Pensions Planning: The NUMBER

bluenose1

moving_forward said:

I've just had a look at guiide but can't work out if retirement income is in today's money or not. I entered what I want to have in today's money but it didn't increase for inflation whereas it did for state pension?

Agree with DT2001 that it ignores inflation, hadn’t noticed that as I intend to go in next year. You would think they would factor in inflation automatically when they ask for date you retire.
Re the tax DT2001 they take off the £12,570 tax free allowance and assume it increases with inflation. Seemed accurate to me, a good sense check of my spreadsheets.

moving_forward

DT2001 said:

moving_forward said:

I've just had a look at guiide but can't work out if retirement income is in today's money or not. I entered what I want to have in today's money but it didn't increase for inflation whereas it did for state pension?

I think it ignores inflation for what you want in retirement so you need to calculate an inflation adjusted figure. It does presume growth on your pension pot.
I’m not sure how it calculates tax - I assumed no 25% tax free amount and my savings are in ISA’s - so need to dig further but a good, simple check of where we are.

Thanks DT.
It asked how much you wanted lump sum. I've presumed all income to be pre tax as it wouldn't know everybody's marginal rate.

bluenose1 said:

moving_forward said:

I've just had a look at guiide but can't work out if retirement income is in today's money or not. I entered what I want to have in today's money but it didn't increase for inflation whereas it did for state pension?

Agree with DT2001 that it ignores inflation, hadn’t noticed that as I intend to go in next year. You would think they would factor in inflation automatically when they ask for date you retire.
Re the tax DT2001 they take off the £12,570 tax free allowance and assume it increases with inflation. Seemed accurate to me, a good sense check of my spreadsheets.

Thanks Bluenose.
It seems a bit mixed up to be if it increases state pension by inflation but ignores inflation on wanted amount 🤔
It did help me check my spreadsheet so a good tool but I think needs to adjust inflation consistently to avoid errors in calculations.

Thrugelmir

moving_forward said:

DT2001 said:

moving_forward said:

I've just had a look at guiide but can't work out if retirement income is in today's money or not. I entered what I want to have in today's money but it didn't increase for inflation whereas it did for state pension?

I think it ignores inflation for what you want in retirement so you need to calculate an inflation adjusted figure. It does presume growth on your pension pot.
I’m not sure how it calculates tax - I assumed no 25% tax free amount and my savings are in ISA’s - so need to dig further but a good, simple check of where we are.

Thanks DT.
It asked how much you wanted lump sum. I've presumed all income to be pre tax as it wouldn't know everybody's marginal rate.

bluenose1 said:

moving_forward said:

I've just had a look at guiide but can't work out if retirement income is in today's money or not. I entered what I want to have in today's money but it didn't increase for inflation whereas it did for state pension?

Agree with DT2001 that it ignores inflation, hadn’t noticed that as I intend to go in next year. You would think they would factor in inflation automatically when they ask for date you retire.
Re the tax DT2001 they take off the £12,570 tax free allowance and assume it increases with inflation. Seemed accurate to me, a good sense check of my spreadsheets.

Thanks Bluenose.
It seems a bit mixed up to be if it increases state pension by inflation but ignores inflation on wanted amount 🤔
It did help me check my spreadsheet so a good tool but I think needs to adjust inflation consistently to avoid errors in calculations.

State pension is defaulted to rise by inflation. Investments aren't. The value of your "pot" will fluctuate with the prevailing wind. 

moving_forward

I was talking about how it asks what you want to retire on but doesn't adjust that for inflation until retirement date. Whereas state pension IS adjusted prior to retirement date. How can people plan for retirement if goal amount isn't adjusted accordingly.

bostonerimus

On the personal heating thing, I have my central heating set at 13 C during the day when I'm in the house and at 10 C other wise. If it gets cold I have slippers and a couple of wonderful Hudson's Bay 4 point wool blankets.

DT2001

moving_forward said:

I was talking about how it asks what you want to retire on but doesn't adjust that for inflation until retirement date. Whereas state pension IS adjusted prior to retirement date. How can people plan for retirement if goal amount isn't adjusted accordingly.

I am unsure why it cannot run your required income figure forward however reasonably easy to work out.
I found the assumptions link at the bottom of the final page. It gives you things to consider if you are doing your own spreadsheet i.e. where you are drawing from as some will want to minimise tax and others may wish to preserve their pensions for IHT reasons. All in all a good starting point.

Whilst the ‘pots’ will fluctuate we need to work on some assumptions as long as we remember what might happen.

sheslookinhot

bostonerimus said:

On the personal heating thing, I have my central heating set at 13 C during the day when I'm in the house and at 10 C other wise. If it gets cold I have slippers and a couple of wonderful Hudson's Bay 4 point wool blankets.

Mine is at 18C during the day when in and 12 C when out. In the evening we have it set to 20 C.

MarriedWithKids89

Given the recent rises in prices, what is your number now? In our case (couple, South East, no mortgage, no dependents, one car (5yo), no pets, non-smokers, social drinkers) I reckon we need:

• £15500/year for "subsistance" (food, fuel, taxes, utilities, insurance etc).
• Plus £6000/year on average for un-avoidable capital expenditure (house/car repairs, replacement windows, new boiler sometime, white goods, new furniture, replace car, etc). 
• Finally, we think that we would need £12000/year to enjoy our retirement (holidays, days trips, theatre trips, eating out, etc).

That's about £33500/year net. How does this compare?

michaels

MarriedWithKids89 said:

Given the recent rises in prices, what is your number now? In our case (couple, South East, no mortgage, no dependents, one car (5yo), no pets, non-smokers, social drinkers) I reckon we need:

• £15500/year for "subsistance" (food, fuel, taxes, utilities, insurance etc).
• Plus £6000/year on average for un-avoidable capital expenditure (house/car repairs, replacement windows, new boiler sometime, white goods, new furniture, replace car, etc). 
• Finally, we think that we would need £12000/year to enjoy our retirement (holidays, days trips, theatre trips, eating out, etc).

That's about £33500/year net. How does this compare?

Thanks, nice breakdown. 

Do you have a comparison with the same calc one or two years ago as you mention the impact of the recent inflation?  (As one example our gas/electric bill with current family usage is likely to go from 2k pa a ear ago to 6.5k or about 5.8k in 2020 money terms which obviously blows up any fixed real term budget)

Pensions_matter_2

My requirements are around £24000 net, My partner needs about £10000 net (we keep our monies separate - its complicated how we organise things but it works!), so that makes it around £34000 net in total if we base it on a couple. That takes account of inflation as it stands now, but might have to tighten belt in future if inflation stays high for another year or two.