Pension Pot

[ChicagoBlue]

As a rule of thumb it's what you'll get per year multiplied by 20.

25-30, in my book, unless you’re expecting to making 5% on your money or leave nothing to your heirs.

 

[ChicagoBlue]

I'm aiming for a total of around £350K in the next 8-10 years.

Currently got about £200K.

I never put too much in because you've always got to have one eye on the here and now and balance this against the chance that you might not make it!

Rule of 72 says you DOUBLE your money in 7.2 years at 10%, 8 years at 9%, 9 years at 8%, and 10 years at 7.2%, so £350K (75% increase) should be quite doable without too much risk.

 

[ChicagoBlue]

Such a hard call this one. There are no guarantees and covid has taught us we could have pots of money but not be able to spend it if places and countries are closed down. Also health issues could arise. The way Russia is sabre rattling we might all go up in a puff of smoke soon anyway.

My advice is to retire as early as possible. Party while you're still fit and able. Everyone is different of course. Mortgage paid off should be a minimum so you only have to worry about bills, food and general upkeep. The way inflation is going though that's going to hammer people's spending power.

….but increase their ability to sell an inflated priced home and downsize, if needed.

 

[paulchapo]

not quite, it's a little complicated but my understanding is that the contracted out thing is now gone from consideration, and as long as you contribute 35 years you get the max state pension. i contracted out for 2 years in the 90's, but I've paid in 38 years in total so I'm golden.....I think

On the other hand if you were CO for 10 or 15 years you'll struggle to hit the 35 year figure and hence will lose out on the state pension....again "I think"

I think they stopped it happening a few years ago but for many of us it was a bit too late. I had 43 years contributions when I took early retirement but many of those were classed as contracted out. I never remember having a choice but as a kid back then i never took much notice. I will get more than the basic state pension but not the top whack unfortunately.

 

[west didsblue]

25-30, in my book, unless you’re expecting to making 5% on your money or leave nothing to your heirs.

I’m on a DB scheme and the assumption for tax purposes is that the pot is equivalent to 20 times the annual pension accrued. For DC schemes it’s irrelevant because the pot is what it is.

 

[ChicagoBlue]

I’m on a DB scheme and the assumption for tax purposes is that the pot is equivalent to 20 times the annual pension accrued. For DC schemes it’s irrelevant because the pot is what it is.

Agreed. From here (DB), you just need an inflation-adjustment from personal savings or some other source.

When I lost my DB Plan and switched to a very small annuity plan and Defined Contribution Plan, I started thinking in terms of saving 25-30x additional income.

I will have two “annuity” type plans, with a very small “kicker” plan from my wife, that will bring in about $60,000 (~£45,000), so we have been trying to save sufficient additional income to supplement that to facilitate a non-drawdown income that would enable 80% replacement of income. I use my calculation for THAT money.

My apologies for making a statement (conclusion) from such incomplete information on my part. This is not really the topic for such statements.

 

[sky tot]

Understanding what you need to live on is something very few people actually know, i can't advise strongly enough how important this is and now is an ideal time to check as you need a datum point such as the stat of the year,

Each January I record how much income after tax we have brought into the household in the previous year, I then deduct any money I have spent increasing savings, paying off any debt and any exceptional expenses such as home improvement (not maintenance). This then gives me a good idea of how much I need to live my current lifestyle. This is based on being debt free without needing to top up any savings and with a well maintained house.

I have found that for me and my wife we need around £26k in today's money, based on us getting a combined state pension of £19k then we need around another £10k - £12k a year before tax that we need to fund ourselves each year. I am hoping to retire early in about 8 years and fingers crossed my pension pot should be more than enough to allow me to do so.

I have read that the average person in the UK doesn't have any retirement plan in place until they get into their 60's and assume the State Pension will see them through. At 55 the average person in the UK only has around £80k in pensions savings, this is really concerning and lots of people are in for a real shock.

Everything I have read indicates that a pension pot between £300k - £500k should be enough to enjoy a comfortable if not lavish retirement. A lot depends on if people want to work until they receive the State Pension or retire early.

I wish , I a joiner and never earnt big money , had a personal pension since I was 23 and it’s only worth £126k . I’m nearly 57 and the maturity date is 2026 . Is is what it is but my only concern is my body , slowly getting fucked . Bad back ect . No way can I see myself working to ll in 67

 

[Citizen of Legoland]

not quite, it's a little complicated but my understanding is that the contracted out thing is now gone from consideration, and as long as you contribute 35 years you get the max state pension. i contracted out for 2 years in the 90's, but I've paid in 38 years in total so I'm golden.....I think

On the other hand if you were CO for 10 or 15 years you'll struggle to hit the 35 year figure and hence will lose out on the state pension....again "I think"

Last time I checked they did some sort of re-calculation so even though I was contracted out for over ten years it only took me about 6 or 7 years to get back to parity. From memory it was something to do with the change of required contribution years rising from 30 to 35. So it might not be a case of having to match CO years with additional CI years for everyone.

 

[M18CTID]

Rule of 72 says you DOUBLE your money in 7.2 years at 10%, 8 years at 9%, 9 years at 8%, and 10 years at 7.2%, so £350K (75% increase) should be quite doable without too much risk.

Yeah, should be doable without him investing another penny. Obviously usual caveats about how the stock market performs in the next 8-10 years apply

 

[Citizen of Legoland]

I wish , I a joiner and never earnt big money , had a personal pension since I was 23 and it’s only worth £126k . I’m nearly 57 and the maturity date is 2026 . Is is what it is but my only concern is my body , slowly getting fucked . Bad back ect . No way can I see myself working to ll in 67

This talk of 300k to 500k is pie in the sky stuff*, fuelled by pension providers who are getting a cut from your deposits;) A £155k pot according to Which gives a comfortable retirement at state pension age, for one person who owns their home. I’d make a stab at adding 50% to the pot if you’re a couple.

Access Restricted

Obviously the more the better but every time I do my calculations I reckon 200k would do me plus whatever ‘er indoors adds. That’s at 67 though, just struggling to see how I can retire early.

*Unless that’s factoring in inflation

 

[RobMCFC]

Yeah, should be doable without him investing another penny. Obviously usual caveats about how the stock market performs in the next 8-10 years apply

I actually put 3% of my wages in and the company put in another 5.5%.

When I said I don't put much in, I mean there are other things that I could do that I choose not to because I'd rather balance living now (as many holidays a year as I can get - i.e. that's paying for 4 of us!).

e.g. you can choose a company option where you chuck in 8% and they''ll match it, but I think that's too much to sacrifice when there's stuff to pay for now (even though the mortgage is paid off).

This talk of 300k to 500k is pie in the sky stuff*, fuelled by pension providers who are getting a cut from your deposits;) A £155k pot according to Which gives a comfortable retirement at state pension age, for one person who owns their home. I’d make a stab at adding 50% to the pot if you’re a couple.

Access Restricted

Obviously the more the better but every time I do my calculations I reckon 200k would do me plus whatever ‘er indoors adds. That’s at 67 though, just struggling to see how I can retire early.

*Unless that’s factoring in inflation

Yes, I agree with that. £200K sounds about right. Whilst living in retirement is expensive, I do think trying to get people to put in massive chunks of their "free money" is often unrealistic and you probably need less as you pass 70, 75, 80 etc.

I aim to retire somewhere between 61-63 and about £120K-£150K will be to fund my life before I hit 67, with the remaining £180K-200K to supplement the state pension.

 

[Chippy_boy]

I work it out as a bit more than that.

Currently our basic cost of living is around £2k per month. Roughly £1k on bills and fixed costs the other on food and other general 'stuff'.

I add to that another £1k per month which is the cost of maintaining the house and keeping a modest car running.

There is a bit of headroom in that but its before any holidays and pricey hobbies etc so £36k per year for the two of us. Note that cost doesn't really change if its just 1 of us.

And also remember that's net and that your pension income will be taxed, so you need more than £36k per year gross.

 

[knuckles]

This is from the Which? website as a rough and ready calculator - also based on any mortgage paid off.

 

[knuckles]

 

[knuckles]

 

[Scottyboi]

View attachment 35136

Wonder what the values will be in like 30 years time.

 

[knuckles]

Wonder what the values will be in like 30 years time.

The thing about the above illustrations from Which? is that they were published in February last year, of course now inflation is at an all time high at over 6% so a difficult one, for the last 30 years or so inflation has been pretty low and constant, God only knows what's in store for the next 30 years.

 

[Gareth Barry Conlon]

And also remember that's net and that your pension income will be taxed, so you need more than £36k per year gross.

Yes. Most people will want to retire well before state pension - 68 for me and i dont want to work beyond 60 so that is 8 years to fund with all of it taxed.

My pre Tax drawdown would need to be circa £47k per annum to have £35k to spend. Once i hit state pension age i get £9k per annum from the state but i'd have spent £376k by then. Even if I cut back the spending to £2k per month I will need to drawdown £30k per annum and a total of £240k before state pension kicks in.

Not sure how these calculations of sub £200k will work.

 

[Citizen of Legoland]

The thing about the above illustrations from Which? is that they were published in February last year, of course now inflation is at an all time high at over 6% so a difficult one, for the last 30 years or so inflation has been pretty low and constant, God only knows what's in store for the next 30 years.

all time high?

 

[hampshireblue]

Does this only apply when you have retired or is it something you are able to do while still working?

If you're working then you can pay upto £40k into your pension and should be doing so. Even if you have no personal income as is the case with my wife, we pay £2800 into her SIPP and get the £700 added a coupld of months later. It's of no benefit to me as I'm through the LTA.