My current pension statement value, good or bad for my age?

I got a pension statement recently and the value was £43,000. At age 43 (in August) is that considered good or bad? Well below average? I really have no idea if I'm seriously behind the average, or if that's considered to be a perfectly respectable amount. I certainly don't expect it to be thought of as a high amount.

I only contributed to it between 1990 and 1995 and have no plans to add more to it. I just plan to let it grow and see how it goes.

Well, there's also the possibility that I might transfer it out of the country to an offshore pension, but assuming I don't, and I leave it to just fester until I'm old enough to take something from it, how does it look with that amount ?
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  • CLAPTON
    CLAPTON Posts: 41,865
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    obviously depends upon how is grows and when you want to retire but in broad terms if you want an index liked annunity then assume 3% i.e. about 108 per month
  • dunstonh
    dunstonh Posts: 116,038
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    I got a pension statement recently and the value was £43,000. At age 43 (in August) is that considered good or bad? Well below average?

    As Clapton says, it depends. If you want a decent income and intend to contribute towards a decent income in retirement then its low. However, its above the national average so that would make it but thats because most people dont fund enough or use multiple providers or pensions.

    If you were retired now, that would provide around £2150 a year
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jamesd
    jamesd Posts: 26,103
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    If it grew by 2% over inflation you'd have 68,000 in current value, enough for 3,400 a year at age 66 assuming 5% of the capital is available for income.

    Add 100 a month and increase that with inflation and it rises to 103,000 and 5,150. At 200 a month it could be 138,000 and 6,900 a year.

    Add say 5,500 for basic state pension and 2,000 for additional state pension (SERPS and S2P, but you may have no or more or less S2P) and the basic state pension is a guess at possible future value.

    Pay careful attention to a good range of investments and you could well do significantly better than these numbers 4-7% above inflation is possible. Ignore the investments choices and changes or use a poor selection and you could do worse.
  • d4005
    d4005 Posts: 18 Forumite
    Thanks for the replies guys.
    dunstonh wrote:
    If you were retired now, that would provide around £2150 a year
    Wow, and that's assuming a retirement at the proper age. If I were to retire about 10 years earlier than that, then I can pretty much figure on getting half that amount. So I'd be looking at around £100/month in today's terms. You see, this is why I regret contributing anything into a pension at all. It just seems such a bad idea. I definitely need to see about getting that money out and into a savings account.

    I'd rather just save and save, up until the age I choose to retire and then just live off my savings. That's what I've been doing since I quit contributing to the pension in around 1995, saving as much as I can. With no debts at all and having filled up my "protected limit of £30k" in 4 major institutions (and this year I'll be looking for a 5th), I think I'm well on my way.

    As much as possible, I'll try to avoid using up more than I'm earning in interest during my retirement, but a steady SLOW decline of maybe 5% per year is fine. I'm not expecting to live to 70. I reckon I'll have done well if I reach 65 with the way I'm going (diet, exercise, weight, family history, etc). So my unofficial plan is to give up work as near to 50 as I can, and enjoy my last 10-15 years.
  • jamesd
    jamesd Posts: 26,103
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    d4005, using the same basis as the pension numbers, you'd get about 1% of the capital as income if you used savings accounts, since the pension numbers are cautious numbers for income available after allowing for inflation. You can substantially increase that by using investments like those used in pensions instead of savings accounts.

    You'll be able to take 25% of the pension value as cash once you're 55 and take an income from the remaining 75%. The pension system is designed to prevent people from assuming a short life expectancy and leaving themselves poorer in older age if they don't die as quickly as they assume.

    Regardless of your expectations, though, it's usually foolish in financial planning to bet on only one outcome. Better to arrange a pension income sufficient to provide for your needs if you don't die quickly and also to have other plans for the die quickly case. That way you won't lose completely whichever outcome happens.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    If you invested the 43k for 20 years, adding nothing further and achieving an average return of 7% p.a., you would have a pot of 166,396 at age 63, which would generate an (taxable)income of around 11-12k p.a depending on how you arranged it.

    If the same pot were to grow by an average of 10% p.a, the final pot size would be 289,282, and your potential income would be in the 21-22k range.

    These figures are not adjusted for inflation.(If you reckon 3% inflation over the period then the income from pot no 1 is what you will get from pot no 2 in real terms).

    But they do show the importance of getting the money well invested and to reduce wastage through charges as much as possible. Even a 1% reduction in charges can make a major difference over 20 years.

    The cheapest way to invest a pension is to open a low cost online SIPP with no annual feee, buy a portfolio of diversified blue chip shares and annually reinvest the dividends.Do not trade the portfolio and you will incur no other costs.

    When you want to retire, put the SIPP into drawdown, take 25% in cash by selling some of your holdings, and then draw the dividends as your income.
    Trying to keep it simple...;)
  • d4005
    d4005 Posts: 18 Forumite
    Thanks Ed and James for those most recent replies. I know you guys are trying to keep it simple, but for me that's not simple enough :confused: A lot of these terms are going over my head :o

    Here's what I've decided I'm going to do, and what I think gives me most flexibility between now and the time I plan to quit work.

    (a) not bother to pay the remaining 17 years of NIC contris that I'd need to get my state pension (I'm the one working abroad remember).

    (b) not contribute any more to my personal pension.

    (c) try my best to get the current value out of my personal pension and into investments (or a savings account).

    (d) save save save

    I figure that in 7 years time, I hope to have about £300k in savings (I'm half way there and think I can make the other half over the next 7 years, saving £25k/year is achievable fairly easily at the moment. Assuming a 5% interest rate on savings in 7 years time, that would be £15k/year. That's way more than enough for a comfortable retirement. Even if I wasn't earning any interest, it would take 20 years to withdraw 300k at 15k/year. Considering that the interest will be continuously being added, I'm sure it goes well beyond 30 years.

    So is there something wrong with my logic? In 7 years time, with 300k saved, and at age 50, I can retire comfortably and live off it for well over 20 years. Being frugal and not using up that whole 15k/year, and withdrawing some of it and putting it into things like Tessas, I can probably manage to prevent that capital amount from hardly coming down at all.

    Compare that strategy to putting money into a pension. First of all, I don't get 100% of what I'm due until I'm 67 (that's 17 years too late for my liking). I can take something from age 55 (that's still 5 years too late), but it's going to work out to be less than half. I'm pretty sure that I'd be lucky to get £5k/year out of it.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    d4005 wrote: »
    (a) not bother to pay the remaining 17 years of NIC contris that I'd need to get my state pension (I'm the one working abroad remember).

    For an expat this is a silly decision as you're missing the pension bargain of the century.
    (b) not contribute any more to my personal pension.

    This is correct as there is no tax benefit because you are overseas.
    (c) try my best to get the current value out of my personal pension and into investments (or a savings account).

    Probably easier to leave it there to grow, as you're not sure what country you'll end up in and returns in Europe for cautious investments tend to be lower.
    (d) save save save

    Very good idea of course ( though it should be invest, not save.)

    I figure that in 7 years time, I hope to have about £300k in savings (I'm half way there and think I can make the other half over the next 7 years, saving £25k/year is achievable fairly easily at the moment. Assuming a 5% interest rate on savings in 7 years time, that would be £15k/year.[/quote]

    Not after inflation and tax it wouldn't.
    That's way more than enough for a comfortable retirement. Even if I wasn't earning any interest, it would take 20 years to withdraw 300k at 15k/year. Considering that the interest will be continuously being added, I'm sure it goes well beyond 30 years.

    I thought you would be withdrawing the interest to live on?

    Have you checked out when you might die?

    http://www.deathclock.com/

    You don't mention what you will get from your German state pension either.Do you have any idea?

    Along with the UK state pension if you fund it, it might be enough to make your plan work - otherwise you will run out of money for sure.
    Trying to keep it simple...;)
  • d4005
    d4005 Posts: 18 Forumite
    EdInvestor wrote:
    For an expat this [not paying NIC to get state pension] is a silly decision as you're missing the pension bargain of the century. You don't mention what you will get from your German state pension either.Do you have any idea?
    Having seen the amounts these state pensions pay out, I really don't feel like I'm missing anything. I also really like the idea of having my cash available for whatever reason I might need it, instead of sending it into something that's a black hole until age 66 or 67, which is already more than 15 years into my retirement if things go according to plan. All the money I avoid paying into pensions now, will directly go to bringing the day I can retire earlier. OK, a tenner a month doesn't sound like much, but that's close to a thousand over the next 7 years, and it's not like I'm frittering it away instead of contributing. I'd agree it's worth doing if it was just a few years of contris I'd need to do, but we're looking at 16 or 17 years. That's 10 years into my retirement.
    EdInvestor wrote:
    Probably easier to leave it [my UK personal pension] there to grow, as you're not sure what country you'll end up in and returns in Europe for cautious investments tend to be lower.
    On the other hand, getting it out and putting it direct into my unofficial savings-style pension means that I get to start using it at age 50, instead of 55 (at 50% or 66 at 100%).
    EdInvestor wrote:
    d4005 wrote:
    I figure that in 7 years time, I hope to have about £300k in savings (I'm half way there and think I can make the other half over the next 7 years, saving £25k/year is achievable fairly easily at the moment. Assuming a 5% interest rate on savings in 7 years time, that would be £15k/year.
    Not after inflation and tax it wouldn't.
    Things don't change all that much in 7 years. It'll be near enough :)
    EdInvestor wrote:
    I thought you would be withdrawing the interest to live on?
    I don't expect to use up all of the interest. It's not like I'll have the interest paid to me and use it all up each month. I'll draw out money as I need it, and hope to draw out less than I'm making in interest, and occasionally more than the interest. So yes, the principal amount will tend downwards, but I can control the speed of that. I'm expecting that I'll know how healthy I'm feeling in my retirement, and whether I think the amount could run out before I'm ready to pop my clogs.

    If, for arguments sake, I am getting 15k/year in interest, and I'm using say one year 12k, one year 20k, one year 18k, one year 14k. As long as I'm not dramatically over that interest figure constantly, then I'll keep either the same savings amount, grow slightly, or decline slightly. I'll just keep an eye on it.
    EdInvestor wrote:
    Have you checked out when you might die? http://www.deathclock.com/
    Cute :T It says I've got until 2053. It's not a serious tool though.
    EdInvestor wrote:
    [fund state pensions] otherwise you will run out of money for sure.
    It'll just take careful managing, budgeting and monitoring of the trend.
  • Dithering_Dad
    Dithering_Dad Posts: 4,554
    Mortgage-free Glee!
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    Brilliant. Scrimp and save while you're working then scrimp and save when you retire, hoping that you die before your money runs out. What a great life you'll have lived!
    Mortgage Free in 3 Years (Apr 2007 / Currently / Δ Difference)
    [strike]● Interest Only Pt: £36,924.12 / £ - - - - 1.00 / Δ £36,923.12[/strike] - Paid off! Yay!! :)
    ● Home Extension: £48,468.07 / £44,435.42 / Δ £4032.65
    ● Repayment Part: £64,331.11 / £59,877.15 / Δ £4453.96
    Total Mortgage Debt: £149,723.30 / £104,313.57 / Δ £45,409.73
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