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https://www.hl.co.uk/pensions/insights/can-i-still-contribute-to-a-pension-after-retirement
In the most part I don't really see who this article applies to. There must be a very limited number of people who have enough of an income (AFTER finishing work!) to put some of that income into the pension, for the income tax breaks...and not actually draw the pension.
IHT avoidance is a good reason for having money in a pension, but again a limited number of people must be in a position to plan on inheritance via that route (they must be either very lucky or, erm, very unlucky)
£14k from my age 60 and £22k (all per annum) from my age 67.
If I was looking at that sort of income there's no way I'd be spending 40k on a bathroom car and a holiday. £5k on a bathroom, 10 if you want it to be high end. £1k flights per person will get you anywhere in the world, and a couple of grand whilst you're there you'll have just as nice a time as if you're spending more. £5k will get you a car that works.
£40k on the 3 is fine if your retirement income is double-triple what you're looking at. On £600 per month per person I'd be sitting staring at my gruel cursing my younger self for being so frivolous.
Gosh. On holiday on a warm and familiar island, Mrs K and I went food shopping in our basic no frills AC only hard plastics Suzuki Vitara hire car yesterday.
At the end of the trip we sat in the car and said “really, do we need anything more than this?” (Lifestyle in general not the car) It’s a thought on my mind as I sit on a porch with coffee and toast watching the morning unravel.
We are familiar with and cautious of romanticising holidays, but 48hrs of simple (island) life has latched on to us very quickly, no doubt our increasing age is a factor .
Makes you think - a lot.
Also not helped by her uncle -same age as me - being part of the holiday party. He’s a contracting Software Engineer of a high standard, forced (his words) into a permanent role becuase IR35. He said yesterday he’s worked for 30yrs to build hefty savings, but the desire to work is leaving him becuase - and the same is true in my industry - where there were 4-5 major players tech/advancement/globalisation has allowed that to multiply to 30-40 competitors or new entrants and it’s just hard to keep up when “the game” is constantly changing. His analogy - each working week is like trying to solve a Rubik’s cube from scratch by Friday only for the rules to have changed by Thursday morning. Frustrating.
Anyway, just musing….
Well I should be retired and could be, but I'm a arse when I'm not working and I like buying guitars so I do assorted graphics work when bit games up and throw bags of fertiliser and gravel around the garden centre when it doesn't. Been doing a two days a week there scraping algae from inside the Koi tanks plus my weekend shifts.
Very physical and pleasant as you can switch off, watch the fish and try to put off the muscle pain.
I'm doing it while i can knowing I'm not dipping into savings and having a whale if a time.
Retirement and an e-bike lay ahead of me, but not yet God please.
Increasingly frustrated at work, and 55 next year - accepting there'd be penalties but I am considering checking out what they would actually pay me, packing in the current job and looking to pick up 2-3 days a week part time work.
Theres a couple of very sensible reasons not to do this, but even so....
I was more or less forced to retire in March, when I was made redundant. I’d have been perfectly happy carrying on working, I enjoyed my job, it was stress-free and payed fairly well, but it seemed like it might be the right time as I turned 69 in July, so put in for my state pension at the beginning of March.
What was a nice surprise was my state pension of £948, plus a lump sum of £12300! My SP has also gone up to £1023/month, so I’m ticking over at the moment, not having to spend £60 on fuel twice a month for work; however, I’ve got a number of workplace pensions, plus two remaining private pensions left from the six I set up to pay off my mortgage, and give me a chunk of money as well.
The mortgage was paid off around three years ago, so that’s out of the way, so I’ve got an independent financial advisor working on getting all of the separate pensions all in one place, giving me an annuity to add to my SP. There’s one sticking point, the two pensions left over from the mortgage are a significant chunk of money, but the entity holding them is really dragging its feet when it comes to releasing the funds! I signed letters of authority in April, they were saying they needed a signed letters of authority in July, IIRC, and were told they’d had them on April 18th! 🤬
Hopefully, once A**** have got their collective heads out of their backsides and my team can get everything sorted, I should be on something like a final salary pension, which will be nice.
Must be a challenge living on 8k a year,not sure i want that level of challenge in retirement.
As he said though, he's capital to dip into so the £8k is what he's 'choosing' to live on (NHS Pension?) and if he needs more he'll use savings and once at 66/67 will also get at least the same again with his State Pension. Single bloke and no mortgage/rent plus didn't he say he'd a rental too? All adds up.
I d expect to live like a king on 34k. Assume no debts I reckon 20k net is a decent standard of living as long as you have a cash pot to dip into for a new roof, car etc.
You've to realise that your monthly pension(s) and any savings/capital are actually all the same monies - most folk could live on £20k if they'd a big pot of cash to dip into for everything but just 'living'.
Intheborders speaks the truth. People who claim to live on X whilst also having a y lump sum available ( or perhaps even an additional z of rental income) are completely misrepresenting the situation.
Similarly to ITB, I could easily live on an income of five quid a week. If I had a dipping pot of a mil.
so many varied opinions on how much of an overall pot for a decent living though. I'm hoping to retire in 4 yrs, ish, just into my 60's and the various calculators throw up a huge variety of numbers. We will have no mortgage, kids will be away, and will have a reasonable private pension pot, maybe 500k and hopefully a bit more, but hard to work out what that actually means in real terms and standard of living.
will have a reasonable private pension pot, maybe 500k and hopefully a bit more, but hard to work out what that actually means in real terms and standard of living.
£500k equates to give or take £12500 pa.
How much do you spend at the moment?
^^^ yeah, significantly more than that, though current spend puts loads into salary sacrifice pension, ISAs etc, plus running 2 cars, supporting teenage/early 20s offspring, so outgoings would reduce a lot.
The size of pot vs projected annual payout is depressing though, £12500 well below minimum wage etc, so would suggest that a pot of 1M is required to get to 25k or so, which feels a more comfortable income. How many folk will get to a 1M pot though !
£500k equates to give or take £12500 pa.
Is that based on taking an annuity? If they're early 60s and expecting to live c. 30 years then basic drawdown gives 16.6K (without growth). If you tweak the phasing of that to eg 10 years active retirement, 15 years passive, 5 years care, the spend during the active phase can be higher, easily 20K plus. And that's without including state pension.
Remember to add on state pension (when available) to total income.
£500k equates to give or take £12500 pa.
more like £20k pa (before tax) based on taking 4% on the pot per year, whoch is the amount most financial advisors seem to think you can safely take without depleting the capital amount
Annuity rates have also gone through the roof in recent years. At 65 a basic male annuity (no increases etc) is now pretty close to £7500, meaning a half mill pot would give you 37k/year income (so 50k when you add in the state pension). Even an rpi linked annuity would pay out over £20k
£500k equates to give or take £12500 pa.
Agree with the other posters who say this is incorrect.
these numbers look more encouraging ! A good prompt to book in an appointment with my IFA later in the summer.
more like £20k pa (before tax) based on taking 4% on the pot per year, whoch is the amount most financial advisors seem to think you can safely take without depleting the capital amount
You'd have struggled to do that over the last 10 or so years. The 4% rule pre-dates the period of near zero interest rates.
Possibly with interest rates higher you can, but then your capital is still deflating...
You’d have struggled to do that over the last 10 or so years. The 4% rule pre-dates the period of near zero interest rates.
you shouldnt be relying solely on interest rates to generate all the growth in your pension, it should be invested across lots of different sectors, so that you achieve a decent growth. I track mine over the last 20 years and it has averaged 7% growth - some years it goes up by 18%-20%, other years it shrinks by 5-10%, other years its flat, but the average growth has been ~7% after fees across the last 20 years. over the last 10 years, growth has been 7.28%
"Possibly with interest rates higher you can, but then your capital is still deflating…"
I dont intent to die with my capital being fully intact. Ideally it will be zero.
similarly, i would be expecting to deflate the capital over the retirement years. The kids will still have a house and various other inheritance elements so not fussed about much of a leftover pot !
Agree with the other posters who say this is incorrect.
It's a 'forecast', therefore neither correct nor incorrect, and remember, you can't buy 'history'.
It’s a ‘forecast’, therefore neither correct nor incorrect, and remember, you can’t buy ‘history’.
You can with an annuity, which pays out way more than the £2,500 per £100k suggested in that post
I dont intent to die with my capital being fully intact. Ideally it will be zero.
Given you don't know if you'll live 1, 5, 20 or 50 years, I'd say planning for that is impossible.
Unless you buy an annuity which just vanishes the day you die.
I’m 58, currently working part-time at just below the tax threshold and drawing down on the proceeds from my house sale for another 7 years before my pensions kick-in. Zero mortgage on a newly built house that shouldn’t need any major costs for the foreseeable.
For the prior 30 years was earning reasonable money and spending it on ‘stuff’, but the priority now is health, happiness and feeling like you’re a part of a community rather than another faceless drone.
Given you don’t know if you’ll live 1, 5, 20 or 50 years, I’d say planning for that is impossible.
Unless you buy an annuity which just vanishes the day you die.
Few folk want to live active lives in their mid 80s onwards - so aim to have it all spent by then
The "4% rule" is designed so that you can sustainably withdraw 4% of the total pot each year, after inflation, without depleting the capital.
THere are a few assumptions.
- you remain invested - back testing has shown that a 60:40 equity-bond portfolio generates the right sort of risk-return model, and upping the portion of equity invested doesn't change the outcome by much.
- ideally invested in global trackers (eg Vanguard Life Series 60)
- long run average market return 8%, with long run average inflation 3%, giving net return 5%. This means (simplistically) that you can therefore take out 4% sustainably without running down the pot
- keep ongoing costs as low as possible. These include low platform fees (eg SIPP), low product fees (some trackers are much more expensive than others), and ideally no advisor fees (the advantage of a global tracker is you don't really need advice on where to invest! Just perhaps an occasional check in to see if things are still on track, which you can do yourself really).
- be flexible. Clearly if there are serious market challenges, then it would be sensible to take lower than 4% if you can, and equally if the market / your pot accelerates then you can perhaps take out more.
- there's one challenge - "sequence of returns risk". In spite of the above simplified approach, the wrinkle is that if the first few years you take 4% and the market experiences persistent recession, then your pot will struggle to recover from its depleted state even if subsequent years are strong growth. This risk abates if you experience recession a few years after starting, or if you are adaptable / flexible in the early few years to accommodate a downturn.
- finally - tax. You won't pay NI on money you take out of your pot as pension, but you will pay income tax at your marginal rate. This means that it might be sensible to take out an amount up to your tax band, rather than a strict % of the pot, depending on your circumstances.
Lots of information.
What's the summary?
You should (highly likely, but not certain) be able to take out 4% each year sustainably, without depleting your pot and still allowing for inflation.
When you’re old enough to stop spending money on activities, you have to spend it on paying someone to wipe your arse.
Not if you have spent all your money.
When you’re old enough to stop spending money on activities, you have to spend it on paying someone to wipe your arse.
Yep, I wouldn't want to have to rely solely on local authority care in my old age, as I expect it will be pretty poor....
Let sat in your own feces for hours whilst the underpaid staff struggle to cope with the number of patients....
We have just returned from a morning at the skate park.
With banana split for refreshments.
You don't need loads of cash to have a nice life.
Yep, I wouldn’t want to have to rely solely on local authority care in my old age, as I expect it will be pretty poor….
After seeing a close relative fade away in a care home with dementia, it is my express wishes what when I become of age to need someone to wipe my bum I will take a nice long winter hill walk with a good bottle of malt.
I will take a nice long winter hill walk with a good bottle of malt.
Unless you have a stroke etc and end up an invalid with zero warning...
Although I fully endorse your intention.
Surely the stw way is c +h, so keep aside enough funds for an absolutely 'killer' week in Vegas, one way flight.
I have dipped in here as I got my annual pension statement the other day and now I'm in my 50s pensions seem more real. On one hand I feel very lucky that compulsory civil service pension contributions have already amassed a fair pension but I won't be retiring early, or even at 60 when some of it is available. I've 3 young kids so will be working to state pension age to pay for them. Still, if I do get to retire then, my income would not drop significantly. I envy those of you talking about retirement in your 50s, well done you.
Still, if I do get to retire then, my income would not drop significantly. I envy those of you talking about retirement in your 50s, well done you.
many of us took the choice to have much less money in retirement to do so. My income dropped by 60+% I remain very fortunate to have a big lump of capital tho
So your income didn't actually drop by 60% in any real and meaningful sense then...
I have dipped in here as I got my annual pension statement the other day and now I’m in my 50s pensions seem more real. On one hand I feel very lucky that compulsory civil service pension contributions have already amassed a fair pension but I won’t be retiring early, or even at 60 when some of it is available. I’ve 3 young kids so will be working to state pension age to pay for them. Still, if I do get to retire then, my income would not drop significantly. I envy those of you talking about retirement in your 50s, well done you.
Isn't that a blindingly obvious downside of having kids later in life.
So your income didn’t actually drop by 60% in any real and meaningful sense then…
yes my income did drop by 60%. I have a safety net by having a large ( to me) lump of capital but I am living on my vastly reduced income.
Isn’t that a blindingly obvious downside of having kids later in life.
not so sure. Kids cost roughly the same regardless of when in life you have them (inflation I suppose aside). It doesn't really cost any different to buy a t-shirt, dinner, or a university education if you're 30 or 60. it'd be just as possible to have kids at 20 and retire at 50 as it is to have kids at 50 and retire at 50, if you plan it right.
I get that you and others chose to retire with lower incomes. The ages of my kids (7, 5 and 3) mean I will be working for a good while yet. When I finally do get to retire I'll have a pension income not far from my working income, but can't not pay in to the pension, nor afford to pay more and retire earlier. I am rather stuck with working to state pension age, where upon I'll feel a pretty comfortable pensioner....or be trying to find ways to help the kids because I'll be to old to spend my pension myself!
And yes robola, it is.
I stopped work in July 21 at 56 3/4. Didnt work for a bit but started again then worked for 3 months earlier this year. I was previously an IT director and took another job but it made me realise I had become a bit unmanageable. I got on really well with my boss (Ops Director) but it became clear we were not going to get the changes we wanted within the organisation. We left on friendly terms, he needed to keep his job and work within those constraints and I didn't.
2 lump sums from pensions has kept us going for that period and I will soon need to liquidate some of my SIPP. I have about £500k plus other pension income and my wife wants to work for another 2.5 yrs at which point our mortgage and other bills will be paid off. She has a pension as well.
I am a bit of a spreadsheet geek and have mapped out every monthly cost until we are both in receipt of our state pensions. After that theres seems no point and my main concern will offloading our assets, we have a house worth a fair amount.
One thing that people need to consider is income "shaping" I possibly stopped work a year or 2 early so our outgoings are still quite high. in just over 2 years they fall off a cliff. Around 4-5 years later they fall futher and our incomes increase. Assuming you will receive a fixed amount forever may not be helpful. It will seem very low to start with as you are very active then very high later when you are not. I would advice trying to predict your income and spreading it over (in our case around the next 20 years) then assuming you wont b spending much after that.