice to accept and a button to do so. (There is, of course, also the option to reject).

Three hours later the contract had been drawn up according to our instructions and agreed with the tenant, signed by both parties, the deposit lodged and our bank account details taken so that the first month's rent could be paid. The whole process knocked our previous experiences of waiting for phone calls from the letting agents and posting contracts back and forth into a cocked hat.

I know that a lot of the hard work of being a landlord comes after the tenant has been found and that managing our own property will not all be as simple and straightforward as finding our first tenant has been, but at least we now know that this part of it can be made a lot simpler (and cheaper) than it has been in the past. If anyone is thinking of giving it a go I would recommend OpenRent's RentNow service without hesitation.

The Spectre Returns to the Feast

A few months ago I mentioned that the possibility of redundancy was looming large and that I was making plans for how to keep on track if it did.

However, a few weeks after telling us what their 5 year savings plan meant in monetary terms and that job cuts were part of the plan, management released a further statement saying that there categorically would not be any further offers of voluntary redundancy and that they expected to make the necessary staff savings by natural wastage alone. The more cynical amongst us were very sceptical that this would turn out to be actually the case given the level of savings required, coupled with the fact the workforce that had already been heavily "wasted" (both naturally and unnaturally) by two previous rounds of cuts.

It turns out that we were right to be cynical because we have now been told that there are another 22 posts to be lost in 2015/16 out of a workforce of around 80. In other words another 25% cut. It seems that denying there were going to be any more job losses was just a ploy to force the hand of anyone who was hanging around waiting for VR in the hope that they would go before they needed to be paid to do so. Fair enough I suppose, but it has put the rest of us through a roller coaster ride - "Perhaps my job is OK, perhaps it isn't, yes it is, oh, wait I minute no it definitely isn't".

All this plays merry hell with my financial planning as I think I'm pretty much in management's sights for redundancy.

My task now is to work out the best way of fitting it into my plans rather than letting it ruin them.

On the plus side, I would get to finish work even earlier :-) I reckon sometime after April 2016 when I would be 57.

On the minus side - how can I fund this when we've just decided my husband will fully retire in Nov 2015? We will need to be able to to live on his DB work pension (State pension not due till Nov 2018), the rent from our studio flat, any dividends I can wring out of our ISAs, whatever finance comes my way as part of the redundancy and my personal pensions (SIPP and FSAVC).

I've been hard at work on the spreadsheets and I'm hopeful that even the worst case scenario will be doable. The worst case being where I come out with a redundancy payment alone (I'm due around £20,000) and unable to access my pension until I'm 63. (This is the earliest reasonable date I can take it without the actuarial reduction being too big of a hit to bear). I am heartened by the fact that all my colleagues who have been made redundant up to now have been given access to their pensions as part of the package and this would certainly be a great result from my point of view but I'm not banking on it.

What this all means is that I have to force feed my SIPP as hard as I can for the next year until my husband retires and hope that will be enough to do the job. I've stopped paying my AVCs (except for a token amount) as they're not payable until I take my main pension and I'm going to reduce the payments into our ISAs so that I can divert the cash into my pension. I've decided that if this turns out to be a wrong move and I end up with more in there than I can withdraw in a tax efficient way, then I'll be happy to take the hit as it will mean that I've got my £8,000 a year LGPS pension 6 years early and unreduced. In that situation I'd be happy to put some of my tax relief back into the public coffers.

(A little good news - I was meant to be on strike today but Unison have negotiated a better pay offer that is heavily weighted towards the lower paid - up to 8.5% for those on the very lowest pay (ie those on around £12,000 pa). For me, this is the part of the improved offer that is far more satisfying than the fact that they also upped the 1% offer to 2.2% from Jan 2015 for the likes of me. What the ongoing cuts will do to services is another worry entirely. I really can't see how the services I look after can be maintained at the current levels of funding, but then I don't suppose that will be my problem for very much longer. Except that the problem belongs to us all  - as a citizen I quietly despair).

(picture courtesy of http://jrgee.deviantart.com/art/Ghost-In-The-Room-242691081)

Whoops I did it again ...

Bought active.

I've just put in a purchase order for £2,000  worth of AXA Framlington Biotech. This is despite the fact that my long term plan is to move most of my ISA funds into a low maintenance stable of cheap trackers very much along the lines of Monevator's "Slow and Steady Passive Portfolio".

However, I have always intended to keep some small holdings in a few specialist areas one of which is pharmaceuticals (I also have Herald IT (comms and multi-media) and IShares Global Clean Energy) and I needed to invest some of the cash left over from my recent sale of a third of my UK Growth fund that was sitting there doing nothing in my account. I looked for a passive-friendly Healthcare ETF but couldn't find one that was available to small investors in the UK so I took the plunge and went with one of the (recently) very successful active funds in the area. The downside of this success is that the fund is valued high at the moment which is another reason I should have perhaps found somewhere else to put the money. Oh well :-)

So, I must admit that I felt a little guilty after clicking on "Buy" but I consoled myself with the fact that the total expense ratio is a fairly low 1% and the trading costs came out of my commission credit so I won't be racking up fees at anything like the level I was whilst holding my CIS active fund at Royal London.

This investing lark certainly does play with the emotions.

September 2014 Update

Portfolio update here. 

 It's been a busy month. My ISA transfer finally completed so I've been doing a bit of re-balancing. So far I've sold around £10,000 of my CIS UK Growth fund and bought £3,000 each of TR European Growth IT and an iShares global property tracker.

I would really like to increase my holding in the US but now just doesn't feel the right time to do it (classic market timing mistake?). However, as there are other areas that I need to beef up a bit (EM's, Europe and property) I'm concentrating on them at the moment. I do have a plan (put £5,000 into a US tracker) but it seems a very expensive one at the moment and I'm hoping to keep to it, but keep down the costs. Given that there doesn't seem to be an overriding and immediate reason to sell any more of my UK Growth top heavy fund just yet, I am prepared to wait it out a bit. I've a feeling that I will need to do it quite soon though, so I might just need to bite the bullet and get on with it.

We've also now taken the decision that my husband will retire fully at the end of Nov 2015. Our original plan was for him to keep going on 3 days a week until he's due for state pension in 2018. This means that our ability to invest at our current rate of about £1400 per month will be severely curtailed in 14 months time so I really do have to have a watertight plan if I'm going to be able to stop work at 58 - 60, defer my pension and live off my SIPP.

It looks like the plan I devised in May has to be refined yet again. Watch this space....

The Feminine Touch

At the weekend I was reading Tim Hale (again) and I came across this statement:

"Overconfidence destroys wealth. Men tend to be more overconfident than women... men trade 45% more than women, This is reflected in risk-adjusted returns 1.4% less a year than women". (Hale. T., Smarter Investing, 3rd ed p89)

Apparently we women have something in our genes that makes us better investors, just like we are statistically better drivers and probably for much the same reasons. We tend to be more cautious, less aggressive and less inclined to take risks. (I just wonder how long it will be before some bloke turns this around by saying that although women are involved in less investing "accidents" they cause them by not getting out of his way fast enough :-))

It's such a shame then that so few of us actually do it. Maybe that's because we don't have control of as much of the wealth. Research in 2013 showed an average 17% difference between the wealth held by men and that held by women whilst:

"At one point, between the ages of 24 and 34, the Wealth Gap can be as wide as 185 per cent with men claiming an average wealth of "£21,827 compared to just £7,648 (by women)."

There an interesting article in April's Money Observer discussing how men and women differ in their attitudes towards investing and yet another in July which carries this infogram

This is all pretty serious and we really should get our act together, especially as far as pensions are concerned, because we're lagging seriously behind our male counterparts:

 "Women retiring this year are nearly three times as likely as men to have only the state pension to live on, according to a report by the insurer Prudential. Some 20% of women, who often take career breaks or work part time to support families, said they have no other pension provision, compared with 7% of men, the research found" (The Guardian April 2014).

I'm absolutely not in favour of creating further financial "dependency" by putting in place statutory measures to tie women's finances to men (as seen with the old "married women" reduced NI contributions etc) but I really don't see how we can ever be playing on a level pitch with men due to the time we spend out of the labour market having, and raising, kids. Or for the fact that we aren't given jobs even if we have no intention of doing so ( 40% of employers would rather employ a young male rather than a young female just on the basis that he won't be asking for maternity leave).

I am lucky in that I have managed to reach the same level of earnings as my husband (having got my MSc as a mature student after the kids went back to school) but I was financially dependant on him for the 10 years I was at home whilst they were little. It can be very uncomfortable indeed, even if it is never raised as an issue, as you can't really avoid feeling that you don't deserve as much of a say in the household finances. Unfortunately I'm not sure that there is a way round this, especially given the fact that such low status is traditionally given to the job/career of bringing up children. Financial equality between the genders is a really hard nut to crack and it may never actually be achieved.

Depressing though that thought is, we do have to deal with it and it seems to me that the only way that women can really support themselves to the same level as men is to be extra clever, start very early, use our innate "cautious" gene to invest well, save more than our male counterparts in those precious pre-kids years (which are also unfortunately the expensive "freedom years" for leisure and travel) and build a career that will welcome us back once family responsibilities lessen. In the meantime employing all our organisational skills and attention to detail to the task of living well, but frugally. Job done :-)

Of course, all this is generalisation. In our household I do all the investing but I do have to make sure that I manage my husband's ISA at a far lower level of risk than I do my own, as he is of a far more cautious bent than I. I'm pretty sure that he would not be comfortable with the risk profile of a couple of my funds, but he tends to act in much the same way as I sometimes do when he's driving - he closes his eyes, crosses his fingers and lets me get on with it.

Missing the "Not So" Obvious

We have a Halifax Online Saver account attached to our main current account which is paying an introductory interest rate of 1.25% for the first year. This rate will soon be coming to an end and we'll be back down to 0.25%. There's not a lot of cash in there as it just holds our pre-emergency fund - ie for when the current account needs topping up a bit if we have an expensive month. Therefore it's pretty key that this money is easily accessible and instantly transferable into the current account. Currently the balance is around £5,500.

I have been thinking about what to do with this cash now Halifax will be dropping the interest rate and I was considering opening another of the higher rate current/savings accounts (we already have a joint Santander 123) when it suddenly dawned on me that the answer was (seemingly) obvious.

Last year I took up a M&S current account and credit card. I shop there a lot and this has definitely been a good move as the points I have earned have gained me plenty of money off vouchers and special offers. I have also been able to take advantage of a 6% regular savings account which is limited to £250 a month for one year (interest paid at the end of the term). The M&S credit card is interest free for 18 months so I have been saving my £250 a month rather than paying it all off knowing that I will be able to do so when the savings account matures whilst gaining the interest along the way. ("Stoozing" the card as I believe it is called).

It then occurred to me that surely the best action would be to pay off the £2,300 credit card balance using some of the cash in the Halifax saver. On the surface this feels like it would be a good move - my basic "commonsense" tells me that this way I will be gaining 6% on the cash and I will come out better off than if I continue to save the money and pay off the card at the end of the year as I originally planned. But is this true? Is there really any benefit to be gained? Don't I get exactly the same benefit either way?

What this exercise has shown me is that although there are lots of cases where we do ignore the obvious in money matters - paying off mortgages when we would be better to keep the low rate of debt and use the money elsewhere, being tempted by BOGOF offers when we didn't even want the "one", putting money into very low rate cash ISAs when there are current accounts paying better interest rates, racking up credit card debt and putting money into low rate savings accounts at the same time, the list goes on and on - there are also cases where our intuition is well and truly fooled by the mechanics of finance.

I am reminded of those "Magic Eye" puzzles which were popular a few years ago where you had to train yourself to squint in order to be able to see what was hidden inside the pattern.

Despite the fact that numerical literacy is generally of a fairly high level in this country some of the basic rules of how money "works" are not obvious, although they are (of course) always logical. This seems to be the root of the problem. We may not struggle with simple numbers, and we can be taught the rules that help us deal with them fairly easily, but the laws of logic are a little trickier to formalise, grasp and apply to real life. We can end up going round in circles and not actually doing anything because the best route isn't actually all that clear. It's easier to just concentrate on one part of the picture at a time rather than try to see it as a whole, work out how the bits interact and act accordingly.

As far as my dilemma goes I'm pretty sure that I'm only going to earn my 6% on the 12 x £250 payments once, so it doesn't really matter which money I use to get it (does anyone disagree?). In any case I will still be left with the problem of finding some way of getting a little interest from what's left over without giving myself too much hassle as regards managing it. Back to the drawing board.

(By the way my ISA transfer has finally completed and I put in a sell order for around £10,000 worth of my CIS UK Growth fund yesterday - I'll be double checking my strategy for what to buy with the money this weekend against Tim Hales and Monevator - hope I can do it without having to squint - those Magic Eye puzzles always gave me headaches :-))

What it is to "travel"

I've just got back from a week away in the Yorkshire Dales, a part of the world which is very close to where I was born and bred and so feels like home, but which also effortlessly hits many of my holiday desirables. The physical beauty of the countryside is indisputable (especially seen in the kind of weather we've benn having recently), the people really do have more time to smile and pass the time of day, the pubs are many and varied and the walking is fantastic. It was a good week.

We spent a lot of time wandering up hill and down dale so I had lots of time to think. One of the subjects occupying my mind was the question of what we mean when we say, as many of us do, that one of the things FI will give us is the freedom to travel. On the face of things this is rather a simple statement. Travel is moving from A to B. But I, for one, certainly do not want to spend any more of my precious time in airport queues or motorway hold ups. The actual "travel" itself is an unfortunate, but unavoidable, side effect of the getting "somewhere else" which is the actual objective.

That "somewhere else" or "somewhere different"  means new experiences, challenges, tastes, sights and sounds and it also means new people with different lifestyles, viewpoints and outlooks. Travel makes finding all this "difference" easy, it gives it to us on a plate. The reason we say that it broadens the mind is that it forces the mind to exercise and to take in all that "difference", to fit it around our existing experience and in the best of cases, change the boundaries of our understanding. This exercise has a lasting influence when we come home,  it really does make us more enlightened.

True travel does not really require going very far at all, as it is ultimately about making an effort to force ourselves outside our normal daily experience and consciously seek out "difference", especially difference that challenges. This could be as simple as reading some science fiction instead of your usual crime, learning to sing or doing some voluntary work to clean out the local canal. Opportunities for travel are around every corner if we choose to take them.

On the other side of the coin there are plenty of people who move around the world but fail to really travel. People who take all inclusive holidays shut away in hotel "compounds" or go on luxury cruises with the odd coach trip to the sights and back again, business men who spend their lives on planes and in hotel conference rooms or the super rich who take their lifestyles with them when they move between their houses in Mexico, St Barths or The Hamptons. It is hard to see how any of these people are actually experiencing "difference".

From a FI point of view seeing travel in this way also means that we don't need to put our urge to get out and do it on hold until we reach our goal. In fact working towards FI could almost be said to be an exercise in travel (it is certainly a journey :-)) as it forces us to look at life in a different way. There are many ways to travel the world without breaking the bank or suffering from a guilt trip on the carbon footprint front.

Ordering my thoughts whilst walking off all those fantastic fish and chips has been a very useful exercise because it has helped me to pin down why I have never really understood people who cite travel as being one of their goals in life without qualifying what they mean and where they want to go. This can come across as a "been there, done that", tick-box kind of attitude which seems at odds with the true value of exploring the world. I much prefer the notion of time spent "wandering", or "roaming", where what happens one day influences where we go the next and the only itinerary is to experience something new and let it touch us in a way that enriches. In the end all that we really need for this kind of travel is time and the imagination to enjoy it. That is what I'm looking for from FI.







Here's something "different" I came across in North Yorkshire. :-) Does anyone know where?

August 2014 Update

It's now 6 months since I started planning for early retirement and investing to make it happen.

In that time my portfolio has increased by £10,687 which I'm pretty happy with. If I add in my husband's investments we now have almost £108,000 of the £170,000 that I reckon we need in order to be able to retire in 4 and a half years time. (£125,000 ISAs, £37,000 DC pension and £11,000 cash).

£62,000 and counting ....

Portfolio Update here

"Almost" and "If Only..."

Last week I read an article on Interactive Investor discussing how to invest in the Internet of Things - a world in which everyday objects contain technology that connects them online.

We are beginning to explore this type of technology at work so I know a little about it and I also know that it is definitely a growth area so I was very  interested to read about the some of the companies involved as potential investment opportunities.

The one which really caught my imagination was CSR and the more I read about the company and its products the more I began to wonder if this wasn't "the one" that would finally make me take the plunge and buy individual stocks. If I'd had my CIS funds in my ISA I do believe I would have gone ahead, sold a little of them and bought £1000's worth of CSR, but, not having available cash and not wanting to sell anything else, I just put the company on my watch list for the time being.

This is what happened two days later:



The stock went up by over 30% overnight.

I was stunned. To be honest although I "knew" that things were volatile out there in the market I have had my limited experience of it cushioned by the fact that I have been watching large funds move slowly up and down. This was the first time that I realised that things can actually move very fast indeed at individual stock level. Am I actually really ready for the type of environment where this was possible? Although I consider myself towards the top end of the "prepared to take a risk" spectrum", this has never actually been tested. Seeing first hand what happened with CSR and being so close to actually being in the thick of it has concentrated my mind on what I would actually be letting myself in for . It has given me the opportunity to think about what individual stock picking and its potentially higher level of risk/reward would mean to me.

These are some of the things I came up with:

Benefits

• The satisfaction of feeling more directly involved with the company in question. I really enjoyed researching CSR and reading about their development work. 

• Technology is my "field" so I felt that I would be able to make a genuinely informed choice to invest rather than relying on the recommendations of financial pundits where I sometimes find it difficult to separate the genuinely knowledgeable from the salesmen.

• I would feel that I am investing more responsibly/ethically by choosing the company and area of business rather than leaving it to a find manager or tracking the whole market. 

• I would learn far more about the business world and how that works which would be time well spent in preparation for actual retirement because at that point I intend to transform my portfolio into an income-producing rather than capital-building model.

• Excitement/ Enjoyment/Enrichment due to a feeling of getting things right

• Potential Financial Gain

Risks

• Loss of confidence if things go wrong

• Excitement/Over confidence/Too much risk taking

• Potential Financial Loss

From the list above I guess you can tell which way I'm leaning and I'm pretty sure I knew which way I was going to go with this even before my experience this week. However I'm glad it happened as it really got me thinking about what I would be getting myself into. I know that this kind of thing doesn't happen often but, crucially, I now know how it feels when it does. 

After all, I almost bought, I almost made a fair bit of money overnight. I now know how it feels to have to deal with "almost" and "if only" and it hasn't put me off. 

(btw I still like the look of CSR. Hurry up ISA transfer :-))

Going It Alone

We own a small studio flat which we bought for my son to live in during a gap year in his studies. We have been renting it out via an agent for the past 4 years or so and have now paid off the mortgage so are finally fully benefiting from the income. (An extra expense we had a couple of years ago was having to buy a lease extension which cost over £10,000 - but that's one for another post).

For the most part we've had good tenants, one of whom stayed 2 years which was great (no void periods and none of the expenses attached to finding a new tenant), but we have had a couple of less than perfect ones, one of whom continually complained about tiny maintenance issues (loose screw in window catch etc.) and one who got himself deported to South Africa on New Year's Eve owing 2 months rent.

However, because we pay 12% for a fully managed service, the agents sorted out any issues and we just paid the bills (which, to be honest, have seemed ridiculously high at times for things like minor repairs and cleaning). In other words, up until now we have been taking the "our time is more important than our money" stance as far as the flat goes.

But the current tenant has just given 2 months' notice and this has prompted me to have another think about this strategy, mainly because I came across the OpenRent website. The difference in cost between what we pay and how much they charge is quite substantial.

What we're paying: - 

• Initial charges: (ie advertising, contract, deposit registration, references, rent collection) - £395.
• Ongoing Charges: (Conducting viewings, Organising any repairs, ongoing rent collection, meter readings etc) - 12% + VAT

What our current agent offered when I told them we were thinking of using OpenRent:

• Initial Charges:- £295 +VAT
• Ongoing Charges - 10%

What we would pay with OpenRent :-

• Initial Charges: £49
• Ongoing Charges: Nil

In cash terms this means that by using OpenRent and DIYing we would be saving at least £1000 per year. (All other things being equal of course - there is the danger that the property won't go as quickly with OpenRent due to them being an online only service, but I think that's a smallish risk - surely a fair number of people use Zoopla and RightMove? and the flat is in a great area. On top of that we have had empty weeks with our current agent anyway so I think it's worth a try).

Is this saving worth the work? I think so. It means £1000 a year (less any extra tax that's due) that could be going straight into our ISAs and even if we don't strictly speaking "need" the money now, we certainly will once I leave work. I think it's worth giving it a go and learning to deal with what's involved sooner rather than later.

I'll be spending the weekend reading up on landlord's responsibilities and making sure we know how to cover all bases before I take the plunge and give our agent the required 3 months' notice to quit. It's still a little scary though :-)

Transfer Blues

This is going to be a bit of a rant ...

On Feb 19th 2014 Interactive Investor sent me a secure message saying that they had received my ISA transfer application form and would start things moving, but that I should be aware that the process could take up to 8 weeks.

Yesterday (26 weeks down the line) I had another message from them saying that they were still waiting for RLUM/CIS to re-register my funds with them in order to complete the transfer process. They expect that this will take another 2-3 weeks.

The time between these two messages has been interspersed with several messages/calls from myself querying the hold up which eventually uncovered the facts that:

1) They were holding the wrong address for RLUM/CIS. That is, they were holding the RLUM address in London (my fault, I wrongly believed that since RLUM had taken over CIS that was where correspondence should go) insted of the CIS address in Manchester. I corrected this for them by sending in another transfer form with the right details.

2) When it came to sending back the acceptance letter to CIS II didn't use this updated address but sent the letter back to the wrong address. They didn't chase when they didn't receive a reply.

3) At no point did any of the hold-ups on my transfer process alert II to make further enquiries/look at my paperwork/wonder why they still have a transfer that hasn't completed after more than 6 months. I have had to chase all the way.

I was aware that I was transferring at a time when we are continually been told that S&S ISA transfers are taking a long time due to volume so we have to be patient. I have been patient but am beginning to wish I hadn't. If I'd shouted a bit more they might have looked a little closer at what was going wrong.

The whole process is not transparent and no updates on progress are forthcoming but from what I have pieced together it seems that this is the order of proceedings:

• Customer sends transfer request to new platform
• New platform asks old platform/fund manager for valuation (via postal system)
• Old platform prepares and sends valuation (via postal system)
• New platform receives valuation and sends acceptance letter to old platform/fund manager
• Old platform re-registers fund.
• Fund appears on new platform.

Repeat for each fund in ISA

If the process stalls at any stage (at least in the case of II at this point in time) things grind to a complete standstill until the customer starts jumping up and down.  

In the meantime II have credited me with the commission credit and cash due as part of their transfer offer, which sounds good but which isn't actually quite so good as I can't use it until I have my CIS funds to sell as part of the re-balancing I'm planning. Unused commission credit is lost at the end of each quarter. The frustration grows. However, I was assured during (yet another) phone call yesterday that they will ensure that I do not lose out due to the delay, and will ensure that I can carry the credit forward. I intend to ask for this assurance in writing.

I know that my experience with II is not at all unusual (my husband's transfer has still not completed after 16 weeks and there are numerous posts on MSE complaining about the same issues), but at the end of the day I am not sorry that I started the transfer process, nor that I chose Interactive Investor. They are going to save me a hell of a lot of money, the online interface does the job, phones are answered promptly and messages replied to in a fairly timely manner but they do need to look at the systems/workflow behind their transfer process. It is absolutely not fit for purpose.

Back in April 2014 I read an article in Investors Chronicle which said that fast transfer for S&S ISAs was already possible but that it hadn't been implemented by many brokers due to the fact that their systems couldn't talk to each other. If the technology is in place I'm sure things will get better in the future, just as I am sure that at some point my funds will magically appear. But it will all be too late to change the fact that this experience hasn't done anything to help my already dodgy blood pressure.

Deep breaths ...

The Real Thing

My thoughts were much provoked by Mister Squirrel's recent post.

His final paragraph made me want to try to pinpoint what we are actually searching for in our quest for early retirement. On the surface this seems to be a bit of a no-brainer. Who wants to go to work? Don't we all want to be released from that particular shackle? But this isn't as self-evidently true as it seems at first sight. Many people (especially whose who are self employed) can't (or don't) separate "work" from "life". What they do has somehow become a part of what they are. I'm sure that examples of this kind of person can be found in many, if not all occupations - farmers, motor cycle mechanics, teachers, politicians, bank managers and corner shop owners.

There is a subtle difference between those of us who "suffer" work and long to be free of it and those who, although they may grumble about the pain of getting out of bed on a cold winter morning, then go on to engage in a working day that they have no need to examine because they know that it has been a good use of their time.

The difference lies in that word "engage". Work should have a purpose that can easily be seen by the person doing it. If we start to ask ourselves "What am I doing this for?" we have moved into a very toxic work situation. People who are bored, uninvolved, unappreciated, unskilled and/or not paid a fair wage soon become disengaged. The working environment is becoming worse for many people. Zero hours contracts only serve to give them the message that they are valued simply as "job fodder" to fill in. Good employers are few and far between with the government now encouraging them to fall to the lowest legal level in the name of economic "growth" (sic) -. This is what happens. 

I wouldn't go as far as to claim that this kind of blatant contempt for dignity at work is what is behind my dream to get out soon. I work in the public sector. Employment law is followed to the letter. No, it's a little more subtle than that. I used to know I was doing a good job, and I still do. I still see direct evidence that what I make happen is valued by the public and improves the lives of those who use it. But things are changing. What I'm also now seeing is services being cut and downgraded not, despite what we are told - believe me I know first hand what kind of savings we are not making - not due to financial necessity, but due to a political agenda fired by the belief that those services shouldn't exist at all. Libraries, youth centres, museums, transport to school for disabled youngsters, mental health hospital beds, emergency duty social workers - all under threat. It breaks my heart to work where I have to see this happening.

It seems that I have become disengaged due to a political shift that, for the first time in my working life, has given me cause to doubt the organisation that I work for at a very deep level. Maybe I've been lucky to keep my faith for so long but that doesn't mean it doesn't hurt now. The work I do is no longer "The Real Thing" and the time has come to find something that is.

This leads me on to weenie's kind nomination for the Liebster award. She explains it very well so I won't repeat the rules, but here are my answers to her questions:

1. What's your favourite holiday destination? - Skipton, the Dales. For the fish and chips, pork pies, dog walks up Phen-y-ghent and great pubs

2. What piece of financial advice would you give to your 18 year old self? - Live for today but try to put a little away for tomorrow

3. What was your favourite book when you were a child? - The "Little House on the Prairie" series by Laura Ingalls Wilder - the books are nothing at all like the twee television series. 

4. What's your favourite quote? - “your body is not a temple, it's an amusement park. Enjoy the ride.” (Anthony Bourdain)

5. Which song is currently on your top play list of your iPod/generic MP3 player/radio? - "What's so funny about peace, love and understanding" Elvis Costello

And finally, I hope weenie will forgive me if I follow the spirit of the award but not the letter by just nominating one blog:

This is "nomaggsrush - diary of a wandering boomer". Not an early retirement/PF/Investing blog but definitely what I'm doing all this stuff for. 

Signing out with Elvis:-

Knowing When ...

The mantra "Thou shalt not take thy pension early for that way actuarial reduction lies" is very well known to those of us with defined benefit pensions.

This "rule" has always made sense to me (and it still does when applied to the majority of people in the majority of situations) and so I have been planning my early retirement to comply with it and haven't questioned the wisdom of waiting until 66 to take my pension. However failing to question a general rule in the light of your own particular circumstances can be a mistake and, as the LGPS has now released the details of the 2014 pension scheme and the protections that have been put in place for those of us who have long service, I decided to take a closer look. After some time with a calculator and spreadsheet these are my thoughts and findings:

• I had been aiming to save enough in my SIPP and FSAVC to fund the 6 years between 60 and 66 at a level just below the personal tax threshold level and supplement to the required level with income from our ISAs. As I have a small Civil Service pension and share the income from our rental flat with my husband this means that I was planning on raising a total pension pot of £48,000 (6 x £8,000).

• In the local government scheme there has always been what is called a CRA (critical retirement age). This differs from both the normal (state) retirement age and the scheme retirement age. It is calculated using the rule of 85 - i.e. it is reached when length of service in the scheme and age, when added together, reach 85. My membership started in Nov 1995. If it continues to my 60th birthday (2019) I will have 23 complete years of membership. Therefore I will satisfy the rule when I am 62 (in March 2021). 

• At CRA certain protections to my pension are applied one of which is that pre-2008 pension entitlement can be taken without reduction. 

• The actuarial reduction applied to my post-2008 pension is a complex calculation applied at two different levels because the 2008 - 2014 pension has a retirement age of 65 and the 2014 onwards bit of the pension has a retirement age of 66.

• All these factors mean that my calculations (checked and double checked) give me a figure of £9,154 pension pa if I leave at 60 and take my pension at 63. This is compared to £10,389 if I wait till I'm 66 before I draw it. Therefore I would draw £27,462 extra pension during the 3 extra years which means that it would be 27 years before the larger pension starts to be the financially better deal. 

• In addition I would get my (slightly reduced) lump sum and AVCs (which can also be all taken as a tax free lump sum - a quirk of the pre-2014 LGPS scheme) three years earlier. Together these should come to around £27,000. I can see that there would be all sorts of advantages to getting access to this pot sooner rather than later.

In view of these considerations I have decided to be very careful about how much I put into my personal pensions because If I do decide to take my LGPS at 63 I don't want to have "left over pension" that will end up being taxable. If this does happen I might have been better off putting the money into my ISA instead.

The result is that I have reduced my target for my SIPP/FSAVC to £37,000 to give me a lump sum of £9,250 and a drawdown of £9,250 for the 3 years. This is still probably a touch high but there are all kinds of unknowns such as the status of the tax free lump sum and the personal tax threshold - a new government might make changes that could have a big impact. Also it's not yet completely clear how drawdown will work post 2015.

All this doesn't mean that I will be saving less, just putting it in different pots to get the balance right and making sure I don't leave it to cook for too long. Timing is all important, it's not just a matter of what you put into the pot, it's also about when you take it out and enjoy it.

July 2014 Update

Things have been a little up and down this month and yesterday was a "red all over the board" day but the good news is that II credited my ISA account with my £20 transfer bonus so maybe the actual funds themselves will arrive very soon. Fingers crossed. :-)(Why am I getting a sense of deja vu as I write that)

Portfolio Update Here

Monte Carlo or Bust

Luckily for me I don't have to plan my retirement from the angle of "how long will my money last". I have an index-linked BD pension that, although modest, when combined with my husband's pension (also DB), state pension and flat rental, is enough to live on and will last as long as I do.

I feel very fortunate because the prospect of running "pension pot" figures through financial modelling software, and feeling confident enough about the results to be able to make firm decisions based on them, is daunting. Especially when you remember that sticking to the "safe side" and over-funding might very well leave you with a surplus that has cost you precious years of freedom, only to remain unspent because you died before the last row on your spreadsheet.

However, despite the fact that I don't need to use this kind of tool "in anger" I was interested to see how the modelling worked so I took a look at Firecalc which is one of the calculators widely recommended for the job. What surprised me most of all is that there doesn't seem to be a UK version so the figures you enter have all to be converted to $s. Also all the data that the calculations are based on is taken from the American markets. However it maybe just that my Google searches just didn't turn up the right results. I was looking for a direct UK equivalent to Firecalc but it is quite likely that a similar type of "Monte Carlo" simulating process is used by many of the other calculators on the market. More investigation needed.

Firecalc works by running your living costs, portfolio value and life expectancy through a series of calculations and gives you a % likelihood of "success" which has been assessed based on how the markets have performed in the past.

"FIRECalc shows you the results of every starting point, since 1871. You can get a sense of just how safe or risky your retirement plan is, based on how it would have withstood every market condition we have ever faced."

I ran my figures through it and this is the result:

FIRECalc Results

Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

Because you indicated a future retirement date (2019), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 5 years of preretirement plus 32 years of retirement, or 37 years.

FIRECalc looked at the 107 possible 37 year periods in the available data, starting with a portfolio of $212,206 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 107 cycles. The lowest and highest portfolio balance throughout your retirement was $212,206 to $2,932,303, with an average of $1,054,551. (Note: values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 37 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

Understanding the charts below: Don't try to follow any individual line -- with most scenarios, there are just too many of them. But if you look at the mass of lines, and the zero axis, you can get a clear visual representation of how frequently your strategy would have failed (dropped below zero) or succeeded. The objective of presenting the information this way is to allow you to get a "big picture" sense of the way your strategy would have performed historically.

Year-by-Year Portfolio Balances

                         The zero line is shown in red.

What my results mean

Predictably the success rate is 100%. However, what is interesting is the vast difference between the highest and lowest potential value of my portfolio - £1,727,271 down to £125,000. This is food for thought, as it seems that there is every chance I could have a substantial amount of savings left that won't be needed to live on in retirement.

I did sort of know this because the period of time I am trying to fund at the moment comes before our pensions kick in, not after. Despite knowing this I have felt reluctant to stop pumping up the ISAs as much as we can. However, it might be better to review this and investigate putting more in my private pension now to help us both retire another year earlier? However I'm not sure what the impact of not working for a further year would have on my LGPS pension so I need to work this out.

Two additional points to Note:

• I need to start to think about how we want to manage inheritance - How much to leave (or gift before we die?).

• Do we need to put something in place to manage potential care costs? Should we earmark some (or all) of the ISA fund for this? What is the best way to manage this?