Council Tax

Old_Slaphead

mitchaa wrote: »

Average pay of how much? Maybe back in the 80's perhaps.

That's over a 40 year lifespan.

Salary starting at £5,000 in 70's increasing to £20,000 now. That's an AVERAGE of £12500pa over the working life (inflation rate used - 3.5%pa)

Old_Slaphead

Guy_Montag wrote: »

& you seem to have forgotten the effects of compound interest. For a sum to be worth £3700 after 40 years £500 need be invested (at 5% interest).

No I haven't.

I'm saying that you need to contribute around 30% of wages ie year 1 salary £5,000 at 30% (ie £1500pa) rising at 3.5%pa up to Year 40 salary £20,000 at 30% (ie £6000pa) to accrue a pension similar to that which public servants get for paying a miserly 5%pa.

With your example ie Year 1 £500 contribs on £5000 salary (ie 10%) and continuing at that 10% over the 40 year period on a salary increasing at 3.5%pa, the accumulated value of private pension fund is £70,000 (assuming 3% asset growth) ie enough to pay a pension of around £4000pa

Do the maths - if you still don't get, it I'll PM you my calcs.

Guy_Montag

Old_Slaphead wrote: »

No I haven't.

I'm saying that you need to contribute around 30% of wages ie year 1 salary £5,000 at 30% (ie £1500pa) rising at 3.5%pa up to Year 40 salary £20,000 at 30% (ie £6000pa) to accrue a pension similar to that which public servants get for paying a miserly 5%pa.

With your example ie Year 1 £500 conribs on £5000 salary ie 10% and continuing at that 10% over the 40 year period, the accumulated value of private pension fund is £70,000 (assuming 3% growth) ie enough to pay a pension of atound £4000pa

Do the maths - if you don't get it I'll PM you my calcs.

Currently £100k will buy you an annuity of £7240 pa.

The average RPI rate over the last 40 years is 6.8%, so that would be a better rate to take.

That would imply a starting salary of £1,500 (final salary 22k). Taking 10% of your salary for 40 years would give you a pot of 90k, if your pension policy grew at 0% real rate (RPI).

To get a pension of half your salary which is £11k (half final salary) would mean that their pension policy would need to grow at RPI+1.9%.

Old_Slaphead

Guy_Montag wrote: »

Currently £100k will buy you an annuity of £7240 pa.

The average RPI rate over the last 40 years is 6.8%, so that would be a better rate to take.

Please please please tell me where I can get an annuity on the terms you state that is index linked, can start at 60 and as with public sector's gives 50% widows pension. I'll probably get killed in the rush! The figure you should be quoting is closer to £4,000 per £100,000 of fund !

Also where's your info on RPI from ??? Using inflation at 6.8% would mean significantly lower salaries in early years (ie as you say, starting at £1500 rather than my £5000) meaning, with compound interest, the accumulated pension pot would be much less than the £70,000 I initially calculated. Where does you £90,000 come from - with a generous 5% compound growth per annum I get a figure closer to £60,000. That gives an annuity of about £3000 which compares with a public sector equivalent pension of £13000 !!!

Even using your figures, which I dispute, the pension accrued paying 10% of salary over the term is less than 40% of public sector equivalent.

mitchaa

I suppose i should be greatful for a 8% contribution 40/60 FSP then?

I never realised these schemes were as scarce as they are.

Old_Slaphead

mitchaa wrote: »

I suppose i should be greatful for a 8% contribution 40/60 FSP then?

I never realised these schemes were as scarce as they are.

As proverbial hens teeth - only downside is, as with Hotel California, "you can never leave"

Guy_Montag

RPI data from the ONS -1968->2008 averaged.
£150 invested at 7% for 40 years nets c. £2250
Assuming salaries increase at 7% pa, but the length of your investment reduces you will receive £2250 for each year worked. 2250 * 40 = £90k

What I'm fiddling with now is using actual RPI data from each year to base pay rises, pension contribs & pension interest. Actually I'm working & fitting this in when I get jaded.

Old_Slaphead

Guy_Montag wrote: »

RPI data from the ONS -1968->2008 averaged.
£150 invested at 7% for 40 years nets c. £2250
Assuming salaries increase at 7% pa, but the length of your investment reduces you will receive £2250 for each year worked. 2250 * 40 = £90k

What I'm fiddling with now is using actual RPI data from each year to base pay rises, pension contribs & pension interest. Actually I'm working & fitting this in when I get jaded.

I'll look forward to your findings (don't forget to check out annuity rates).

7% return of investment ? - that's the stuff of dreams (remember Gordon wants his share)

FWIW I've used 6.8% pay inflation and 5% compound investment return and I think that's very very optimistic

Guy_Montag

Old_Slaphead wrote: »

I'll look forward to your findings (don't forget to check out annuity rates).

7% return of investment ? - that's the stuff of dreams (remember Gordon wants his share)

FWIW I've used 6.8% pay inflation and 5% compound investment return and I think that's very very optimistic

The 7% is just my rounding of the 6.8% average RPI. So what I'm implying is a real terms increase in salary & investment of 0.2% - hardly the stuff of dreams.

Anyway I've moved on....
So if you got a RPI pay rise each year & continued to invest 10% in your pension which made nothing in real terms (i.e. it kept in line with inflation) you would have a sparkly £80k pension pot at the end of it.

Trying to find historic index prices for comparison.

Old_Slaphead

Guy_Montag wrote: »

The 7% is just my rounding of the 6.8% average RPI. So what I'm implying is a real terms increase in salary & investment of 0.2% - hardly the stuff of dreams.

Anyway I've moved on....
So if you got a RPI pay rise each year & continued to invest 10% in your pension which made nothing in real terms (i.e. it kept in line with inflation) you would have a sparkly £80k pension pot at the end of it.

Trying to find historic index prices for comparison.

Ok, sparkly £80,000 gives pension around £3,200 for total contribs of around £42,000

Public sector gets £13,000pa pension for total contribs of £21,000 (in this example).

No objection to public sector getting a decent deal (tho' I think it's now just a bit too generous for the economic circumstances) what I do object to, most vehemently, is that GB is screwing the rest of us. That's blatently not fair.