Pensions Planning: The NUMBER

m_c_s

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/822623/pensioners-incomes-series-2017-18-report.pdf

For those that are interested the link is the latest UK Pensions' Income Series report issued by DWP and checked by NS. Useful for comparison purposes (upto 2018) only but contains some interesting insights into single versus couple income sources and differences in regional pension incomes.

Johnnyboy11

If you have no other income source, then starting a DB pension early would benefit from the Personal Allowance of £12,500 being tax-free each year. Worth factoring into your calculation.

gadgetmind

m_c_s wrote: »

contains some interesting insights into single versus couple income sources and differences in regional pension incomes.

Agreed, but what's the difference between a private pension and a personal pension?

I can't see why they split down the data.

gadgetmind

SingleSue wrote: »

last tax year my earnings were a smidge over £5.2k

Hmmm, that's less than the LEL so you need to make sure something is keeping your state pension years up.

Once you hit 55, you can start having fun with your pension. Assuming your income is £5200, you can put £4160 into your pension, and the tax man will then add £1040. You can then take £1300 out tax free and the remaining £3900 is likely to still be within your personal allowance, but you might also be receiving some benefits that you need to take into account.

My wife was earning around this sum for many years and was on "negative tax" because of this pension boost. In the most recent complete tax year, she had some unexpected self-employed income, but the lot (OK, 80% of it) went into her SIPP and the tax man gave her £2500 as tax relief.

VoucherMan

I only stumbled across this part of the forum recently, and this topic even more so, but it’s already giving me new ideas, so time to declare my ambition, or at least the latest incarnation. If nothing else, it will motivate me.

 

I’ve got my number to about £775 a month (£9300pa) . Much lower than most on here, but I enjoy a relatively simple lifestyle, not being a liker of foreign holidays, or long breaks away from home at all really. Though I’ve not yet finished reading through the topic, I have found

Wenlock said:

Wow! If I add up the cost of every holiday I have ever had in my 52 years of life I wouldn't get anywhere near 12K.
As a single person I am comfortable on my annual income of £7k. In fact my savings & investments have increased by about £5k in the last 12 months (including interest etc).
Obviously we all have different needs and desires.

That suggests my number is not wildly unrealistic.

I've looked though the last 10 years or so of spreadsheets I use to keep track of all things financial, and can't find anything of note that wouldn't be covered by my budget, which includes £200 a month for general spending (hobbies, days out, emergency stuff). I wouldn't envisage needing that much, but better to err on the side of caution.

Even better as I’m seriously contemplating giving up the car when I retire too, which would knock over £200 off my monthly figure.

 

I think I could live quite happily on the basic state pension, so all I theoretically need is enough to get me there, though I plan to have quite a bit more. For some time I’d set myself a target of retiring at 60, but recently I’ve been asking myself if I could retire at 55. That may be a little ambitious, but I'll have to see how the pension fund performs, and whether or not my plans change.

 

There are still a few potential spanners laying around to be thrown in the works, but that’s all the more reason to have a good think now. Currently, the biggest one is that I don’t have any specific retirement plans. I always find myself short of time to do the things I want, even during a 2 week holiday, but once the holiday extends to 365 days a year, I may feel differently.

I’m looking forward to more time to enjoy outdoor pursuits, mostly cycling & walking, which will benefit the general health. Along with hobbies, and general internet browsing (which can consume several hours a day),  and relaxing in front of the TV, the hours, days & weeks do seem to disappear rapidly, but I don’t yet know if it will be enough for full time retirement.

 

Notepad_Phil

VoucherMan said:

I've got my number to about £775 a month (£9300pa) . Much lower than most on here, but I enjoy a relatively simple lifestyle, not being a liker of foreign holidays, or long breaks away from home at all really.

Don't forget you'll need to squirrel some money away for those occasional but necessary expenditures such as replacement cars (though you say you might give that up), repairs to the house, new central heating boilers, fridges, cookers, carpets, beds, and all those other things that you might only buy once in a blue moon. Some of these might already be included in your spreadsheets, but if not then better to think about them now and make sure the budget can deal with them.

geoffers4

VoucherMan said:

I’ve got my number to about £775 a month (£9300pa) . Much lower than most on here, but I enjoy a relatively simple lifestyle, not being a liker of foreign holidays, or long breaks away from home at all really. I've looked though the last 10 years or so of spreadsheets I use to keep track of all things financial, and can't find anything of note that wouldn't be covered by my budget, which includes £200 a month for general spending (hobbies, days out, emergency stuff). Even better as I’m seriously contemplating giving up the car when I retire too, which would knock over £200 off my monthly figure.

9.3k is much lower than most figures on here - I admire your frugal approach. I'd be interested in a breakdown of your budget, if you'd be happy sharing this. And in particular how much you've put down for things like:
*replacing broken central heating
*general house maintenance/repairs
*costs of long-term care in later life.

VoucherMan

geoffers4 said:

9.3k is much lower than most figures on here - I admire your frugal approach. I'd be interested in a breakdown of your budget, if you'd be happy sharing this. And in particular how much you've put down for things like:
*replacing broken central heating
*general house maintenance/repairs
*costs of long-term care in later life.

Quite happy to share it. I’d far sooner have someone here tell me now that my figures don’t add up, rather than wait until I see the pensions advisors years down the line & have them tell me. 

Broadband    £282
Gas/Electric    £600
Water rates    £283
Council Tax    £1,164
House insurance    £200
Boiler Service    £120
Dentist    £200
TV licence    £155
Food    £1,200
Car insurance?    £500
Car Tax?    £150
Car Service ?    £500
Petrol    £600
car replace    £750
new boiler    £180
Leisure/Emergency    £2,400

Notepad_Phil said:

Don't forget you'll need to squirrel some money away for those occasional but necessary expenditures such as replacement cars (though you say you might give that up), repairs to the house, new central heating boilers, fridges, cookers, carpets, beds, and all those other things that you might only buy once in a blue moon. Some of these might already be included in your spreadsheets, but if not then better to think about them now and make sure the budget can deal with them.

Generally speaking, most of the examples will be covered by my £200 a month leisure/EF budget.  I already have an ‘emergency fund’ that I add to periodically. The plan is that I can use this for any of the items mentioned, and whenever I have money left at the end of the month, it goes into the EF. I anticipate more going into the EF than coming out overall.

More specifically, I should only need one, maybe two new boilers.  Occasionally I question the state of my boiler when it’s being serviced, and I’m assured it has many years left in it. (I have a good local engineer) Although listed separately, If needs be I can dip into the EF.

Repairs/maintenance are minimal. The EF should cover most stuff. Anything major would hopefully be covered on the insurance.

I don’t do much in the way of replacing bigger stuff. White goods, only when the existing ones break, and aren’t economical to repair. Carpets don’t get much wear. I’ve only just (last year) had the living room & stairs/landing done. I may replace the bedroom carpets, but only once. Other big furniture should, like other items, be funded from the occasionally topped up EF. If I ever replace the bed it will hopefully be with a new one. For the sofa I’m less bothered. I bought a second hand leather one from a charity shop last year, my logic being that there’s no point spending a small fortune on a new one unless I like it. 6 months on & I’m very happy with the second hand one, with no intentions of replacing it with a new model.

Replacement cars are included in budget - £750 a year - A decent 2nd hand car should last about 8 years. I've never sold one yet. Just keep them until it's not worth fixing them.

Hoping that makes enough sense. Trying to mess around with the formatting here I almost lost it.

kinger101

VoucherMan said:

Broadband    £282 - [reasonable - you could get lower still if you don't need high bandwidth] 
Gas/Electric    £600 - [prices can fluctuate wildly due to geopolitical events.  You'll also likely be at home more once retired] 
Water rates    £283 
Council Tax    £1,164 [I'd possible budget higher as they'd had years of freezes, and there's political pressure on business rates]
House insurance    £200
Boiler Service    £120
Dentist    £200 
TV licence    £155
Food    £1,200 [I'm impressed if that's your annual budget including toiletries/cleaning stuff]
Car insurance?    £500 [would probably increase if you made a claim - even if it wasn't your fault]
Car Tax?    £150 [my feeling is these will increase as fuel duties decline in the move to electric vehicles]
Car Service ?    £500 [on a good year.  A major item like clutch or cambelt would eat that very quickly]
Petrol    £600 [again, can ramp up quickly if it kicks off in the Middle-East]
car replace    £750
new boiler    £180 
Leisure/Emergency    £2,400 [I wound't want this as an either/or]

The risk with the frugal budget is there's little margin for error.  

Linton

VoucherMan said:

Quite happy to share it. I’d far sooner have someone here tell me now that my figures don’t add up, rather than wait until I see the pensions advisors years down the line & have them tell me. 

Broadband    £282
Gas/Electric    £600
Water rates    £283
Council Tax    £1,164
House insurance    £200
Boiler Service    £120
Dentist    £200
TV licence    £155
Food    £1,200
Car insurance?    £500
Car Tax?    £150
Car Service ?    £500
Petrol    £600
car replace    £750
new boiler    £180
Leisure/Emergency    £2,400

How much in total are you actually spending now per year? Having a major change in living standards when you retire from what you have previously been used to could be very difficult. I do not think bottom-up budgeting is a sensible way of planning as you can easily miss out minor things that are not easily categorised but are important to your enjoyment of life. Remember this is how you will live for perhaps 1/3rd of your life with little opportunity for additional income if you find you have miscalculated.

I would certainly split leisure and emergency funds. You don’t want excess spending in one to force a cutback in the other. Clothing? Phone? Food at about £3.50/day or £1.20 per meal seems unbelievably frugal.