David Dewsnap, 63, is a maintenance electrician from Glossop, Derbyshire. He is married to Helen, 61, with whom he holds a 10-year mortgage with £16,000 remaining, due to be paid off in September 2008.
David wants advice about the best time to retire and start drawing from his pension schemes. He also feels that he could improve his quality of life by moving to a part-time job nearer to home, but he would like to know how that might affect his future income.
We asked three financial advisers for their comments on David's situation: Ian Hudson from Hudson Green and Associates; Donna Bradshaw from IFG Group and Keith Churchouse from Churchouse Financial Planning.
Case notes: David Dewsnap, 63, Glossop
Salary: £25,000 per annum
Monthly spending: approx £1,500
Debts: £8,000 on three credit cards
Property value: £249,000
Savings: approx £12,000
Pension pot: approx £80,000
David's main reason for writing to us was that he is unsure about how and when to start drawing his pension. Bradshaw agrees that the choices involved can be daunting. "Questions he needs to ask are: how much money he needs and when, how long he plans to continue working, his general state of health, and his spouse's income."
With so much to consider it is perhaps not surprising that both Bradshaw and Churchouse recommend delaying taking his pension for as long as possible, both to maximise the final amount available and to give himself more time to consider his future.
However, Hudson points out that David does not have to make all of these choices at the same time. By using "phasing and drawdown" he can split his pension into several different parts, accessing some now and saving the rest for the future.
All three advisers agree that David needs to make sure he has up-to-date information from his pension providers about the value of his three pensions. If necessary, he can provide a financial adviser with a " letter of authority" allowing them to follow this up.
Churchouse recommends that David use cash drawn from his pension to pay off his mortgage, for which payment is due in September next year. David also owes £8,000 on three credit cards. These are charged at 0 per cent interest until spring 2008, but Hudson says David should clear these "as soon as possible", especially once interest begins to be charged.
Planning for the future
David is considering taking a part-time job closer to home, which would reduce his income but cut his travelling time by four hours a day. Churchouse says that as David and Helen's combined income and spending leaves them with a monthly surplus of £1,405, David could make the change and reduce his spending, without having to cut out "those little luxury extras".
Alternatively, David could make up the shortfall in his income by taking some of his pension now.
The advisers also urge David to look into the future by nominating Helen as the beneficiary of his pensions should he die before completely withdrawing them. David and Helen should also draw up a will. "Having a will ensures that your estate is distributed promptly and in the manner you would like," says Hudson.
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