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[quote[I’m on a civil service pension – alpha, it is based on ‘normal retirement age’ which is currently 68.
If I read it correctly, and I’m hoping I’m wrong, if the state pension age moves to 71, so does alpha. So it instantly devalues your accrued benefits. Roughly for 4% for every year. So civil servants on this scheme will suddenly see their pension pot devalue by approx 12%.
I’m really hoping I’m wrong. I’ve kind of accepted state pension will be unlikley by the time I get there, but I didn’t factor in that I’d get hit with a 12% reduction on the pot I have been paying into (if I try to retire at 68).
Got to be alot of people in the same boat.
@DT78 unfortunately, you're exactly right (see my post to poly earlier in the thread).
It's not just true of Civil Service pensions though, this is essentially across the board*. See, for example, this post from Hargreaves Lansdown on their SIPP: Can I withdraw my money at any time? (hl.co.uk)
"Can I withdraw my money at any time?
No. Once invested in a pension you cannot normally access the money until age 55. The minimum age will rise to 57 in 2028 and then in line with increases in the state pension age, remaining 10 years below (for example if the state pension age rises to 68, the minimum retirement age will rise to 58)."
* It wouldn't surprise me if pensions for the uber priviledged - CEOs, MPs etc, still have a fixed retirement age of 60. I haven't looked into this.
65 years.
i have used this, which was posted on here a while back :
Will give it a try. Have just noted that the 59k mentioned above for 'comfortable' is *after tax*. Lol.
There’s also the option of drawing a pension early. Yes, you may get penalties, but you could be recieving it for a fair few years at a reduced rate that is worth more overall than a scenario where you may only get 1 or 2 years at your official retirement age only to go and pop yer clogs!
Yep, I took out the tax free amount at 55 and am using it to build an extension and pay most of mortgage off.
I can then save the money I would have been paying on mortgage while having a very big new kitchen/lounge room where I will spend most of my time in until retirement and after so why wait.
Current lifestyle costs us as a couple ~22k a year and that includes private health care, occasional meals out, servicing our vehicle, fuel and bike park tickets.
How TF do 2 of you live in Germany for £22k - or is "lifestyle costs" stuff over & above basic subsistence rent/food/etc etc?
How TF do 2 of you live in Germany for £22k – or is “lifestyle costs” stuff over & above basic subsistence rent/food/etc etc?
I believe it involves living in a van, so no rent/mortgage/fixing the roof etc?
Just looked up some stats. Average pension income for a couple in 2022 was £515/week (after tax & housing).
97% of pensioners were getting state pension, at an average of £195 a week.
So our couple had additional income (after tax/housing) of £62.50/week, or £3,250 pa each.
Which gives a bit of context some of the numbers bandied about on this thread!
I agree that some people can do it Ewan, but it's a small minority. 2% inflation may be optimistic. First site I googled suggested about 6% over the past 50 years and 3% over the past 25 (1 pound in 2019 worth 16 in 1969, 1.06^50 = 18ish. Also worth 2 pounds in 1994, 1.03^25 = 2ish)
I have been doing some retirement planning recently and the question I really struggle with is how much will I need when retired. Honestly, I have no idea. I won't have a mortgage or kids at home but I will also be at home all day so I assume I will need money to do stuff.
Outside of family stuff that I wont be doing, my weekends are currently spent riding my bike, walking and popping to the pub for a post ride/walk pint and possibly a burger. I doubt I will have the energy to do that 7 days a week so what else will I do? Cinema, learn to play the flute, fly a jet, I have no idea and therefore how much it will cost.
I'd prefer not to have to sit in the dark and cold eating value beans on toast but I don't need to be on a Caribbean cruise for 4 months of the year.
spreadsheets you can download online?
Not aware of any but when I have tried to use templates in the past I have ended up spending so much time changing calcs and formulas it was best to build my own, they are very personal to you anyway.
I would suggest deciding how much spare cash you want each month, say £1500 for beer, days out, meals etc. Things that are not fixed or predictable. Then work back from that.
A tab for every years outgoings, obviously reducing in accuracy as they go further into the future but including all of the items you can predict. Loans, Mortgage, utility bills, fuel and food cost estimates etc. So take your month now and extrapolate. Build in increases as you know them, eg Council tax will increase by 5% pa without doubt and your mortgage will end at some point. Build in inflation etc for items impacted by it (easy to build a number and link a formula for all items effected) It cant be 100% accurate but is the best you can predict. Estimate costs for vehicle purchase, service, tax etc as well as holiday funds, annual subscriptions and so on. You will then see quite accurately how much you need. Add that to your spare cash fund above and that is how much you need per month/year.
Then estimate your income streams from maturing pensions, lump sums etc, including state pension (build in increases here) and you will see your income ebb and flow over the years and how you can support those outgoings. As above mine (I am 59 and retired) are high for the next 3 years, lower for a few after that then by the time I am drawing my state pension I will have happily spent around 50% of (our) SIPP and ISA pot by which time (assuming 4%) it will have started to grow again.
Just looked up some stats. Average pension income for a couple in 2022 was £515/week (after tax & housing).
97% of pensioners were getting state pension, at an average of £195 a week.
So our couple had additional income (after tax/housing) of £62.50/week, or £3,250 pa each.
Which gives a bit of context some of the numbers bandied about on this thread!
Not sure I understand what you mean - that link says 515 per week or 25k a year not including anything they spend on tax, rent, water rates and charges, structural insurance premiums, mortgage interest payments and ground rent, and service charges from income BHC.
That's more than the minimal income suggested earlier...
The Mccarthy and Stone flat usually has a hefty monthly service charge. And that will only get worse as care needs increase.
I don’t think i’ve done any detailed financial analysis (and it was pointed out it was wrong anyway on the last page – I’d like someone to tell me how to do it properly!). All i’ve got is a spreadsheet i track my pensions on and have extrapolated out at 5% growth (7% minus 2% for inflation) and current contributions and then two columns that shows what 3 or 4% of that total is.
I work on current money values based on the 'theory' that returns & inflation balance themselves out long-term.
Not perfect but near enough for a 'forecast' - also I assume taxation at current levels/percentages too.
The idea of not including the use of the capital to also spend also feels odd to me, yes understand that using it means that the returns fall, but aim to at least use the majority while you're alive.
And yes we do have kids, but no doubt they'll inherit from us at the age we inherited from our parents - when we were almost retired (and set up too) too.
Not sure I understand what you mean – that link says 515 per week or 25k a year not including anything they spend on tax, rent, water rates and charges, structural insurance premiums, mortgage interest payments and ground rent, and service charges from income BHC.
That’s more than the minimal income suggested earlier…
Yes, although with incomes of £12,500 each, no tax is payable anyway, and given the usual assumption here of mortgage being paid off, there would also be no mortgage interest either.
So yeah, it's a bit more than the absolute minimum suggested in that graphic. Or to put it another way, the average UK pensioner couple is about 40% below the level suggested for a 'moderate' lifestyle! So to refer to a previous question of yours, the number of people with £750k pension pots must be a very, very, enormously low percentage.
I am sure it has been asked - but how many people actually have such large pension pots?
I am assuming that this is partly the finance industry with a vested interest in selling everyone a pension doing their annual frightener so that more money is in their coffers. And of course those who work in financial services are earning way above average and live in that world. This for me is like the Times Money column - always someone earning a wedge, with parental help/inheritance, and never Neil in a council house in Stoke on an hourly shift rate of £11 and a debt on the car loan...
So yeah, it’s a bit more than the absolute minimum suggested in that graphic. Or to put it another way, the average UK pensioner couple is about 40% below the level suggested for a ‘moderate’ lifestyle! So to refer to a previous question of yours, the number of people with £750k pension pots must be a very, very, enormously low percentage.
Ok see what you mean, tho I think a lot of pensioner couples are probably one pension for two people. My parents are like that as our my wifes parents. Mum staying home to look after kids used to be the norm.
I think earlier it was shown that the average pension pot currently is 275k (presumably this is all pots not just ones currently paying out).
I think earlier it was shown that the average pension pot currently is 275k (presumably this is all pots not just ones currently paying out).
Of those already retired or everyone?
And how are they accounting for DB Pensions as these don't really have a 'pension pot' in the true sense like DC's do as it depends on how long you live (and then any spouse-type benefits).
Google brought this up, no where near the £275k, with only £37k for 55-68...
And how are they accounting for DB Pensions as these don’t really have a ‘pension pot’ in the true sense like DC’s do as it depends on how long you live (and then any spouse-type benefits).
I don't know the details of how it's reckoned up (no doubt an incredibly complicated actuarial process), but DB benefit pensions do all have an equivalent "pot size" calculated, because the lifetime cap of £1m still applies.
I know this as this thread made me check my Civil Service pension today, and I saw I'd used xx% of my lifetime pot.
I don’t know the details of how it’s reckoned up (no doubt an incredibly complicated actuarial process), but DB benefit pensions do all have an equivalent “pot size” calculated, because the lifetime cap of £1m still applies.
Yes, the 'calculation seems to value them at half a DC even if both pay out the same value of pension (pa) - based on comparing my multitude of DB's & DC's.
I still think all these average pots into the 100's of thousands are suspicious, it's almost like they're ignoring anyone with zero(ish).
The DB value calculation for lifetime allowance is quite simple.
20x annual payout + any lump sum value.
Although as lifetime allowance has been sacked off, it doesn’t matter now.
Apologies Ewan, I don't have a specific template to point to, and like others have alluded to, I think you'll end up making enough adjustments top one as to make it as efficient to try your own model.
When the taxman looks at DB schemes he will apply a 20x multiple to the annual DB pension you take at the outset to infer a pot size - £10k pa is deemed to be a £200k pot etc. If you have more than one DB scheme, the 20x multiplier is applied to each DB scheme and totted up. The state pension sits outside this framework, and doesn't enter the £1m Lifetime Allowance regime - i just referred to it earlier to highlight the value of it. When interest rates were much lower you could ask your DB provider to transfer an actuarially calculated pot to your SIPP and the multiplier was often much higher - think 40+x - but higher interest rates have killed off that game, but that does mean that £10k pa pension payment could have been worth nearly £500k as a pot (and I know a few people who did get those sort of numbers).
So a genuine question for the retired on here, how are you managing, how much are you actually needing to have a reasonable life and are you relativley happy.
I work in local council bereavement services, i observe mid seventies to be the most common number.
So a genuine question for the retired on here, how are you managing, how much are you actually needing to have a reasonable life and are you relativley happy.
I've just asked my mum who is 78 and in pretty good health. She has about £1600 per month inclusive of the state pension. She feels that she has a moderate lifestyle and that the numbers that were recently published about the income needed were vastly inflated. She's pretty happy I would say.
My understanding is that, actually, many people overestimate how much they're going to want to spend in later life.
I've retired twice 😉
First time I was 50, with a DB pension. I got a lot less than than I would have if I'd carried on another ten years but, with a working wife and then my income from some part-time jobs we've managed fine. My pension provides me with less than the average UK income, but it obviously helps that we paid off the mortgage upon my retirement.
I retired again at 60 - giving up my part-time work. Latterly, I'd been putting all of my wages into the Nest pension scheme as we were coping without them, so I've a wee lump sum to take from that at some point.
We're not big spenders though. A 10 year old Skoda and a 15 year old converted Trafic are our vehicles and I've not had a foreign holiday for about 6-7 years. Outside of our normal living costs, we support my daughter as best we can. Mrs S will be retiring in a couple of months, though is planning to work two days per week. My state pension will come through in November, though it'll be less than "normal" as I was contracted out for so long, so that'll make up any difference.
We're into outdoor activities - riding, running, walking, swimming etc and these can (save for the cost of equipment) mainly be done quite cheaply. We do like our cafe stops - both at home and away.
I worry about ongoing/increasing energy costs and we'll have to consider how we fund a replacement car at some point but we're not consciously penny-pinching on an ongoing basis.
Happy? Pretty much.
Thanks Kramer, one of the last things my dad said to me was he regretted that he worried far to much about money and worked too many hours and weekends because of it, he said turns out you dont need as much as you think, died at 73 with cancer, probably one of the healthiest fittest 73 year you could ever meet...mam also at 71 cancer...
Both my folks died of cancer - in their 80s. My BiL died of cancer in his early 60s. My wife was diagnosed with cancer 4 years ago but has had the treatment and a clean bill of health. The latter in particular does put savings and expenditure in a different light and she headed off to Australia for a month's holiday after being given the all-clear on the basis that there's nae pockets in a shroud 😂
All i’ve got is a spreadsheet i track my pensions on and have extrapolated out at 5% growth
@ewan 5% above inflation is a very optimistic figure to use, the reason drawdown is normally 4%ish is because inflation adjusted growth is slightly lower than that over the long term. I'd run your calls at 3.5-4% to get a more realistic pot figure
I think one of the main issues, some people are oblivious to pensions and how much is required. I know people that feel they’re ok as they are “paying into my company pension.” With absolutely no idea what that pot is going to give them or how to draw benefits.
Unfortunately I know people in their 50’s with literally no private pension. They’re just hoping for an inheritance to dig them out.
Yes, the ‘calculation seems to value them at half a DC even if both pay out the same value of pension (pa) – based on comparing my multitude of DB’s & DC’s.
This is my brother's, who is a pension actuary, rule of thumb. But as he says what do you expect when people who benefit from DB pensions draft the rules.
@ewan 5% above inflation is a very optimistic figure to use, the reason drawdown is normally 4%ish is because inflation adjusted growth is slightly lower than that over the long term. I’d run your calls at 3.5-4% to get a more realistic pot figure
Thanks I will update my yanky spreadsheet. If I do that do I have to worry about inflation making the amount worth less in the future? Ideally I want to see how much id have in today's money (i.e. in 26 years time I want whatever the equivalent of say 25k is today).
To those who mentioned it above the 275k average pot figure for couples was from the BBC article. I assume they valued dB pensions as well as dc ones.
Isn't this because, when you die, your defined benefit pension dies with you (except maybe a much smaller survivors benefit) whereas when a DC recipient dies, any remaining pot becomes part of their inheritance?
From an actuarial POV, they probably assume a lot of DB recipients actually die before they extract all the value of their pension...
(I'm guessing BTW)
EDIT: that's my response to Mefty
I've got several DC pensions from previous employments, plus my current one.
I'm planning for drawdown all the way due to the risk of checking out soon after purchasing an annuity.
E.g. my dad, on a great DB scheme, retired at 60 and was dead at 69. my mum still does get some pension from this...but overall my take-away is what looked good on paper for them is actually proving rather shit VFM.
Also worth noting that a pension pot can be inherited and is outside inheritance tax
So a genuine question for the retired on here, how are you managing, how much are you actually needing to have a reasonable life and are you relativley happy.
@EhWhoMe talking to my Mum, 78, she said you need less than you think you do. Her and my dad spent years going over figure/working out when they could stop and when they did they were surprised how well they did. When my dad was alive I believe they had a total income of mid to late £30k’s, ran a car, had holidays abroad etc. when my dad died 2 years ago her income fell to late £20k’s, no car now and holidays in the UK, shops in M+S, uses Gusto for her meals etc and in her words she ‘has more money than she needs’ and doesn’t worry about it.
Thanks Andy, this is why i asked the question, for real world answers and experiences...which adds context, like i have said previously it depends what you want and how you define happiness...
The richest man in the world is he who smiles the most..
I'm 68 State and Royal Mail pension are around £300 a week, wife gets State Pension in August so that'll make around £500 a week. She reckons then we will be able to start saving again and still have holidays .
We've made the most of in-laws inheritance over the last 2 years, new kitchen changing the car big holidays and setting aside money to cover loss of wife's income when she stopped working after her dad died .
I can see that when/ if i get to 70 next year 😳there will be certain things we won't want to do perhaps . For example last year we did an amazing trip to Canada and we both think that'll be our last long haul, it's sobering to think we'll never need another kitchen and certain other things , so outgoings should reduce replaced with more low key things. Not visiting garden centres or taking up crown green bowls though !
I'm doing an MTB week in Italy in June and I'm hoping to still do more like that the problem being getting insurance beyond 70
What rarely gets mentioned is if everyone is working who's volunteering? There are a lot of organisations that rely on volunteers and a lot of these volunteers are retired. Generally there is a drop off in people volunteering once you get over 75. Creeping the retirement age up means we are gradually cutting the time people have where they can choose to put back into society. Often putting back to cover off things lost due to a hollowed out public sector and austerity generally.
Thanks I will update my yanky spreadsheet. If I do that do I have to worry about inflation making the amount worth less in the future? Ideally I want to see how much id have in today’s money (i.e. in 26 years time I want whatever the equivalent of say 25k is today).
3.5% above inflation should be an extremely safe bet, no need to worry about inflation. Long term fund growth has been about 7%, long term inflation about 3%. Ultimately it's all a bit of a gamble
Ewan - the fact that you've made in effort to work up and manage a spreadsheet of projected post-pension income puts you waaay ahead of most of the population. You can re-model at any time using different assumptions; you can 'reverse engineer' your spreadsheet to calculate the approximate value; in N years, what would be the value of £x today (it's a very long time since I looked at NPV calcs and similar); change the assumptions - annual inflation rate, annual return etc - ad infinitum.
Have you taken into account fees - management/platform/others - in your calcs? They will erode some value if ypu haven't.
El Boufador - re inherited SIPP, you're not quite right; the actual legal position today is...Any money left in your SIPP when you die can normally be passed to your heirs free of inheritance tax. Any withdrawals they then make will usually be tax free if you died before you were 75. If you die when 75 or older, any withdrawals will be taxed as their income. There is more to it than that which you can check out, if you wish.
EhWhoMe - are you quoting Confucius with...The richest man in the world is he who smiles the most.. I'm not saying you - or he - are wrong...
From an actuarial POV, they probably assume a lot of DB recipients actually die before they extract all the value of their pension…
No because you will be comparing like v like - to value a DB pension on a market value basis you work out what it would cost to purchase an annuity which provides the same income stream and benefits. Like a DB pension, an annuity stops when you die. (obviously some DB pensions will provide for a surviving spouse pension and you would need an equivalent annuity so these would stop when both spouses are dead.) Drawdown is separate and relatively new but the Government are expecting people to spunk their money early through drawdown because their projections assume an increase in the tax take.
Frank, had to google that as not aware of who what that was..but no..just my own thought as far as i am aware...
How can you not know who Confucius was?
One of his best lines was...sex maniac must be f99999g crackers!
No idea, theres loads of people i dont know that i dont know of..
But thanks , ive just been reading some of his quotes....brilliant
@frankconway cheers yes you are correct re:IHT
Either way (tapping out pre 75 or after), it seems sensible to use a pension to avoid paying any tax (your income tax or kids' income tax) before you need to - unless you have a need for the ££££ before you hit the NMPA.
Just to correct my earlier Confucius reference...sex maniac in biscuit tin must be f99999g crackers; it wasn't him but sounds vaguely philosophical - and Chinese!
If you like Confucius, try Sun Tzu - Art of War; not readily quotable but...interesting. Don't go anywhere near the various Art of War books for business - american bollocks. None of those foreign bollocks over 'ere; Chinese bollocks - yeah, they're OK; well, Friday and Saturday nights but other than that...foreign bollocks.