A Transition to Retirement

I am currently at the point where if I can maintain my current savings rate and forecast average investment return run rate I expect to have accrued sufficient wealth for full financial independence in a little less than 3 years.  This will mean I will have the option of either:

• continuing to work in my current full time career knowing that I don’t need the company but that the company needs me; or
• taking early retirement from my current day job which will allow opportunity for everything from doing nothing to side hustles to part time work (whether in my current or a new career) to a new full time career which might include my own business;

all at the relatively early age of 44.

With only a few years to run until Financial Independence I now believe I'm at the point where I need to start thinking about how to transition from my current position to retirement.  Before I document my first musings on what the strategy might look like to financially transition to early retirement let me first detail some relevant considerations that need to be accounted for based on where I am today:

• I am planning to be in the position where I will need to generate no active income with all expenses being covered by investment return from my accrued wealth.  Planning this way means any work undertaken, which might earn an income, becomes an activity that brings enjoyment or learning opportunities only. 
• I am a higher rate, 40%, tax payer and expect to be a basic rate, 20%, tax payer in retirement.  This along with the facts that as part of a pension salary sacrifice arrangement my employer adds to my pension a large part of the 13.8% Employers National Insurance Contribution that they now save, plus I also get the 2% Employees National Insurance contribution above the Upper Earnings Limit added to the Pension, means I have a lot to gain by making large pension contributions.  At current rates my pension contribution is about 50% of my monthly 60% of gross earnings savings rate.  This means that over the next 3 years, after accounting for expenses, taxes and investment types in and out of the pension, I expect my Pension wealth to move from 41% of total net worth today to something closer to 44%.  I am therefore left with only 56% of my total net worth to live off until age 55 when I can start to Drawdown on my Defined Contribution Pension.  Of course that assumes the UK government doesn't change the retirement age or other pension rules meaning I'm also carrying a bit of contingency in my planning.
• I haven’t yet bought a home and while I will have the assets to sell to buy the home outright a small mortgage looks prudent to maximise my wealth retention by paying some short term interest payments which will allow long term minimisation of taxes.  Some of these tax minimisations will include not cashing in any of my Stocks and Shares ISA wealth as I want that tax free income forever, avoiding payment of any capital gains tax and not selling some offshore Non-Reporting Funds where the gains are subjected to income tax rather than capital gains tax, which I foolishly bought before I knew what I was doing, while I'm a higher rate tax payer.  This will reduce any Capital Gains Tax from 28% to 18% after allowing for my Annual Exempt Amount (£10,900 for 2013/14) and the tax on the gains of my Non-Reporting Funds from 40% to 20% or possibly even a portion at 0% if I'm careful.

So what’s the plan thus far?

1. I still believe UK housing is overvalued and hence overpriced.  I don’t know if I'm wrong or right on this one but I do know that if I don’t buy before retiring gaining a mortgage might prove difficult.   I also know that I can maximise my earnings today by living in the expensive South East, which then allows me to maximise savings by living in rented accommodation, which costs a lot less than I can afford.  When I retire I won’t have to worry about maximising earnings and so intend to move either out of the South East where better property value, even if it’s still over priced, can be found along with some wonderful countryside.  Alternatively I’ll move to another European country but a bit more work and exploration still has to be done on that front.     
2. If I stay in the UK that non-South East property will be modest in size, which will allow running costs to be minimised, but will include a little land to enable some limited self sufficiency.  Having now started looking at some non-South East regions I know roughly what that will cost at today’s prices.
3. Considering point 1 it therefore makes sense to buy just before I retire.  By selling my NS&I Index Linked Savings Certificates, only enough equities outside of my ISA to keep me under the Capital Gains Annual Exempt Amount plus using all cash except for an Emergency Fund (ie paying no additional tax) I could today rustle up about 40% of that house cost.  Wait until just before retirement and that deposit becomes circa 70% of the house price.
4. That leaves me requiring a mortgage equalling approximately 30% of the house price at a time when I am soon to have no more earnings.  
5. I'm now living off my non-Pension wealth for around 11 years until age 55.  During the first few years I will live off the sales of investments that are not in tax wrappers.  I will sell only enough to keep my capital gains below the Capital Gains Annual Exempt Amount and to ensure my capital gains sales of my Non-Reporting Funds stay below the tax-free Personal Allowance which will be sufficient to provide for my lifestyle while also enabling healthy ISA contributions.
6. During those early years what I won’t have sufficient funds for is to pay down the mortgage quickly.  To ensure I know my costs I’ll likely take a 10 year fixed rate mortgage which I’ll then let revert to the Standard Variable Rate for 1 year by which point I’ll be 55.  Now I take the 25% tax-free lump sum from my Pension, pay off the mortgage, maximise the ISA contribution in that year and invest the rest as tax efficiently as possible outside of the Pension.
7. The remainder of the Pension fund gets put into Income Drawdown where I will drawdown the maximum permitted by the Government Actuary’s Department Drawdown Pension Tables (GAD Tables) for the remainder of my retirement.  The aim is to get as much out of the Pension as quickly as possible to minimise government meddling risk.  At current rates and based on my Pension value estimates it will just about perfectly meet my spending needs.  
8. In parallel I’ll continue to sell off whatever non-tax efficiently invested assets I have remaining while staying below Capital Gains Annual Exempt Amount and ensure my capital gains sales of my Non-Reporting Funds keep me below the basic 20% tax rate.  This will continue to be added to the ISA whenever I don’t need it for income.

As an overview that’s about it.  I end up with a home for my family and an income stream which keeps taxes to the bare minimum.  I know it’s a very top level assessment and behind the scenes I have a lot of maths to support what I've written here.  I also know it’s based on a lot of assumptions and the world may be a different place in 1 week let alone many years but I'm also ready to alter the strategy as the world unfolds.  I also know I haven’t mentioned the State Pension.  All of my retirement planning excludes anything I might get here.  If it’s not means tested by the time I get to whatever age the government dictates I can have it then it will be considered upside.  I will however pay National Insurance Contributions during early retirement until I have accrued sufficient years for a full State Pension just in case it all goes horribly wrong.  I feel I'm planning well but the million pound question is what I have I missed?

As always DYOR.