Pensions Planning: The NUMBER

NedS

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?

Same ballpark as us. Last year's essential spend was £19k, and we factor in another £6k for plenty of wiggle room / to be comfortable, giving £25k which can be achieved tax free across our two personal allowances. Add on taxable drawdown of whatever for luxuries / holidays / discretionary spending etc as required (maybe another £10-12k pa).
The plan is quite flexible in the first 10 years of retirement, bridging until 2 x full SPs and 4 x DBs have all kicked in.

indiasign

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?

Yes, I’ve been working on similar figures - current essential outgoings at £18500, estimating to drop to around £14500 post retirement, so I’m working on at least £28K being required, but preferably with an additional buffer of £3-4K.

I’m also looking to ease into retirement over the next 4-5 years, by dropping my working days to 4 next year, then to 3 the year after, and with the OH doing the same over the following two years (she’s younger than me 🙂), getting used to a gradual drop in disposable income before finally pulling the plug at either 62 or 63

pensionpawn

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?

£29,330 is our baseline, tax free. That's one pa via UFPLS at £16760 + standard pa at £12570. We may draw slightly more (taxed) if need be however we'll never draw less as we'll just reinvest (2 x £3600 (£2880 net)) if drawdown exceeds our needs. However what has been a target for us is minimising our outgoings (e.g. solar panels) in retirement, thus minimising the need to draw above our pa's. Also, all retirement figures are subjective. That said, some people may not be earning £33500 net a year, let alone hoping to retire on it!

MarriedWithKids89

michaels said:

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)

The subsidence figure is based on real spending for April '21 to March '22 plus 9%. I have not adjusted specifically for petrol and gas/electric - although maybe I should do for the reasons you suggest.

bownyboy

Ours have definitely started creeping up because of Netflix, Council Tax, Diesel, Gas and Electricity.

Things I have managed to get lower this year:

• Virgin Broadband - called up haggled, said I was going to leave etc and got £15 a month off for 12 months
• Mobile Sims - moved to O2 got Volt upgrade on Broadband and Data and saved £5 a month x2
• House Insurance - managed to save £50 a year
• Breakdown insurance - called up and got the same price 
• Car Legal Cover - Saved £2
• eBike Insurance - They offered £20 off for 2nd year 

We've been off travelling for the last 2 months so haven't felt the full force of some of the above, but a quick update on spreadsheet says we're coming in around £42k a year now.

The majority of the big yearly numbers come from discretionary spending or spending that we could reduce eg:

• Holidays / Travel - £7k
• Groceries / Alcohol / Toiletries - £7k
• Eating out / Pub - £4k
• Clothing - £3k

So we'll see how it goes for the rest of the year before we start to see if we need to dial back the spending.

cfw1994

Saved £2 on car legal cover?
Save all of it - https://www.freemotorlegal.co.uk 😉

Good job on the rest though 👍
Obviously some rises you can’t do anything about…..but as you’ve illustrated well, there are plenty you can impact.

Mick70

for a couple ,  Im thinking  for a half decent retirement .  £30- 35k pa ?

for a good one   +£40k

hugheskevi

Quick reminder of a few data sources to consider target income. I wouldn't be too concerned about the words 'moderate' 'comfortable' and luxurious and just treat them as average and good lifestyles.,

(1) PLSA Retirement Living Standards - calculates a pensioner couple needs £30,600 for a moderate lifestyle or £49,700 for a comfortable lifestyle

(2) Which - calculates a pensioner couple needs £28,000 for a comfortable lifestyle or £45,000 for a luxurious lifestyle

(3) Pensioner Income Series shows that pensioner couples under 75 have a median net income of £30,000

That all points toward pensioner couples needing an income after tax of about £30,000 p/a to have an average lifestyle. If both partners have a full State Pension that is £19,300, leaving about £10,000 per year extra to fund, plus any early retirement funding desired or funding for a lifestyle above average..

Importantly though, these are all measured before the recent high inflation, so it would be prudent to add another 10% (remembering State Pension will also increase by around 10% in April).

SouthCoastBoy

Mick70 said:

for a couple ,  Im thinking  for a half decent retirement .  £30- 35k pa ?

for a good one   +£40k

I opened a new joint account end of December, putting in £2600 a mth and paying everything out of that, so 7 mths in we have a float just shy of £9000, so am I now starting to question whether I need as much as I first thought, we'll see how the next 5 months go

L9XSS

Done the calculations.......and I’m retiring at 60, just under 5 years to go. I’m currently managing on a salary of 21k and a mortgage. I’m about to pay off the mortgage next month, then will continue to focus on SIPP, work pension and savings.
Coupled with a DB pension, I’m looking at a net figure of £32k pa at age 60.