[Closed] Just checked my pension pot...yay I'm rich....oh hang on...

Estimated pension pot at age of 62 is 355k...this seems like alot!

Very much depends on when you will be 62. If it's tomorrow then yeah that's quite a bit but if it's far into the future then not so much, The 8k is likely to be amount you would get converted into todays money i.e. the amount that you will get in the future will be the equivalent of £8k today.

Indeed, that's why final salary schemes are worth so much. 30 years as an MP and you have the equivalent of £1.6m

They did change the rules to allow you to take it all as a lump sum but you'll pay 40% plus tax on it

That £8k will be based on buying an annuity though.

I wouldn't be sticking £355k in an annuity. Even assuming no growth that £55k will give you £8k a year for over 44 years. So unless you live past 106, and assuming zero growth on the capital, there's only going to be one winner.

Hardly seems worth it...I'd rather just take the lot as a lump sum and spunk it on hookers and coke, dying beautiful at the age of 70.

Pre redundancy I was earning £45k

After Tax, pension, student loan that was about £2100/month, after the mortgage and savings have been paid into it's more like £800 for household bills and disposable income.

£800*12= £9600, not far off £8k (and well under the personal allowance). So once I've got the mortgage paid off before retirement my income needs will be a fraction of what I was earning.

Also, that's not including state pension.

Also, that's not including state pension

Depending on how old the op is that may kick in when he's 106.

Or if he's been contracted out, with or without his knowledge. COPE is the next pension time bomb when people get less than they thought.

I've not even got a mortgage and I'm 29... it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by

it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by

If you have little understanding of pensions then good luck finding that 'more tangible form of investment'

Can you take the 355k all in one go?

as I understand it yes...but at 40% tax.

Can you take the 355k all in one go?

Yes and no.

You can take 25% tax free when you retire.

You can then put the remainder into a draw down pension, which is basically a savings account that you pay income tax on withdrawals from. So under the allowance it's free, then 20%, then 40% etc. So you could access it all tax free given sufficient time, but not to splurge on a Ferrari on day 1. then if you don't spend it your kids inherit it (or it pays for a slightly prettier person to change your incontinence pads).

Ok so taking £344k as a lump sum less 40% tax you could only draw £8K for 26 years - an annuity does sound quite so bad then. What are the other options for a pension pot?

Edit: 30 years if first 25% is tax free.

There is more freedom than that now if the scheme rules allow. You can take the whole lot as cash, 25% tax free with the remainder taxed as income. This is also brewing to be a future mis-selling scandal

I wouldn't be sticking £355k in an annuity. Even assuming no growth that £55k will give you £8k a year for over 44 years. So unless you live past 106, and assuming zero growth on the capital, there's only going to be one winner.

so can i draw it down at say 20k a year for 20 years and avoid top rate tax?

im 40 btw...never given it a moments thought before but on previous calculations thought i'd be getting at least 15k per year.

so can i draw it down at say 20k a year for 20 years and avoid top rate tax?

I figure if I aim for 90, then once past that what use is there for that much money? Assuming the state pension will be enough to keep a flat warm somewhere near the sea.

Ok so taking £344k as a lump sum less 40% tax you could only draw £8K for 26 years - an annuity does sound quite so bad then. What are the other options for a pension pot?

You can draw down your £8K p.a. without the 40% tax. All academic though as the OP probably isn't anywhere near age 62 and the rules will change a few more times by the time he is

Or if he's been contracted out, with or without his knowledge. COPE is the next pension time bomb when people get less than they thought.

Opting out of SERPS means that people where never going to receive that money from the government, instead it would be rolled up as part of the their occupational (and later personal) pension. They won't get the second pension because they didn't contribute to it. Instead they will get more from their other pensions than they otherwise would have.

62 is a fairly young age to retire though?

tpbiker - i'm 12 years older & have just £130k so far, plan to work till 70 & then live to 135 so annuity all the way for me 😆

[I]I've not even got a mortgage and I'm 29... it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by [/I]

The key 'benefit' of pensions is the Govt/Taxpayer giving you the taxc back.

But on the opposing side, returns from annuities are currently at an all-time-low with £100k generating less than £5k whereas 10 years previously they were over £7k (all index-linked). Which also does imply that the OP's £355k is worth a bit more than £8k, in fact nearer £17k.

http://www.sharingpensions.co.uk/annuity-rates-chart-latest.htm

Just checked and to get state pension I'll need to be 70, best hope my private pension and investments work out.

im 40 btw...never given it a moments thought before but on previous calculations thought i'd be getting at least 15k per year.

add in the state pension (currently 8K, although I think we've reached a high point there) and you will be.

also who retires at 62 anyway?

I'm in a similar boat to you but I just had a look on a tax calculator, and 8K pension plus 8K state gives you about £1150 a month after tax to live on. With no mortgage costs I think that's quite a lot!

Which also does imply that the OP's £355k is worth a bit more than £8k, in fact nearer £17k.

The £355 is the projected value when he is 62, not what it is worth now.

62 is a fairly young age to retire though?

Is it? I'll be retiring at 55.

I've not even got a mortgage and I'm 29... it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by

That used to be owning a buy to let (or 2) but the tax rules and regulation on landlords are tightening there. The only sure thing is the current generation of old farts have had it far far easyer than my generation will (say age 40 and lower). I managed to get about 5 years on the final salary scheme before they closed it down and it will not make much difference in the end. I am expecting my pension to be about 20% of my final wage where as a final salary scheme would typically pay around 75%.

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

Quick pension question. I'm hoping to contribute via AVC's a portion of my salary that would ordinarily be taxed at a higher rate. Ie I want to pay in to keep me under the tax threshold, is this a good idea or am I missing something?

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

That sounds like crap advice! That house would be costing council tax, insurance etc and the only upside would be when you sell it and you would pay capital gains tax.

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

I think that is how it works but dont take my word for it!

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

You can turn a residential mortgage into a let property, just ask the mortgage company permission to let it out, I'd not do it so soon after taking the mortgage though.

Quick pension question. I'm hoping to contribute via AVC's a portion of my salary that would ordinarily be taxed at a higher rate. Ie I want to pay in to keep me under the tax threshold, is this a good idea or am I missing something?

Yes it's a very good idea, assuming you can afford to lock the money away until retirement.

[i]The £355 is the projected value when he is 62, not what it is worth now. [/i]

Ah, missed that.

You can turn a residential mortgage into a let property, just ask the mortgage company permission to let it out, I'd not do it so soon after taking the mortgage though.

I've been renting out a property on a residential mortgage for 20 years. When I bought the place 'buy to let' mortgage wasn't an option. It's never been an issue. I changed lenders about 10 years ago and the bank advisor said 'I won't tell if you won't'

I won't even dare look at mine, it was a gold plated, final salary pension from RBS, but I left 7 years ago and haven't paid a penny in pension since. Haven't had the cash. I think it said £100k about 4 years ago.

Things are *just* about good enough again now to start putting something aside again. We've got a Pension guy coming to work soon to explain to us all in small words just how ****ed we all are. I'll take some comfort from the fact that whilst ****ed, I'll not be as ****ed as my colleagues - they've never had a pension, and are older than me.

Most of my friends retirement plans are based around sticking their parents into a shit retirement homes when the time comes so they don't live too long and squander their retirement pot (their Folks's houses)on care.

Mine is based on having our house paid off, a bit of good pension, a bit of crap pension, a bit of state pension and my wife's opted out state pension - yeah how wonderful state pensions are they're worth a fortune - no one ever says how much you have to pay in to get them! it's 3 times what I was paying in RBS for 2/3rds the salary.

Is it? I'll be retiring at 55.

ditto.

I've got final salary pension and a career average scheme (which is defined benefit) I've been given a projected value to 65 but not what it's worth in total. How do they work that out if you pull the pension from retirement age till you die if this could be 1 year or 25?

Hedge funds and property, there's no ****ing way I will be putting my money into a pension scheme.

I've got final salary pension and a career average scheme (which is defined benefit) I've been given a projected value to 65 but not what it's worth in total. How do they work that out if you pull the pension from retirement age till you die if this could be 1 year or 25?

Your pension pot has a value today and they can estimate what it would be going forward assuming you continue to pay in. At the point you retire you can then assume you convert the estimated pot all into an annuity which is basically turning it into a monthly payment for life. In reality there are more options and it is complicated but having an estimate of your pot at retirement and knowing what that would convert to as a monthly payment is a good indication of how piss poor you are going to be!

there's no * way I will be putting my money into a pension scheme

there's no * way I will be turning down an employers contribution into a pension scheme

there's no * way I will be putting my money into a pension scheme.

Why not? You're happy to invest in hedge funds but not into a pension which may invest the pot in things similar to er hedge funds but with a tax benefit.

there's no * way I will be turning down an employers contribution into a pension scheme

Damn right, exclaiming there's no way you'll invest in a pension but instead stick money in a hedge fund suggests you don't really know what you're on about.

Maybe, I'd still rather trust my money with a good quantitative based investor like Winton Capital and property. Perhaps I could mix and match a bit though.

Your pension pot has a value today

He doesn't have a pot as such. His final salary scheme was based on service and final pensionable salary whilst his career average scheme is based on service and the average of his revalued salary over his entire service.

You are thinking of defined contribution/money purchase pension schemes

trickydisco - Member

I've got final salary pension and a career average scheme (which is defined benefit) I've been given a projected value to 65 but not what it's worth in total. How do they work that out if you pull the pension from retirement age till you die if this could be 1 year or 25?

That's the 'gamble' of pensions, or spread risk if you prefer - they offer set pensions to people based set criteria - if you live to 110 you 'win' they've paid out more than they took in (or possibly not, there are some shit ones around) if you keel over on your way home from picking up your gold watch, they 'win'.

If you plan to die early, die whilst you're still employed - 'death in service' pay-outs can be quite generous.

Maybe, I'd still rather put my money into a good quantitative based investor like Winton Capital and property. Perhaps do both.

...and I'll lay odds that you could get that or something very similar to that but wrapped up in a pension.

When it was the case that you had to buy an annuity with your money then I'd sort of understand it but when an investment would have to make a 66% return (based on being a 40% tax payer) just to get to the initial value of a pension investment, being anti pension seems like a very strange position to take.

You are thinking of defined contribution/money purchase pension schemes

that's it. Mine's defined benefits which i'm told is the gold standard so not as much as a gamble as other pension schemes out there.