Pensions Planning: The NUMBER

Terron

michaels said:

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.

Except that when introduced by the Tories it actually was a loan, with an interest rate equal to RPI, the option for deferring payment one year at a time, and the loans being written off on death or certain other conditions. It was Labour in 1998 who made repayments contingent on income and made it more tax like, but still calling it a loan to disguise it whilst they increased the need for students to have one.

SouthCoastBoy

Yes, I have found uni costs to be a massive drain on resources, and can have an impact on "the number". The real issue is I'm not sure when it is going to stop, therefore difficult to get an accurate number. The other cost that to me is totally unfair and I have little control over is council tax, should we be factoring costs of RPI+3% on that as well?

Going back to interest rates on loans, I just don't think there is justification for an interest rate 56 times large than the base rate. What happens if a govt decides to change the rules on student loans and decides not to write them off at 50, or changes pay back terms etc. Personally if I was 21 I wouldn't like the liability hanging over me.

westv

Nobody is forced to go to university. 

michaels

SouthCoastBoy said:

Yes, I have found uni costs to be a massive drain on resources, and can have an impact on "the number". The real issue is I'm not sure when it is going to stop, therefore difficult to get an accurate number. The other cost that to me is totally unfair and I have little control over is council tax, should we be factoring costs of RPI+3% on that as well?

Going back to interest rates on loans, I just don't think there is justification for an interest rate 56 times large than the base rate. What happens if a govt decides to change the rules on student loans and decides not to write them off at 50, or changes pay back terms etc. Personally if I was 21 I wouldn't like the liability hanging over me.

Currently at least there is the option to refinance on commercial terms (once income supports that or via bank of Mum and Dad) which might well be worth dong for the 17% who are likely to pay it back.  The only risk is that having paid it back there is a change of govt and the loans are written off to be replaced by higher taxes for all - and you end up paying twice.....

Anonymous101

I've opened up that can of worms on here before... Personally I think the whole system needs reforming. In my opinion there are far too many courses which offer little value but whilst University is pushed as the default path for 50% of the population chances are I'll have to factor it in for my children when they are of age.

LULULU1

Our number is 30k per year.

 I am 58 and have a full time job paying 45k per year gross. I am hoping to retire from this role next year in March 2022 and work part time with an income of approx 10k per year gross. I will just tip into the higher tax bracket this year by 2k as I still pay a lot into my AVC, Approx £1k per month.

I have a final salary pension which will pays me £15k gross a year which I now taken to help us pay down our debts.
My wife is 54, she is earning gross 12k per year. She has a final pension of £5k per year due when she is 55.

Both of us are due to receive full state pension.
We have a mortgage of 114k at 1.64% interest rate fixed for 5 years and due to finish in 19 years time. This is still high as currently we favour investments over mortgage overpayments but can flip this if things change when rate expires in 2024. 
We a few small debts less than 5k in total which we will pay off before retirement

We have 105k in our AVCs which we can access when we reach 55. (me 45k, wife 60k)
We have 100k in my wife’s SIPP.

Any other thoughts or ideas would be greatly appreciated. 

AlanP_2

SouthCoastBoy said:

 The other cost that to me is totally unfair and I have little control over is council tax, should we be factoring costs of RPI+3% on that as well?

Council Tax is no different to any other cost in reality, you have no control over any of them really. If the price of bread goes up by by 20% you can't stop it.

Admittedly you can bake your own to avoid some of that cost but you can't control it.

I'm not sure how Council Tax can be made fairer, there have been numerous attempts at "local tax" levy schemes in the UK and none of them have been perfect.

AlanP_2

I don't recognise many of the estimates / actuals that are posted on here for Uni contribution from parents but perhaps we were just fortunate with the way things worked out for our 3 and perhaps accomodation has gone up a lot.

Each is on a different version of the loan scheme and each had the full loan with no grant element.

Grandparents contributed £3k a year for each of them for 3-year courses (one did a 4-year Masters followed by a PhD) and we contributed ~£100 pm (for 10 months) towards their rent, plus ~£400 a year for "big shops" at the start of each term.

They all worked whilst not at Uni and the one who did the PhD (in a science) took it on himself to contact local "science based" companies to see if he could get any assistance. Got a pre-Uni summer holiday role in the labs at one of them and an ongoing "holiday" job at another plus £1k a year of sponsorship.

So overall cost to us for 3 was approx £13k over about 13 years. Even if the GPs had not contributed our top end cost would have been £40k for the 3.

Luckily they have all found good jobs and are doing well in their respective careers.

The eldest has nearly paid back his loan, the middle one (PhD) will pay it back I have no doubt, and the youngest probably never will.

lollynerd

Hi Gatser,
I worked out my monthly spend for a number years (monthly) before I retired in 2017. The conclusion was that we (Me, wife, grown up, live in daughter) needed £40K per year. It turns out I have spent a little bit less than that, but not much. Here is my detailed breakdown.

Groceries	7,300
Holidays	6,500
Social	5,600
1 Car & petrol	3,660
2 Car & petrol	3,660
Council Tax	2,900
DIY & Garden	1,800
Gas & Electric	2,000
Clothes	1,300
Golf	1,300
Presents	700
Hair, Beauty Health	700
Gym	800
BT	700
Water	570
Mobile	500
Total	39,990

A lot of companies say "You will need X% of your final salary. This makes no sense to me, as I was saving most of my salary in my final years. Some people may earn £200K and live on £50K and others may earn £60K and spend it all.

Anonymous101

lollynerd said:

A lot of companies say "You will need X% of your final salary. This makes no sense to me, as I was saving most of my salary in my final years. Some people may earn £200K and live on £50K and others may earn £60K and spend it all.

Absolutely agree, any calculations of your number has to be on spending rather than on income.