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Don’t forget to take inflation into account. For your £43,000/yr “comfortable” figure you’d actually need an income of ~£92,000 if you retire in 30 years in order to enjoy the same spending power.
There’s a reason your MP’s final salary pension scheme is index-linked.
inflation works both ways though - for sure the actual income you need is higher, but your input salary would have risen by an equivilent amount. Additionally, any debts you hold (such as mortgage) inflate away, so whilst £1000/month today might be a pinch, in 20 years time, its the equivilent of approx half that, leaving you with more space to invest in your pension
for sure, saving into a pension is hard, but life is all about compromises, at every income interval
inflation works both ways though – for sure the actual income you need is higher, but your input salary would have risen by an equivalent amount.
Really? I got a 3% raise last year and I'm expecting the same this year.
Really? I got a 3% raise last year and I’m expecting the same this year.
Agreed. Over a decade since my last pay rise. It'll only happen when minimum wage catches me I reckon. Doubt I'm unique.
Also bear in mind that the compounding has most effect on the early years when salary is likely to be some way below the median and pension contributions commensurately smaller too. I don't think 5% above inflation is a realistic return anyway though.
Most people earn much less than the average salary (mean) The modal salary is £23300.
Sauce https://rohan-tangri.medium.com/fooled-by-the-average-f254ff9bc08c
The only plausible way for an average earner to have amassed that sort of wealth is through highly geared investment in the housing bubble, which of course plenty of people have done, but that opportunity doesn't exist for everyone. (Or inheritance from rich relatives of course.)
I'm not working until im 71, f that. The only thing that makes work tolerable for 8hrs a day is counting down to the weekend and the idea of being able to retire and doing what I actually want to do 5 days of the week.
The only plausible way for an average earner to have amassed that sort of wealth is through highly geared investment in the housing bubble,
sounds awesome, where do I sign up? 1992? 😉
Over a decade since my last pay rise. It’ll only happen when minimum wage catches me I reckon. Doubt I’m unique.
An admin at work was somewhat bitter when she said that 30 years in the civil service had finally seen her salary come down to the minimum wage.
for sure, saving into a pension is hard, but life is all about compromises, at every income interval
Agreed. Few people understand the tough decisions I face chosing which Ferrari will be my next n+1.
I can see a lot of civil unrest down line as wealth is hoovered up by the minority creating a huge divide.
greed. Few people understand the tough decisions I face chosing which Ferrari will be my next n+1.
I'm sorry to hear you're having to slum it with the Prancing Horse, can we set up a Gofundme to help you get into something desirable?
I didn’t save all my money when I was a working teen. But I already started the first of my pension plans . Traded shares on the stock market, was lucky enough to stag a few good ones and was lucky enough to make thousands.
and the award for worlds most boring teenager goes to…
for sure, saving into a pension is hard, but life is all about compromises, at every income interval
What an utterly ridiculous statement. There are some extremely naive and fortunate/ignorant posts on this thread. Wild guess here, but you’ve never lived on or below the breadline have you?
In theory I'm ploughing thousands into my pension every year and should end up somewhere a bit below the moderate picture above. This means I drive a 15 year old banger instead of a nice Merc or whatever. However I will be extremely surprised if there isn't a tax raid on my pension before I get to use it. I reckon this'll be coming before I get my pension (aged 42):
- no state pension if you've over a certain amount of private pension or savings
- decent sized tax raid before I get it (maybe a 1% yearly tax from what the think tanks are publishing)
- end of tax free lump sum
- pension tax relief will be cut to 20% within a decade
- pension included in inheritance tax when you die (I believe it's excluded at the moment)
- ability to take private pension pushed into mid 60s
- all those freebies pensioners get gone (bus passes, free swimming etc)
Pretty sangine about it, I believe in progressive taxation and the money has to come from somewhere. I'll be bitter if NHS is totally gone tho but that point.
I often do wonder how many normal folk have amassed a pension pot >£750k or so when they retire. That seems to be the number bandied about for a moderate type existence, with £1M+ for comfortable, whatever that is.
I might get part way to the lower number, with a fair wind and a lot of luck, though being in my late 50’s time isn't on my side.
Most people earn much less than the average salary
Yup.... Averages are bolleaux.... The majority of people are earning way below the average.
I often do wonder how many normal folk have amassed a pension pot >£750k or so when they retire.
A bit less money spent on multiple new cars and multiple high end bikes might have put you in the same situation? There is nothing wrong with having those things, but we all choose our compromises (those of us in a fortunate position to be able to afford expensive toys or putting money into a pension - clearly this isn’t everyone)
A bit less money spent on multiple new cars and multiple high end bikes might have put you in the same situation?
I presume you know me ? …. 😁
😀 You do always seem to have nice bikes and cars, nowt wrong with that, there no guarantee any of us will make it to retirement
Many folks a generation ago didn't enter the workforce in their mid to late 20s.
The idea that everyone needed to go to university in order to get a job is massively flawed.
I started part-time work at 16 and was guilty self employed at 20. Many of my friends didn't start work until they were finished with uni, so mid 20s.
In Germany the age that university students start work proper is closer to 30 than 20.
The majority of people are earning way below the average.
I think most of the average salaries people have referred to in this thread is the median (which is what the media and ons use), so by definition the majority won't be earning below that as it's the mid point.
As soon as I can unlock my pension I’m going after it. Whether that is to fully retire I’m yet to see but I’ll use it to reduce hours/change jobs so I’ve more free time. If it runs out 80’s plus, well meh.
Ya think?
Christ sometimes I am honestly glad I have no money if sounds quite stressful worrying about amassing a million quid 😄
This thread has turned into an absolute trainwreck since Krypton posted those bloody stupid numbers without any of the obviously essential info about what they actually are for....
Also loving Ewan's contribution 🙂
I'm ****ing loaded, all you poor people are ****ed"
Thanks Ewan 🙂
Wild guess here, but you’ve never lived on or below the breadline have you?
I was a self-funded student for 3 years, living off £4k per year which I earned by working minimum wage job at the local supermarket, and after that my first job paid £15k/year (equivilent to £24k/year now, so just above minimum wage) for a couple of years. So I'm pretty familiar with the idea, yep. £32k (as suggested above) is not on or below the breadline.
posted those bloody stupid numbers
The were from Sky news and from the same sources posted by others later on, sorry but I often read STW during the 20 mins I have to eat breakfast, I don't have time to do the full research.
I'm usually pretty good with numbers, but pensions baffle the bejesus out of me. DB, salary sacrifice, employer matched (up to a value) AVCs, index linked. Pot to be worth X, with drawdown Y but with inflation, its really Y*1.0(AvInf)^n....Gosh it's complicated.
Ploughing "thousands" in each year doesn't really square with the million figure.
Tens of thousands, perhaps.
Few people have that sort of disposable income. For those that do, great.
Chuff my pension will have me in squalid poverty after 30 years of teaching, according to the numbers up there.
You need to consider how compound interest works.
Something like 6k a year for 40yrs would have you over a million. Using a modest figure around 7% year on year.
Inflation would obviously ruin a lot of that return mind.
Average pension pot when retiring is about 70K currently I think?
Just under 20% have no pension pot at all.
I think that if you're on course for £1 million in a pension pot, then a good dose of humility is probably the order of the day.
My parents have retired on the state pension and have a very modest amount of savings (think 1 year of median salary as a ballpark). I'll be honest, I really worry about them.
Did I hear correctly on the news tonight that for a woman to achieve a comfortable retirement according to those figures she would have to start saving from the age of 3 ? 🤔
Something like 6k a year for 40yrs
Yet how many people can afford to save/invest that from an assumed working age of 20..... (£500 a month).
I was a self-funded student for 3 years, living off £4k per year which I earned by working minimum wage job at the local supermarket, and after that my first job paid £15k/year (equivilent to £24k/year now, so just above minimum wage) for a couple of years. So I’m pretty familiar with the idea, yep. £32k (as suggested above) is not on or below the breadline.
Given that fact does your previous post make any sense then? You speak of compromise at every level, yet still seem to not understand that compromise for some, including me at one point, is eat or have power. Where does putting money aside for a pension fall in that equation?
My first job paid £35 per week on a YTS scheme. When they took me on it was a £1 an hour. Had to rent a house at 17. Saving wasn’t in my vocabulary until my mid 20’s
£500/mth for 45 years at 5% compounded will generate c£1.1 million.
Who has £500 month to save?
@Ewan the £38800 figure is the mean, the median is £29900, the mode is £23200.
I earn less than the mode, work till I am 71 I can't see any attractive alternative. Hope my health holds out but you know the low wages and poor health thing
More to the point, who had 500 quid per month spare 45 years ago when the typical gross salary was probably around 10k pa? (Wild guess someone can look it up if they care).
In 26 years your million won’t be worth anything like the million that’s being talked about for someone retiring today.
In 26 years your million won’t be worth anything like the million that’s being talked about for someone retiring today
Yeah. I'll admit I've not tried modelling that / understand. I say model, I've just got a spreadsheet which increases the size by an average of 5% each year which I got by average stock market increase (7% pa) minus 2% for average inflation which I figured allowed me to stay in today's money. I'm guessing that's wrong - what's the correct way to do it?
Given that fact does your previous post make any sense then? You speak of compromise at every level, yet still seem to not understand that compromise for some, including me at one point, is eat or have power. Where does putting money aside for a pension fall in that equation?
this is what the state pension and auto-enrollment attempts to solve for. It doesn't give a comfortable retirement, but you probably have a similar retirement to the working life you had.
Compromise exists more when you're earning a little more, and you're choosing between having a nicer life now or a nicer life later. That is where compromise starts to come in. You might not think that on, say, £30k you can afford to save anything, and I'd agree it would be tough, but if its possible to live on £29k (and most would agree it is), its possible to save £1k/year.
That's a simple model but will, probably, produce a reasonable estimate.
As for having a pension pot worth £1 million today - assume...45 year working life as an employee (self employment and personal pensions are outside of this), reasonable progression/promotion, annual salary increases broadly equal to inflation, employee and employers combined contributions of 10% throughout, compound interest.
That will produce £1 million.
All are reasonable assumptions looking into the past; as for the future, that will be different - possibly very different.
Not to underestimate the task of accumulating a pension pot, but just a reminder that the state pension is c£12k (I think), which an actuary will tell you is worth £240k as a pot of valued at 20x that payment (or £300k as implied by a 4% withdrawal rate). And that payment is currently index linked and guaranteed for life. Not enough if you have nothing else but does need to be bought into calculations.
I don't think it'll still exist in its current form when I retire. It'll be means tested and not start to 75.