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    • kev2009
    • By kev2009 11th Oct 17, 7:10 PM
    • 168Posts
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    kev2009
    Pension query
    • #1
    • 11th Oct 17, 7:10 PM
    Pension query 11th Oct 17 at 7:10 PM
    Hi all,

    I saw this on BBC website today: http://www.bbc.co.uk/news/business-41580082

    and I've a couple of questions.

    They are saying single person needs:-
    10-15k for minimum standard of living
    10-25k for modest standard of living
    Over 25k for comfortable standard of living

    Does this mean your pension + state pension in total to get to those figures or is it your pension shoudl be those and you get state on top?

    They then show a graph of how much to pay in in order to get 20k a year at various ages.

    In the graph they show for example at 35 years of age you need to put in £404 which I presume is per month, does that £404 include your payment and your employers contribution or *just* what you pay yourself?

    Also further down it mentions needing to pay in over 15%, again is this your payment or yours + employers?

    I'm curious because my company pension predicts I will have approx £7k a year when I retire which based on my % contribution doesn't match what they say above.

    I know I have a few years before i retire but just trying to see if i'm on the right track or if i need to make some adjustments somehow...

    Thanks

    Kev
Page 1
    • kev2009
    • By kev2009 11th Oct 17, 7:22 PM
    • 168 Posts
    • 259 Thanks
    kev2009
    • #2
    • 11th Oct 17, 7:22 PM
    • #2
    • 11th Oct 17, 7:22 PM
    Just to add, I started a pension just before 25 in a private pension, paid in a fixed amount, then joined company pension and after a few years i transferred private pension into company pension and starting contributing a % of salary into it each month.

    Kev
    • Alexland
    • By Alexland 12th Oct 17, 12:10 AM
    • 793 Posts
    • 493 Thanks
    Alexland
    • #3
    • 12th Oct 17, 12:10 AM
    • #3
    • 12th Oct 17, 12:10 AM
    Hi Kev

    The article is unclear and a lot depends on circumstances such as if you own a house or pay rent or if you have a partner to share bills. It also depends on your investment choices, fees and market performance.

    I would expect the £10k to £15k minimum range covers a person who already owns their own small home (mortgage free), pays utility bills and basic food but cannot afford to run a car (unless they share with a partner in which case maybe one car if they are in the upper end of the minimum range) and does not go on holidays and around half this income would be from the state pension.

    In terms of contributions I find it's best to work backwards from the total pot size required. So for a £7k per annum personal pension income from state pension age you would need a pot of around £210k (1/30th) in today's value (much more in future due to inflation). Assuming you have paid enough NI you will then get your £8k+ state pension and access to this minimum lifestyle.

    Practically someone in this position might start considering releasing money from their property to supplement their low income at the expense of any inheritance.

    For the £20k lifestyle (some of this would be taxed) then £8k+ again comes from the state pension then that leaves about £12k to find which would need a pot of around £360k.

    So contributing £404 per month (increasing with inflation) total including employer contribution for 40+ years would be about £200k (or more after inflation) and it's not unreasonable that with compound growth above inflation you might get to the required £360k (or more after inflation) but you would need to accept volatility and risk.

    All this is very rough but hopefully helps you get a feel for the rough orders of magnitude.

    Alex
    Last edited by Alexland; 12-10-2017 at 12:34 AM.
    • OldMusicGuy
    • By OldMusicGuy 12th Oct 17, 9:04 AM
    • 210 Posts
    • 392 Thanks
    OldMusicGuy
    • #4
    • 12th Oct 17, 9:04 AM
    • #4
    • 12th Oct 17, 9:04 AM
    Having a target is a very good idea as it allows people to visualize what they should be aiming for in terms of pension contributions.

    Take a look at this thread: http://forums.moneysavingexpert.com/showthread.php?t=2146737&highlight=the+number
    It's where people planning for retirement discuss the "number" as in the annual income they think they will need when they retire. There's some good real world examples in there.

    Regarding the article, the contributions they are talking about are the total of employee + employer, eg if they say you need to be putting in 15%, if your employer contributes 5% then you would need to put in 10% (and vice versa).
    Last edited by OldMusicGuy; 12-10-2017 at 9:08 AM.
    • Mnd
    • By Mnd 12th Oct 17, 9:56 AM
    • 270 Posts
    • 292 Thanks
    Mnd
    • #5
    • 12th Oct 17, 9:56 AM
    • #5
    • 12th Oct 17, 9:56 AM
    If the new flat rate pension is 155 a week, how will a single person, no additional pension get anywhere near this figure of 1000 a month? With or without housing costs
    .
    • Triumph13
    • By Triumph13 12th Oct 17, 10:27 AM
    • 1,117 Posts
    • 1,373 Thanks
    Triumph13
    • #6
    • 12th Oct 17, 10:27 AM
    • #6
    • 12th Oct 17, 10:27 AM
    If the new flat rate pension is 155 a week, how will a single person, no additional pension get anywhere near this figure of 1000 a month? With or without housing costs
    .
    Originally posted by Mnd
    By the simple expedient of working for a living and paying pension contributions. From April 2019 the minimum total contribution will be 8%. Someone on the median UK income of £27k contributing at that level over a full working life with only moderate investment growth would expect to build a pot of around £250k by state pension age. 3.5% drawdown on that plus the state pension gives you something over £16k pa post tax.
    • Mnd
    • By Mnd 12th Oct 17, 11:50 AM
    • 270 Posts
    • 292 Thanks
    Mnd
    • #7
    • 12th Oct 17, 11:50 AM
    • #7
    • 12th Oct 17, 11:50 AM
    I realise that some (most?) people will have some additional pension either through savings themselves or auto enrolment, My worry though is individuals who have made no additional provision and seem to think that auto enrolment will provide a decent amount of pension.my wife works with people who seem to think that this will be enough
    • bigadaj
    • By bigadaj 12th Oct 17, 12:38 PM
    • 10,803 Posts
    • 7,100 Thanks
    bigadaj
    • #8
    • 12th Oct 17, 12:38 PM
    • #8
    • 12th Oct 17, 12:38 PM
    I realise that some (most?) people will have some additional pension either through savings themselves or auto enrolment, My worry though is individuals who have made no additional provision and seem to think that auto enrolment will provide a decent amount of pension.my wife works with people who seem to think that this will be enough
    Originally posted by Mnd
    It may well be enough to take them out of means tested benefits which is a start and reduces reliance on the taxpayer at least.
    • Mnd
    • By Mnd 12th Oct 17, 12:59 PM
    • 270 Posts
    • 292 Thanks
    Mnd
    • #9
    • 12th Oct 17, 12:59 PM
    • #9
    • 12th Oct 17, 12:59 PM
    I think that if 1 was on my own, I would be perfectly happy on 1200 net per month.
    That's no debts and no mortgage. The original post doesn't say if those incomes are net and if they Inc housing costs
    • bigadaj
    • By bigadaj 12th Oct 17, 2:50 PM
    • 10,803 Posts
    • 7,100 Thanks
    bigadaj
    I think that if 1 was on my own, I would be perfectly happy on 1200 net per month.
    That's no debts and no mortgage. The original post doesn't say if those incomes are net and if they Inc housing costs
    Originally posted by Mnd
    I'd say the income is probably gross, but at the lower end that doesn't make any difference in any case, also some income could be from isas which are tax free, and some benefits are also.

    I'd guess the assumption on housing costs are fairly low with a mortgage free house though council tax would be significant even with a single persons discount.
    • AnotherJoe
    • By AnotherJoe 12th Oct 17, 4:19 PM
    • 7,681 Posts
    • 8,291 Thanks
    AnotherJoe
    I realise that some (most?) people will have some additional pension either through savings themselves or auto enrolment, My worry though is individuals who have made no additional provision and seem to think that auto enrolment will provide a decent amount of pension.my wife works with people who seem to think that this will be enough
    Originally posted by Mnd
    I agree, I suspect there are many people who think that whats important is contributing to a pension just as an thing , rather than how much they contribute. The sad fact is that the current 1% type rates will provide a risibly small pension.
    • Triumph13
    • By Triumph13 12th Oct 17, 5:30 PM
    • 1,117 Posts
    • 1,373 Thanks
    Triumph13
    I've now had a bit of a read of the actual paper from the PLSA behind the story and to say I'm unimpressed would be putting it mildly. I was expecting a certain amount of cherry picking from an industry body with a vested interest in increasing their own business, but this one was pretty dreadful.
    Those headline numbers are from a survey, the prime findings of which were that most people hadn't thought about it and didn't have a clue. They asked these people to guess the levels and then printed the most common guess.
    The £25k needed per individual to be 'comfortable' is, in reality, the same number as the average spending per household for the top quintile of pensioner households. That must mean that well under 10% of pensioner households are actually 'comfortable'. It also contrasts very markedly with the figure when they asked people in the 55 to 64 age bracket - who are presumably much more likely to have thought about the question and been able to give an intelligent answer. Their answer to 'comfortable' came out at £15k to £20k.
    It's also interesting to note how people's perception of the word 'comfortable' is skewed by what other options are presented with it. This survey just offered 'minimum', 'modest' and 'comfortable' positioning comfortable as the highest level to aspire to. The Which survey offered 'comfortable' and 'luxury' and accordingly got an answer where the luxury level was comparable with the comfortable level from the PLSA survey.
    Whilst part of me has to admire their skill in constructing surveys and picking which results to present to produce 'evidence' to support whatever they want, my background is in the sciences and this kind of thing therefore gets the steam coming out of my ears! [/rant]
    • kev2009
    • By kev2009 17th Oct 17, 9:28 PM
    • 168 Posts
    • 259 Thanks
    kev2009
    Thanks all.

    Kev
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