People in their 30's - future financial plans?
Comments
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chucknorris wrote: »A 57th accrual is very generous:
Say her salary was £40k:
£40,000/57 = £701.75, that isn't a contribution of £701.75, it is what she will be paid every year in retirement, for every year that she works. If she worked for 40 years, her pension would be £28,070 per annum (it is obviously indexed, I am valuing it using current values and ignoring inflation). On my spreadsheet I use a multiplier of 28.5 (that is subjective based upon what my other investments pay and the risk, TPS is virtually risk free, like a Gov gilt). so using my multiplier of 28.5 her pension would be capitalised at just under £800k.
That makes much more sense. Wow, that is generous. I can now see why they work teachers to the point of mental breakdown.
So the 57th accrual rate, do her monthly contributions also accumulate and get added to the pot or is the 1/57th system the be all and end all and the monthly contribution is part payment for that as such? For example, what I and my e'er contribute gets added to a pot, receives a + or - % return based on where it is invested and that makes up the total pot for retirement. With the teacher's pension, let's say she earns 40k every year for 35 years, under the 1/57 accrual rules this equates to £24,561 per year - presumably this is all she gets and the monthly contributions will not necessarily marry up to this figure but are simply offsetting against the benefit she receives? Also, I saw somewhere that the e'er contributes ~16% per month - is this from a different scheme? Surely she does not get the £24,561 AND 35 years of contributions by e'ee and e'er?
Sorry for all the questions which probably seem daft, but I am new to the pensions game so thought it was more simple than it seems to be.0 -
chucknorris wrote: »A 57th accrual is very generous:
Say her salary was £40k:
£40,000/57 = £701.75, that isn't a contribution of £701.75, it is what she will be paid every year in retirement, for every year that she works. If she worked for 40 years, her pension would be £28,070 per annum (it is obviously indexed, I am valuing it using current values and ignoring inflation). On my spreadsheet I use a multiplier of 28.5 (that is subjective based upon what my other investments pay and the risk, TPS is virtually risk free, like a Gov gilt). so using my multiplier of 28.5 her pension would be capitalised at just under £800k.
Interested to hear more about how you calculated this, if you don't mind?
So it would be capitalised at, say, £800k and then an annuity would be purchased for that amount?0 -
That makes much more sense. Wow, that is generous. I can now see why they work teachers to the point of mental breakdown.
So the 57th accrual rate, do her monthly contributions also accumulate and get added to the pot or is the 1/57th system the be all and end all and the monthly contribution is part payment for that as such? For example, what I and my e'er contribute gets added to a pot, receives a + or - % return based on where it is invested and that makes up the total pot for retirement. With the teacher's pension, let's say she earns 40k every year for 35 years, under the 1/57 accrual rules this equates to £24,561 per year - presumably this is all she gets and the monthly contributions will not necessarily marry up to this figure but are simply offsetting against the benefit she receives? Also, I saw somewhere that the e'er contributes ~16% per month - is this from a different scheme? Surely she does not get the £24,561 AND 35 years of contributions by e'ee and e'er?
Sorry for all the questions which probably seem daft, but I am new to the pensions game so thought it was more simple than it seems to be.
No her contributions are merely what she pays, it is all about the 1/57th accrual.
She would 'only' receive an annual pension of £24,561 (her contributions are only what she paid towards getting that pension, she doesn't also get them back). Imagine two married teachers, they would have a combined pension of almost £50k, plus their state pensions and any other income from other investments, not bad! That's why you will see the occasional angry post from some with only DC schemes complaining that as a tax payer they are subsidising these public sector pensions.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
chucknorris wrote: »No her contributions are merely what she pays, it is all about the 1/57th accrual.
She would 'only' receive an annual pension of £24,561 (her contributions are only what she paid towards getting that pension, she doesn't also get them back). Imagine two married teachers, they would have a combined pension of almost £50k, plus their state pensions and any other income from other investments, not bad!
Makes sense. So the e'er contribution method works the same, for example the Local Authority pays in x% as an e'er contribution and that, in addition to her contributions, goes towards paying for the 24k per year in retirement?
On that note, I imagine that the pension portal will not give her a value as of now, rather there will be a tool to forecast roughly how much her pension will be?0 -
Interested to hear more about how you calculated this, if you don't mind?
So it would be capitalised at, say, £800k and then an annuity would be purchased for that amount?
I am a bit out of touch with annuities, but I think indexed linked (non enhanced) pay around 3.1%. 100/3.1 = a multiplier of 32.3. I don't use 32.3 because there are better investment alternatives than annuities. I use (this is very subjective) 28.5, although it is marginally less than what my other investments return, the TPS pension is virtually risk free, which is why I use a slightly higher multiplier than my other investments return, to reflect the very low risk.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
Makes sense. So the e'er contribution method works the same, for example the Local Authority pays in x% as an e'er contribution and that, in addition to her contributions, goes towards paying for the 24k per year in retirement?
On that note, I imagine that the pension portal will not give her a value as of now, rather there will be a tool to forecast roughly how much her pension will be?
I am not familiar with the LA scheme, but I imagine it is quite similar.
Yes it will only show current (not projected) values.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
Sorry for all the questions which probably seem daft, but I am new to the pensions game so thought it was more simple than it seems to be.
There is no such thing as a daft question! Those that don't question are daft! The answer to your daft question may be the one that helps you and/or others get the understanding you/ we seek.
I'm in the NHS Scheme and under my scheme rules I accrue 1/80th for every year worked up to 40/80ths if I retire at my pensionable age or I can then work an additional 3 years and accrue upto 45/80ths. From then on although I can pay into the scheme I cannot accrue any further pension increase although I do get to keep death in service benefit and so for me personally and my situation retiring under my scheme with 40/80ths at 55 makes the most sense.
I think and am open to be corrected that the teachers scheme like the NHS scheme is unfunded, which means the contributions made don't actually go into an invested pot but are used towards existing pensioners pensions. The actual cost of these pensions is met by government local and national and that is why with increased lifespan generally they are being reformed and altered and staff in the reformed schemes are having to work longer and make higher contributions before being allowed to retire.
These type of defined benefit(DB) or final salary schemes have almost all disappeared in the private sector and most people in the private sector can only make defined contributions(DC) which are invested for them and are subject to market fluctuations, hence the number of posts/ questions about the different investment areas/ providers.
Hope that helps explain a little more and you don't think I'm being presumptuous in posting this, and good luck!
CRVCRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!0 -
i am 34:
Been working in finance for 10 years. Consistently having an income of around 80-90k on average.
My net worth (just under 800k) broken down into:
- property (my home in london) worth 600k vs mortgage of 260k (1.54% fixed for 2 years).
- stocks and shares ISA worth 163k (fully invested)
- pension worth 95k (all in stock funds, no bonds)
- P2P lending worth 33k
- cash savings worth 165k (some ISA) - yes i know i need to invest this!
expect to get inheritance north of 500k.
currently out of work and looking for opportunities.
my advice is to look at ways to get both spending down and income up. can be easier said then done but thats the only rule you need to know to become financially comfortable. it certainly helps to find it fun (i know i do).0 -
i am 34:
Been working in finance for 10 years. Consistently having an income of around 80-90k on average.
My net worth (just under 800k) broken down into:
- property (my home in london) worth 600k vs mortgage of 260k (1.54% fixed for 2 years).
- stocks and shares ISA worth 163k (fully invested)
- pension worth 95k (all in stock funds, no bonds)
- P2P lending worth 33k
- cash savings worth 165k (some ISA) - yes i know i need to invest this!
expect to get inheritance north of 500k.
currently out of work and looking for opportunities.
Firstly, incredible position to be in. I am incredibly envious, but it is what is is.my advice is to look at ways to get both spending down and income up. can be easier said then done but thats the only rule you need to know to become financially comfortable. it certainly helps to find it fun (i know i do).
Totally agree, but the part about increasing the income is really rather difficult at this stage of life. Been through an accountancy qualification and I find myself at 34 on 32k which is obviously quite depressing. Short of retraining (and taking a big pay cut for 5 years) I don't see where significant increases in income will come from so I guess I need to go down the frugality route.0 -
Firstly, incredible position to be in. I am incredibly envious, but it is what is is.
Totally agree, but the part about increasing the income is really rather difficult at this stage of life. Been through an accountancy qualification and I find myself at 34 on 32k which is obviously quite depressing. Short of retraining (and taking a big pay cut for 5 years) I don't see where significant increases in income will come from so I guess I need to go down the frugality route.
im in a position where i dont really know where the next stages of my life will go. i left finance hoping to never go back but then i am left with not knowing what to do so i end up applying for finance jobs. i keep thinking only a few more years in finance will enable to be a bit more financially comfortable.
thats not really the right attitude one should have. i know it is quite tough for those with lower savings and income (im not saying you, im just generalising) but its better to focus on doing things that make you happy, keep the spending less and saving more goals as well, but also develop your skills in areas you like and see what happens. if you like accounting then maybe you can setup your own practice? what about moving to a bigger practice or london for higher wages? or if you dont like accounting then try something you do like and see what happens. of course easy for me to say this and i do think its very difficult / impossible for those who are financially "just getting by".0
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