[Closed] Talk to me about pensions and retirement

[i]Other than all those sound investments in bikes, what are your plans for funding a retirement filled with yachts, holidays and gallons of vino collapso? Or is that lifestyle just an anachronism, only to be witnessed in my parents and their peers?[/i]

Wife has a very good pension, mine reasonable, I have a couple of properties I rent out, invest in stocks and shares ISAS annually & saving a bit should see us alright.

Plan is to sell our main house here, buy a place in Spain, rent that out over the summer/holiday season while we go traveling in our camper. That should give us around £12k a year on top of pensions etc. Unless the Spanish government screw that up for us.

That sounds brilliant, thanks for sharing. Inspiring diversity and exciting plans 🙂

No worries, happy to inspire 🙂 Not that far off being realised either.

Pouring as much money as I can into Company Pension, ISAs and SIPPs at the moment, whilst we still get higher rate relief on pension contributions!

Police pension. One day. Maybe.

Cheers

Ironside

I got a pension forecast yesterday estimating a 1k of pension would cost 37k.

thankfully I have alternative plans - mix of everything.

to net 12k out of a spanish rental is going to cost u c 300k. Maybe more as you will be paying someone to do everything, I guess you would need to be grossing 18-20k so thats q a special villa.

[i]to net 12k out of a spanish rental is going to cost u c 300k. Maybe more as you will be paying someone to do everything, I guess you would need to be grossing 18-20k so thats q a special villa.[/i]

I know, I have done my homework, I didn't just pluck figures out the sky. We're looking at 350k roughly.

I got a pension forecast yesterday estimating a 1k of pension would cost 37k.

I assume Annuity?

I expect to keep mine invested and just draw down on capital / dividends as required rather than convert to annuity. But who knows what rules will be in place in 20 years time......

Become a MP

Ok well done its doable at that price. If its a home too go for it but as a standalone investment a london flat easily outperforms a spanish holiday rental.

You'll be living in poverty if you don't... with an ageing population, UK'll be bust if we continue to pay out state pensions at current rates. I don't think a personal pension is an option as a lot of people seem to think, it's essential
BTL is about to go pop so I'd steer clear of that, not least because it assumes continual house price growth for ever and ever which is a heroic assumption - UK housing has only stood up because of zero interest rates and massive government subsidy...
A basic stakeholder pension gives you 20% tax relief straight back, more if you're a higher rate taxpayer
You can get online calculators to work out what income you'll need and what size pot you'll need for that income. IIRC I need something like £1-1.25m pot for £30k pension a year, which is £500/month now.
Personally, a financially secure retirement is more important than shiny things now

I have recently retired at 60.

I think I'm a little lucky, but I have always had a pension and paid additional money into the pension pots, even when it was difficult with a growing family.

Fortunately I have 24 years worth of a final salary pension, other pension funds are now consolidated into a future drawdown fund, yet to be used.

It will be difficult for individuals with the current economic situation, but paying as soon as possible into company pensions is a must, additional contributions make a surprisingly good investment over time.

Someone gave me this piece of advice, there's only one thing worse than a bad pension and that's no pension.

It will be impossible to guess the pension funds status in the next 10 years, let alone further into the future.

Property is not cast iron, neither is the stock market.

I think Gideon said that there was to be a green paper on the future of pensions.

I guess things are going to be unsustainable if the majority of people are elderly, but at some point things will go bang as you can't keep getting more and more young people in to support the old as they age too.

Due to working in research then IT I have four pension pots which aren't due to give me a massive amount. I'm also thinking about draw-down instead of annuity as the rates are rubbish and I'll be long dead before they would have paid me half of the funds' value. I'm 48 now and would like to retire at 60 latest (IF I manage to keep in work!).

It would be nice if there was a central way of having a pension which travelled with you so different companies would pay into it. One which could be held at a very very *very* long arm's reach from a government.

BTL is about to go pop so I'd steer clear of that, not least because it assumes continual house price growth for ever and ever which is a heroic assumption

[quote=AdamW ]It would be nice if there was a central way of having a pension which travelled with you so different companies would pay into it. I've just signed up with [url= http://www.nestpensions.org.uk/ ]NEST[/url]. It's a second pension for me as I'm already drawing one but still working.

Current pension is paying out about £20k per year which I think is enough for most lifestyles. When I reach State Pension age (and assuming there is still such a thing) that'll be a handy £6k/year on top. Interested to see brooess is targetting £30k and was wondering what figures other folk had in mind.

BTL is about to go pop so I'd steer clear of that, not least because it assumes continual house price growth for ever and ever which is a heroic assumption

I have to disagree. It is possible to invest in BTL successfully without the assumption of house price growth. I have.

If you play the long game, take a capital repayment mortgage (not interest only) and ensure you can cover the payments if/when rates rise (and then some more) then you'll eventually end up with a mortgage free property paying you X a month. Its a simple model that in my opinion is low risk if you understand the risks (interest rates) and forget about the property value/appreciation.

Personally i'm planning for early retirement with a 3 pronged approach:

1. BTLs
2. Stuffing of ISAs with low cost index funds and dividend shares
3. Defined contribution pension from worked topped up as and when I can

Oh and the even more simple piece of the equation is that if you reduce your spending you'll need less in retirement!

The fact that Osborne has just taken away a load of the financial benefit of BTL in the last budget. Landlords are quite upset about it, which suggests it's hit the spot and they'll be forced to sell.
BTL is now seen a doing a lot of damage to the wider economy by driving up the cost of living by creating a shortage of houses for sale - BoE warned on it a week before the budget - so it's in government sights
Government Debt is sky high, BTL property is an easy target for more taxes to help reduce this debt
The number of renters are increasing which makes them more politically powerful. Next election, Tories will need the renter vote more than the Landlord vote and no-ones going to shed tears for a few bankrupt BTLers. Bit like we don't care about bankers...
All the Boomers will be selling at some point soon - will change the supply dynamic somewhat
The fact that UK property has only once gone up continually for 15 years, which is what we've just had - it has a cycle of boom and bust historically. Remember 1989?
The fact that Prime London is not in a pretty state at all...
[url= http://www.ft.com/cms/s/0/8e85675c-2648-11e5-bd83-71cb60e8f08c.html#ft-article-comments ]Nine Elms[/url]
The fact that property has become, in the public perception some kind of guaranteed 'get rich' scheme - which always attracts excessive money which overheats a market. Did you see the Chinese stock market last week?
Interest rates are about to go up...
First Time Buyers can no longer afford current prices. No demand = no sales until prices drop
Look at Rightmove and Zoopla and check out the % of houses that have been discounted: c 25% in most of SE London at least

Edit: Djambo, that model might work for you but the BTL model is based on interest-only mortgage and I'm talking about BTL as a whole, not your unusual model. I wouldn't assume the Budget was the last time Osbourne will be going after BTL as an easy target for tax either...

Worth bearing in mind the strength of comments made by BoE on BLT...

[url= http://www.independent.co.uk/news/business/news/buytolet-poses-potential-threat--to-financial-stability-says-bank-of-england-governor-mark-carney-10359650.html ]BoE warns on bTL[/url]

Plan is to sell our main house here, buy a place in Spain, rent that out over the summer/holiday season while we go traveling in our camper. That should give us around £12k a year on top of pensions etc. Unless the Spanish government screw that up for us.

For starters the Spanish Govt will issue you with a tax bill based on what they think you could have rented it out for - irrespective of how much rent you actually received. The same goes when you sell it. It goes downhill from there so unless you like playing roulette best avoid buying property in Spain for a while..

Don't have children, save plenty, give up early. My Dad supported a wife and family on 40y work, simple maths says a typical working DINKY couple should be able to retire after 20y each or even sooner. You do need to live well within your means for the 20y though, some people don't like that and some don't earn enough for it to be reasonable. But it's definitely possible for typical professional salaries.

Having children doesn't preclude you from not spending too much.

It goes downhill from there so unless you like playing roulette best avoid buying property in Spain for a while..

A skint country won't be too happy with foreigners taking their assets for their own gain either. Unless you're the UK government that is 🙂 although the mood music's changing here somewhat...

I have an RAF pension that will pay out £10k/year from 65. My company pension should reach a pot of @£700k, which I plan to take 25% tax free, and draw an income maintaining under higher rate tax. When the State Pension (+S2P) kicks in I plan to adjust the amount I draw down from my pot.

The mortgage will be gone by 65, and my wife will also have a reasonable company pension.

simple maths says a typical working DINKY couple should be able to retire after 20y each or even sooner.

Only of you plan to live till you're 50!

No way could a typical couple save enough in 20 years to last a possible 40yr+ retirement in any form of comfort.

Thank you so much everyone - I am learning a lot here.

Spend one salary, save one. 20 years at 40k average is over a million quid (compounding the investment income). A million quid invested in shares is 25-30k income for ever, roughly index-linked. Rough numbers but not that unreasonable. You can always top it up with a bit of checkout work if money gets tight.

Spend one salary, save one. 20 years at 40k average...

Which means that 2nd income is 50k before tax, putting you in the top 6% of UK household income earners

First salary has to be 60-70k to support 2 people comfortably. 70k puts you in top 2%

so, yes. Not that unreasonable if you're one of the richest in the country, get to a mid-level management role before you're 30 and stay there for 20+ years with no career gaps or changes 🙂

median UK household income is c £26k btw...

Well if you think you need 60-70k as a couple to live comfortably, I agree it's unlikely to work for you. As you point out yourself, the vast majority survive on a whole lot less...

I'm not trying to make a sweeping judgement here, so please don't attack the following as a generic statement.

When I got married I was in the company final salary pension which were part of my terms and conditions, so I was fortunate enough to have contributed into a final salary pension for 24 years. The company closed down with redundancy and everyone lost their jobs.

In this time, we started a family, my wife gave up work to look after what turned into 3 children eventually, we sold the car as we couldn't afford to run it, or replace it.

Al the time I was contributing to the company pension and making some additional contributions.

When I left, I was then in money purchase pensions in a few companies, again always paid a little extra in additional contributions, still didn't have a car , hardly any holidays, but very little debt and a reasonable mortgage .

Things eventually sorted themselves out in my 50's , but I was still making quite high additional contributions which have enabled me to retire early on the strength of my pension activity over say 40 years.

My reflection on my younger working friends portrays a very different picture.
High mortgages, holidays, cars, a lot of expenditure on lifestyle purchases, no pension payments even into their 30's as they see this as something they cannot afford.
Most were envious of me retiring at a relatively young age, and not having any debt and a reasonably comfortable lifestyle, not extravagant though.

I don't blame them entirely, but the erosion of final salary pensions and general workplace benefits compared to the 70's and 80's is stark in contrast.

It takes a long time to accumulate a reasonable pension pot, and early sacrifices have to be made.

Obviously, this isn't totally representative of everyone, but I believe it is more common than not.

The times have changed, and they will change in the near(ish) future I am sure.

Plan to quit work at 58 on a full 2/3 final salery pension.

Public sector but not on final salary... (GP). Would have had a rather good pension but a chunk of the money goes to soon to be ex wife. And that's ok. It's hers. Then there are the changes in annual and lifetime allowance by HMRC. These are not only stopping pension contributions but encouraging a lot of my colleagues to retire or go part-time early. So don't believe any of this "we will employ 5000 more GPs crap... There will be 5000 less...

I was going to go at 60 in 6 years. Now will be another few after that, but younger partner so all good 🙂

Had a pension but can't afford one now since buying a house.
Not really thinking about the future, as we're just trying to enjoy our time at the moment. I'm sure everyone won't agree but I've known a few people who've saved all their life for retirement and dropped dead a few months after realising their dream.
Don't worry, we won't be a drain on the system, as we don't have kids so hopefully will have some equity to release in our old age.
I'm sure there are plenty of people like us who have a choice of living life comfortably now or struggling to save for a pension.
We can't do both.

36, Defined benefit pension worth 12k pa index linked so far, plus a pot of £40k from previous employment. Expecting to work another 30yrs so thinking I should be fairly comfortable unless something untoward happens. I plan to increase the amount I pay into the pension this year to get the most of the current tax boundaries and child benefit. Run a 16yr old car and still live in a cheap property (though wife wants to change that). Most of my mates have new bmws huge mortgages and no pension. They are banking on property and inheritance. That might work for a few of them....

[i]Ok well done its doable at that price. If its a home too go for it but as a standalone investment a london flat easily outperforms a spanish holiday rental. [/i]

It will be a home first, any money we make on it will be a bonus so if we don't make £12k its not a big issue.

[i]For starters the Spanish Govt will issue you with a tax bill based on what they think you could have rented it out for - irrespective of how much rent you actually received. The same goes when you sell it. It goes downhill from there so unless you like playing roulette best avoid buying property in Spain for a while.[/i]

We won't be looking to do that for around 5 years but if Spain isn't a good option at the time we'll look elswhere, lake district or the dales are also on the possible list. But as I said the income we would make on it isn't factored into what we'll need.

BTL about to pop? People have been saying that for years. One property I have I bought 20 years ago and its quadrupled in value - I'm not going to lose on that and I won't be selling it anyway. The other I've had for 13 years but I'll be selling that within the next couple of years to release the capital for another project.

[i]I need something like £1-1.25m pot for £30k pension a year, which is £500/month now.[/i]

How many years are you planning on working for to get £500 a month up to £1million? I presume that £500 will be matched by your employer but even then thats a struggle.

My pension plan....

[img] [/img]

😀

Pensions? Simple, put money away every month (even just to get the tax saving) and if you can find someone else to also do it for you great.

I feel sorry though for younger folk as at least I'm old enough to have benefited from final-salary schemes plus senior enough when money-purchase schemes came along to have had a decent percentages (of high salaries) put in by the company.

Oh, and you need a pot of £35k just to generate £1k pa - so while £500k sounds a lot, it'll only generate a £14k pa pension (which you'll be taxed on).

[i]Oh, and you need a pot of £35k just to generate £1k pa - so while £500k sounds a lot, it'll only generate a £14k pa pension (which you'll be taxed on). [/i]

Based on an annuity though.

If you have £500,000 in your pension pot, and take out the 25% tax free lump sum if you need it. That would leave £375,000 to drawdown from with the capital continuing to grow. Now if its growing at just 4% a year that's £15,000 per annum before taking any money out the capital.

Oh, and you need a pot of £35k just to generate £1k pa

That depends on what type of annuity you want to buy. If you want a 3% increase p.a. from the age of 55 then yeah that's what it will cost you. If on the other hand you go for a fixed rate with no guarantees and at 65 it will buy you about double that.

http://www.sharingpensions.co.uk/annuity_rates.htm

Edit. This assumes that you will be buying "today"

You never know, the Tories might actually privatise the NHS and end free health care for all, which could see annuity rates go up as life expectancy starts falling again in the UK!

@footflaps brilliant idea, i'm voting tory then.

how much does health insurance cost a 70 years old?

The fact that UK property has only once gone up continually for 15 years, which is what we've just had - it has a cycle of boom and bust historically. Remember 1989?

if you bought an average property at the absolute worst possible point of the 1980s (i.e. in 1988) it would have cost you £62K. You'd have paid off the mortgage in 2013, and you'd now have an asset worth £180K that's bringing in £750 a month (perhaps minus agent's fees).

Sounds alright to me....

I'm working on the assumption that it'll all have gone a bit Logans Run before I reach retirerment age

[img] [/img]

Original plan was to join the army then become a mercenary when I came out - could see myself making it much past 45...

Tinnitus put paid to that idea 🙁

I'm working on the assumption that it'll all have gone a bit Logans Run before I reach retirerment age

You're planning on running off with Jenny Agutter? Good plan!

[img] [/img]

nurse!!!!!

How many years are you planning on working for to get £500 a month up to £1million?

Including capital growth of say 7% - 40 years would be more than enough.

[i]Including capital growth of say 7% - 40 years would be more than enough.[/i]

Yes that's what I was thinking. But I'd rather retire at 55 and have a bit less in the pot than slog along till I'm 65.

That must also be a fairly high salary for a 25 year old to be able to put £500 a month in a pension and have it matched by the employer.

Most would be paying of mortgage in earlier years - best that way IMO, also best to wait until on higher tax rate.

I paid of mortgage then put lump sums into SIPP, using 40% tax, and ISAs. Hard to get the balance right between enjoying money whilst young enough to take full advantage, and having enough to be comfortable later.

Grabbing an online calculator shows I should be saving £1k/month inc 20% tax back to get c 25k/year. Not a massive amount to live off at all. I'm 42 and have been paying into a personal pension every month for 15 years but there's no way I can find £800k/month at current rent/house prices and I earn well and am pretty tight with my cash IMO...

Anyone who's not paying into a pension at all or hasn't worked through one of those calculators is insane... you do wonder if we're going to be faced with mass pensioner poverty in 20+ years time, when you see how much debt people are in and how little they're saving for retirement or assuming they can just use their house as a nest egg...

I'm 39 and have 17 years of pension payments totalling £80k, now I'm running my own Ltd company I've just started a SIPP which I plan to sweep all excess profits in to - about £15k a year. That should get to about £500k of pension pot plus any future inheritance plus released equity from downsizing in later retirement.
Our first child is due in October which may screw up my savings plan though...

I get the impression that most people my age and younger are going to be screwed come retirement age.