Pensions Planning: The NUMBER

gtat

DairyQueen said:
Apologies, I missed the DB membership. Will your DB pay £36kp.a. in today's terms? i.e. will it revalue to allow for inflation over time? Or is £36k a projection that includes inflation (salary increase?) of x% p.a. over the next 24 years? I ask as, your number will increase by inflation so will be significantly higher by the time you reach 58 and your projected income needs to match it in real terms. 

£36kp.a. (current value) is a generous DB entitlement. For example, it would require 40 years membership of a 1/60th scheme at final salary of approx £55k (also current value) to achieve that. A high earner (say £110kp.a.) could achieve the same amount from 20 years membership of the same scheme.

Simplistic numbers but you get the drift.

It's great that you are planning in your 30s. Nobody reaches their 50s regretting having planned early but plenty regret planning too late. Those of us that have made it across the line with sufficient income for a comfy retirement either planned early or got lucky. No prizes for guessing which camp most belong to. 

Very best wishes on the new babe; the best investment you will ever make.

Thanks DQ! All figures are in today's terms - my DB pensions are inflation linked, so I expect my 'number' and DB pension to both increase with pension, and hopefully my salary should do so too - or possibly increase with promotion / job change.

I have been lucky with my workplace pensions, but I think I have also benefited from trying to make myself knowledgeable about pensions whilst still young(ish). My first job had a DC pension, but I moved to academia after a couple of years and transferred it into a good DB pension. My current pension is a CS alpha pension, which is accrued at 2.32% of earnings (1/43). My wife is currently on maternity leave and will be going back to a low-ish paid job part time, but it is NHS, so she is also building up a small DB pension.

I think our biggest risk to the plan to retire at 58 is that I get 'bored' at work and fancy a change of role. If this does happen it is very likely my next job would have a worse DB pension or a DC pension. If so, then I want to make sure I price this in to my new salary when job hunting / negotiating. If I am able to build up a few more years of DB in my current role then I feel it wouldn't be the end of the world to have a DC pension alongside it anyway for a bit of added flexibility.
(EDIT: The other big risks are changes to pension schemes / retirement ages / state pension!).

Our baby will be our most expensive cost, but by far the best investment!  He was a long time coming, and we know not everyone is so lucky to be able to have a baby. We feel very blessed.

DairyQueen

gtat said:

DairyQueen said:
Apologies, I missed the DB membership. Will your DB pay £36kp.a. in today's terms? i.e. will it revalue to allow for inflation over time? Or is £36k a projection that includes inflation (salary increase?) of x% p.a. over the next 24 years? I ask as, your number will increase by inflation so will be significantly higher by the time you reach 58 and your projected income needs to match it in real terms. 

£36kp.a. (current value) is a generous DB entitlement. For example, it would require 40 years membership of a 1/60th scheme at final salary of approx £55k (also current value) to achieve that. A high earner (say £110kp.a.) could achieve the same amount from 20 years membership of the same scheme.

Simplistic numbers but you get the drift.

It's great that you are planning in your 30s. Nobody reaches their 50s regretting having planned early but plenty regret planning too late. Those of us that have made it across the line with sufficient income for a comfy retirement either planned early or got lucky. No prizes for guessing which camp most belong to. 

Very best wishes on the new babe; the best investment you will ever make.

Thanks DQ! All figures are in today's terms - my DB pensions are inflation linked, so I expect my 'number' and DB pension to both increase with pension, and hopefully my salary should do so too - or possibly increase with promotion / job change.

I have been lucky with my workplace pensions, but I think I have also benefited from trying to make myself knowledgeable about pensions whilst still young(ish). My first job had a DC pension, but I moved to academia after a couple of years and transferred it into a good DB pension. My current pension is a CS alpha pension, which is accrued at 2.32% of earnings (1/43). My wife is currently on maternity leave and will be going back to a low-ish paid job part time, but it is NHS, so she is also building up a small DB pension.

I think our biggest risk to the plan to retire at 58 is that I get 'bored' at work and fancy a change of role. If this does happen it is very likely my next job would have a worse DB pension or a DC pension. If so, then I want to make sure I price this in to my new salary when job hunting / negotiating. If I am able to build up a few more years of DB in my current role then I feel it wouldn't be the end of the world to have a DC pension alongside it anyway for a bit of added flexibility.
(EDIT: The other big risks are changes to pension schemes / retirement ages / state pension!).

Our baby will be our most expensive cost, but by far the best investment!  He was a long time coming, and we know not everyone is so lucky to be able to have a baby. We feel very blessed.

Just a thought....

At that level of DB income, and even assuming that the LTA recommences inflation increases in 2025, you could be flirting with an LTA breach. Your wife OTOH could be on course for a pension too low to use her PA in retirement. You may wish to consider contributing additional payments into a SIPP for her in order to optimise your tax position as a couple in retirement. Something to keep an eye on over time. It's common for couples to focus on tax relief 'on the way in' by prioritising the higher earner's contributions  (especially if one pays tax at 40%). But worth considering tax 'on the way out' too. 

MovingForwards

Don't think I've ever replied to this thread. 

I'm 45, OH 46, plus currently one cat aged 14, could be a couple when retired. 

I've recently jiggled my outgoings as there's a couple of local shops I go to for nice food treats.

Outgoings, less mortgage and work related costs, annual outgoings worked out as monthly:

Utilities £50
CT, incl water £112.50
2x mobile phone, internet and Netflix £40
Food, cleaning products, cat food etc £150
Home / car insurance and repairs / MOT £100
Petrol £30
Leftovers pays for a haircut every couple of years, I colour my own hair (maybe one day I will embrace the grey), clothes / footwear as and when they need replacing.

I'm aiming for £100k cash saved up while working, if I go to SPA, to cover property repairs, upgrades etc.

I carry a surplus in my car pot for when I replace it for another runabout. Insurances / car tax are paid annually, repairs as and when required.

Cat has a pocket money tub and any vet bills would be self-funded, as I've always done over the years.

Each month I pay into a SIPP to fund early retirement and I've a couple of small old pensions rolling along in the background. I expect to leave current employer after building up 5 years DB pension; I prefer the private sector.

Outgoings when reaching SPA are covered by one SP, I'm on track to receive the full amount unless they alter that again.

I review finance annually and when received a payrise to ensure everything is on track.

michaels

MovingForwards said:

Don't think I've ever replied to this thread. 

I'm 45, OH 46, plus currently one cat aged 14, could be a couple when retired. 

I've recently jiggled my outgoings as there's a couple of local shops I go to for nice food treats.

Outgoings, less mortgage and work related costs, annual outgoings worked out as monthly:

Utilities £50
CT £135
2x mobile phone, internet and Netflix £40
CT, incl water £112.50
Food, cleaning products, cat food etc £150
Home / car insurance and repairs / MOT £100
Petrol £30
Leftovers pays for a haircut every couple of years, I colour my own hair (maybe one day I will embrace the grey), clothes / footwear as and when they need replacing.

I'm aiming for £100k cash saved up while working, if I go to SPA, to cover property repairs, upgrades etc.

I carry a surplus in my car pot for when I replace it for another runabout. Insurances / car tax are paid annually, repairs as and when required.

Cat has a pocket money tub and any vet bills would be self-funded, as I've always done over the years.

Each month I pay into a SIPP to fund early retirement and I've a couple of small old pensions rolling along in the background. I expect to leave current employer after building up 5 years DB pension; I prefer the private sector.

Outgoings when reaching SPA are covered by one SP, I'm on track to receive the full amount unless they alter that again.

I review finance annually and when received a payrise to ensure everything is on track.

Just querying CT and CT inc water as I thought that was council tax?

MovingForwards

@michaels   Sorry, it's because I should have removed CT as the 10x payment because I worked it out as a monthly equivalent. I will update my post!

VoucherMan

For the sake of a bump, and somewhere to view my outrageous ideas in a few years if it all goes pear shaped...

I originally posted here, with a breakdown a few posts after it, and 2 or 3 follow up posts on subsequent pages.

A year on, and there's been a little 'fine tuning'. Some of the figures are still notably OTT, and some should be even lower (removed) in a few years. I'm only listing some of the notable amendments here. Others on the OP, I still consider reasonably accurate. I'm not lowering my Number because of these, but just highlighting where I expect to spend even less.

Broadband    £282 £228
Gas/Electric    £600 £583-£650
Water rates    £283  £222
Council Tax    £1,164 £1049
House insurance    £200  £111
Dentist    £200 £135
TV licence    £155 £0.00
Car insurance?    £500  £165-£0 **
Car Tax?    £150    - £0.00 **
Car Service ?    £500   - £0.00 **
Petrol    £600  £240-£0 **
car replace    £750  £0.00

Broadband is lower, thanks to a good deal. No idea if I'll get anything like it next time.

Energy costs are only likely to go one way, especially if/when I decide I want the house warmer, and more often, but for now I'm happy to leave it.

Water/council tax I've adjusted to give correct figures, as they are paid over 10 months, not 12 as I'd originally calculated.

The dentist recently said an annual check-up is fine, instead if biannually.

I cancelled the TV licence last year after becoming frustrated with the BBC. I find it so liberating, not being able to just turn on the TV and channel surf. I wish I'd done it years ago.

The car has had so little use when I've not been working that I've decided not to get another. For now I intend to keep this one until I decide it's costing too much to maintain. whether that's 1 year, or 10, remains to be seen.

Gin_and_Milk

Your number is certainly very low - less than minimum wage, but if you can live off that and enjoy life, go for it as soon as you can.

westv

On the numbers front, I have just been told my ISP (KCom) will in 2022 be joining the merry band of ISPs that will raise their prices annually by CPI + 3.95%!! 

SouthCoastBoy

Over the last few weeks the news appears to be pointing towards inflation and the latest CPI figure seems to confirm that, the question is will it be temporary and then settle down or keep climbing? I'm not sure how accurate CPI is when comparing it against my personal inflation figure.

Maybe interest rates will start to move soon, to me it seems quite unbelievable that they have been so low for so long. Who would have thought in 2009 when the base rate went down to 0.5% it would be only 0.1% in 2021, are we in a new paradigm or will there be a shift to interest rates that are more reflective of historical values?

Both inflation and interest rates will have a big factor in the number I need for retirement, as it will for most probably all.

michaels

Even if we only see a temporary blip to 5% (+) this autumn that is a 5% real fall in the value of all assets including pension funds and assuming it is temporary and interest rates/bond prices don't adjust that is also 5% of the national debt burden.

Funny how we accept financial repression as 'one of those things' but would be up in arms if the govt proposed taxing 5% of all assets to help pay for Covid.