Pensions Planning: The NUMBER

SouthCoastBoy

cfw1994 said:

SouthCoastBoy said:

I've given up trying to second guess my number, too many variables, currently at 3k per mth net in today's money, but no idea if that is correct. Depends on kids rents uni housing costs etc.

My “Number” doesn’t have our offspring’s rent....one has finished, the other in their last year anyway, but I do allow for some monthly payment to help them along (or continue to save in their LISA/ISA, etc).
If it did, however, you should still be able to figure that out - in theory the parental support goes up to about £5k....I would call it £6k (£500 pcm).  See https://www.savethestudent.org/money/asking-parents-for-money-university.html 
On the “too many variables” comment - that’s precisely why you break it down to fixed and variable costs.   Why not give it a go: it’s part of the journey to figuring out when you can chose to give it all up!

I've definitely given it a go, broken down all my monthly costs for the last 5 years and tracked, but that is based in the past. When kids went to uni the costs astounded me, this year in the pandemic I have forked out 17k on rent (both at uni at the same time and get minimum loan) and they haven't been there most of the time! Youngest daughter most probably going to do Phd so I imagine will need additional funding. Helping eldest out with buying a car, then when she graduates this year what chances are there of her getting a job in the era of the pandemic so most probably will need extra help. Hence currently just too many unknowns to safely predict my required amount, so carrying on working until things become clearer. 

randompenitent

I spent ages trying to figure out my number by looking at all the things I thought I spent money on. Took ages and I always thought there was something missing. 

So more recently (well, about three years ago) I took a different approach: since everything I spend goes through my bank account, I just looked at my bank statements (conveniently turned into a spreadsheet) and totalled all the outgoings. That tells me what I spend from my net salary. This turned out to be a significantly higher number than the total of what I thought I should be spending but couldn't really be argued with - after all, it was what I had actually spent.

I recommend it as an approach.  Once you have the headline number, you can start figuring out which items won't be needed in retirement and subtract them from the headline figure. In my case, the big number was savings, but for others it could be mortgage payments, commuting costs or other business-related expenses. Having done that, then figure out whether you can get enough from your pension(s) to support the level of expenditure you've identified, and if not, do some serious head-scratching. 

michaels

Another approach is to be living off isas etc whilst DKs are at uni as this then qualifies them for max govt loans for living expenses - whether using this source of funding makes sense depends in a way if they are in the small percentage (17%) who expect to pay off their loans or the majority who will end up with the balance being written off when they reach the required age.

Anonymous101

SouthCoastBoy said:

cfw1994 said:

SouthCoastBoy said:

I've given up trying to second guess my number, too many variables, currently at 3k per mth net in today's money, but no idea if that is correct. Depends on kids rents uni housing costs etc.

My “Number” doesn’t have our offspring’s rent....one has finished, the other in their last year anyway, but I do allow for some monthly payment to help them along (or continue to save in their LISA/ISA, etc).
If it did, however, you should still be able to figure that out - in theory the parental support goes up to about £5k....I would call it £6k (£500 pcm).  See https://www.savethestudent.org/money/asking-parents-for-money-university.html 
On the “too many variables” comment - that’s precisely why you break it down to fixed and variable costs.   Why not give it a go: it’s part of the journey to figuring out when you can chose to give it all up!

I've definitely given it a go, broken down all my monthly costs for the last 5 years and tracked, but that is based in the past. When kids went to uni the costs astounded me, this year in the pandemic I have forked out 17k on rent (both at uni at the same time and get minimum loan)

The whole University model is broken to me especially when it comes to means testing. I really hope it changes fundamentally in the next decade or so prior to my children getting to that age. I can't think of anywhere else in life where your ability to get financial assistance is judged on your parents income. These young people are all adults but the system still treats them as children in many respects.
That being said we as individuals are only trying to do the best for our own so I don't disagree with digging as deep as you can to provide support. Its certainly something I'll be budgeting in although as it sounds like circa £20k a child it certainly could result in an extra few years work.

Terron

randompenitent said:

I spent ages trying to figure out my number by looking at all the things I thought I spent money on. Took ages and I always thought there was something missing. 

So more recently (well, about three years ago) I took a different approach: since everything I spend goes through my bank account, I just looked at my bank statements (conveniently turned into a spreadsheet) and totalled all the outgoings. That tells me what I spend from my net salary. This turned out to be a significantly higher number than the total of what I thought I should be spending but couldn't really be argued with - after all, it was what I had actually spent.

I recommend it as an approach.  Once you have the headline number, you can start figuring out which items won't be needed in retirement and subtract them from the headline figure. In my case, the big number was savings, but for others it could be mortgage payments, commuting costs or other business-related expenses. Having done that, then figure out whether you can get enough from your pension(s) to support the level of expenditure you've identified, and if not, do some serious head-scratching. 

That is pretty much what I did to begin with. I was spending about £18k a year whilst working (excluding holidays), so that was my starting point.

Stubod

I have done our monthly accounts for over 20 years so have a pretty good idea what we spend and where it goes.

We both retired from full time a few years ago, and so far our annual spend has remained more or less the same, (circa £24k). We had budgeted to spend significantly more during retirement but with recent events this has not happened!.

SouthCoastBoy

Anonymous101 said:

SouthCoastBoy said:

cfw1994 said:

SouthCoastBoy said:

I've given up trying to second guess my number, too many variables, currently at 3k per mth net in today's money, but no idea if that is correct. Depends on kids rents uni housing costs etc.

My “Number” doesn’t have our offspring’s rent....one has finished, the other in their last year anyway, but I do allow for some monthly payment to help them along (or continue to save in their LISA/ISA, etc).
If it did, however, you should still be able to figure that out - in theory the parental support goes up to about £5k....I would call it £6k (£500 pcm).  See https://www.savethestudent.org/money/asking-parents-for-money-university.html 
On the “too many variables” comment - that’s precisely why you break it down to fixed and variable costs.   Why not give it a go: it’s part of the journey to figuring out when you can chose to give it all up!

I've definitely given it a go, broken down all my monthly costs for the last 5 years and tracked, but that is based in the past. When kids went to uni the costs astounded me, this year in the pandemic I have forked out 17k on rent (both at uni at the same time and get minimum loan)

The whole University model is broken to me especially when it comes to means testing. I really hope it changes fundamentally in the next decade or so prior to my children getting to that age. I can't think of anywhere else in life where your ability to get financial assistance is judged on your parents income. These young people are all adults but the system still treats them as children in many respects.
That being said we as individuals are only trying to do the best for our own so I don't disagree with digging as deep as you can to provide support. Its certainly something I'll be budgeting in although as it sounds like circa £20k a child it certainly could result in an extra few years work.

Yes £20k a child is about right, as you say system is broken and unfair. The interest rates on the loans are a complete rip off as well, RPI+3%. Currently RPI is based on a figure of 2.6% (RPI at March 2020)! so nearly 6% interest when base rates is 0.10%, unbelievable that government think this is acceptable.

michaels

SouthCoastBoy said:

Anonymous101 said:

SouthCoastBoy said:

cfw1994 said:

SouthCoastBoy said:

I've given up trying to second guess my number, too many variables, currently at 3k per mth net in today's money, but no idea if that is correct. Depends on kids rents uni housing costs etc.

My “Number” doesn’t have our offspring’s rent....one has finished, the other in their last year anyway, but I do allow for some monthly payment to help them along (or continue to save in their LISA/ISA, etc).
If it did, however, you should still be able to figure that out - in theory the parental support goes up to about £5k....I would call it £6k (£500 pcm).  See https://www.savethestudent.org/money/asking-parents-for-money-university.html 
On the “too many variables” comment - that’s precisely why you break it down to fixed and variable costs.   Why not give it a go: it’s part of the journey to figuring out when you can chose to give it all up!

I've definitely given it a go, broken down all my monthly costs for the last 5 years and tracked, but that is based in the past. When kids went to uni the costs astounded me, this year in the pandemic I have forked out 17k on rent (both at uni at the same time and get minimum loan)

The whole University model is broken to me especially when it comes to means testing. I really hope it changes fundamentally in the next decade or so prior to my children getting to that age. I can't think of anywhere else in life where your ability to get financial assistance is judged on your parents income. These young people are all adults but the system still treats them as children in many respects.
That being said we as individuals are only trying to do the best for our own so I don't disagree with digging as deep as you can to provide support. Its certainly something I'll be budgeting in although as it sounds like circa £20k a child it certainly could result in an extra few years work.

Yes £20k a child is about right, as you say system is broken and unfair. The interest rates on the loans are a complete rip off as well, RPI+3%. Currently RPI is based on a figure of 2.6% (RPI at March 2020)! so nearly 6% interest when base rates is 0.10%, unbelievable that government think this is acceptable.

As the majority never pay most of it back they have to set a high interest rate to make up for some of the losses. 

It is much more realistic to think of it as a graduate tax which is disguised as a loan to satisfy the Tory party way of thinking of the world.

DT2001

SouthCoastBoy said

Yes £20k a child is about right, as you say system is broken and unfair. The interest rates on the loans are a complete rip off as well, RPI+3%. Currently RPI is based on a figure of 2.6% (RPI at March 2020)! so nearly 6% interest when base rates is 0.10%, unbelievable that government think this is acceptable.

I understand most will not repay full amount so not sure how they set the interest rate.

We are topping up pensions at the moment and these payments look like they are taken off earnings when calculating loans available. I know someone who owned his own business and manipulated income to allow their child to access larger loans. So the system is not ideal but I suspect whatever was in place would work for some not others.

Calculating the cost of children is difficult. If potentially funding Uni in run up to retirement or early stages thereof it can make a difference to when you can give up. We’ve been lucky, eldest is an apprentice, 2nd at Uni in France so funds built up for those now available to help with 3rd and 4th. It wasn’t what was expected and we have friends with children doing Masters!

MallyGirl

or you can raise a darling daughter that chooses a 6 year undergrad degree! She will absolutely never pay off the loans.