Pensions Planning: The NUMBER

kimwp

barnstar2077 said:

barnstar2077 said:

kimwp said:

My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself! I'm wanting to have more than 20k so I'm not having to watch my spend as closely as now and more than that for peace of mind, but really not sure on what that means given the unknowns. I know I feel secure knowing I can increase my income (by changing my salary sacrifice) by £2k a month so that puts my number currently between 20k and 56k. £300k saved so far, at 39.

Did you mean to say £140k a year? 

"My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself!"

So this is a joke?

It was a statement of fact, the absurdity of which I thought highlighted the importance of knowing your number (this thread) and financial planning. 

And I thought writing it down might help with my anxiety around the future. 

Phossy

It was (is) just very confusing. Perhaps the explanation you've just given would have been helpful in the original post.

barnstar2077

kimwp said:

barnstar2077 said:

barnstar2077 said:

kimwp said:

My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself! I'm wanting to have more than 20k so I'm not having to watch my spend as closely as now and more than that for peace of mind, but really not sure on what that means given the unknowns. I know I feel secure knowing I can increase my income (by changing my salary sacrifice) by £2k a month so that puts my number currently between 20k and 56k. £300k saved so far, at 39.

Did you mean to say £140k a year? 

"My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself!"

So this is a joke?

It was a statement of fact, the absurdity of which I thought highlighted the importance of knowing your number (this thread) and financial planning. 

And I thought writing it down might help with my anxiety around the future. 

Don't forget to live a little today!  I used to put half my salary into my pension, but it really burnt me out.  It was a bit like being on a strict diet instead of just improving my diet.  The latter is sustainable, the other isn't.  In the end I halved the money I was putting away and dropped down a day to find a new life balance that works much better for me.  It was like a weight being lifted.

I would look at retiring in my fifties if I was in your position.  Life is too short, don't be the richest man in the graveyard!

Cus

kimwp said:

barnstar2077 said:

kimwp said:

My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself! I'm wanting to have more than 20k so I'm not having to watch my spend as closely as now and more than that for peace of mind, but really not sure on what that means given the unknowns. I know I feel secure knowing I can increase my income (by changing my salary sacrifice) by £2k a month so that puts my number currently between 20k and 56k. £300k saved so far, at 39.

Did you mean to say £140k a year? 

Yes, that's what the forecast says. 300k plus 50k for 26 years plus market performance. I don't know if it takes into account inflation or what assumption it makes for fund performance.

I think it takes inflation into account, so equivalent to £80k a year in today's money assuming 2% inflation.

DT2001

Cus said:

kimwp said:

barnstar2077 said:

kimwp said:

My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself! I'm wanting to have more than 20k so I'm not having to watch my spend as closely as now and more than that for peace of mind, but really not sure on what that means given the unknowns. I know I feel secure knowing I can increase my income (by changing my salary sacrifice) by £2k a month so that puts my number currently between 20k and 56k. £300k saved so far, at 39.

Did you mean to say £140k a year? 

Yes, that's what the forecast says. 300k plus 50k for 26 years plus market performance. I don't know if it takes into account inflation or what assumption it makes for fund performance.

I think it takes inflation into account, so equivalent to £80k a year in today's money assuming 2% inflation.

Try the compound interest calculator at omnicalculator.com you can fiddle around with returns and deposits. If you put in a guesstimate of % growth after inflation you can see what figure you would have at say SPA. You can also work out what you would have if you made no more contributions - 4% give £955k. So maybe you need to work on the plan for pre SPA years and pre SIPP pension age. You have the ability to be in an excellent position to cope with many unknowns/plan changes. Well done 

kimwp

Phossy said:

It was (is) just very confusing. Perhaps the explanation you've just given would have been helpful in the original post.

Ah! I'll try to clarify it, thank you.

barnstar2077 said:

kimwp said:

barnstar2077 said:

barnstar2077 said:

kimwp said:

My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself! I'm wanting to have more than 20k so I'm not having to watch my spend as closely as now and more than that for peace of mind, but really not sure on what that means given the unknowns. I know I feel secure knowing I can increase my income (by changing my salary sacrifice) by £2k a month so that puts my number currently between 20k and 56k. £300k saved so far, at 39.

Did you mean to say £140k a year? 

"My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself!"

So this is a joke?

It was a statement of fact, the absurdity of which I thought highlighted the importance of knowing your number (this thread) and financial planning. 

And I thought writing it down might help with my anxiety around the future. 

Don't forget to live a little today!  I used to put half my salary into my pension, but it really burnt me out.  It was a bit like being on a strict diet instead of just improving my diet.  The latter is sustainable, the other isn't.  In the end I halved the money I was putting away and dropped down a day to find a new life balance that works much better for me.  It was like a weight being lifted.

I would look at retiring in my fifties if I was in your position.  Life is too short, don't be the richest man in the graveyard!

I actually started to spend a bit more earlier in the year, then started to worry about my pension again and wanted to save the amount needed for retirement before reducing my hours/salary. I was worried about regretting not having saved more if eg I lost the ability to work permanently at some point.

Your post has nudged me to to go back to making sure I'm enjoying some of my luck now - thank you.

Purplelady65

  Kimwp I started to spend a bit more earlier in the year, then started to worry about my pension again and wanted to save the amount needed for retirement before reducing my hours/salary. I was worried about regretting not having saved more if eg I lost the ability to work permanently at some point.

Your post has nudged me to to go back to making sure I'm enjoying some of my luck now - thank you.

If you are only 39 years old then you are doing a great job saving for your pension. However I’d make sure you’re not depriving yourself of experiences and activities that you would enjoy doing now. I hope you’re not turning down invitations to events and activities you’d enjoy just so you can save more money into your pension. You’re only young once and the years fly by. No one knows what the future holds so as you say there may come a day when you might not be able to work but there may also come a day when you don’t have the health to undertake any plans you have for activities in retirement. It’s all about balance and restricting yourself to a £20k salary now to have an income of £80k per annum in retirement doesn’t seem quite balanced. 

kimwp

Cus said:

kimwp said:

barnstar2077 said:

kimwp said:

My pensions annual statement says that if I continue contributing until 65, I'll have £140k a year, which is just a smidge more than the £20k pre tax that currently I pay myself! I'm wanting to have more than 20k so I'm not having to watch my spend as closely as now and more than that for peace of mind, but really not sure on what that means given the unknowns. I know I feel secure knowing I can increase my income (by changing my salary sacrifice) by £2k a month so that puts my number currently between 20k and 56k. £300k saved so far, at 39.

Did you mean to say £140k a year? 

Yes, that's what the forecast says. 300k plus 50k for 26 years plus market performance. I don't know if it takes into account inflation or what assumption it makes for fund performance.

I think it takes inflation into account, so equivalent to £80k a year in today's money assuming 2% inflation.

Purely for interest, the statement with the forecast of £140k states "to show how inflation affects you, the values shown are how much your pension would be worth if we were paying it to you today. We've shown here the income you may receive if you don’t take a tax-free lump sum and use your plan's value to buy a guaranteed lifetime income (an annuity). We’ve shown an income based on your life only, which doesn't increase, is paid monthly in advance from your retirement date and for at least five years."
The numbers are: £219,000 at 5th April (the rest of the £300,000 is in LISA and an old pension pot)
Assumed investment growth 3.78%, assumed inflation 2.5%
Not sure the implications of the bits in bold and I presume it doesn't take into account tax, whether LTA or income tax.

Arthurian

Vanguard just emailed me this https://www.vanguardinvestor.co.uk/articles/latest-thoughts/retirement/how-much-do-i-need-to-save-for-retirement  which purports to use PLSA projections, but Vanguard's prediction of how much you need to save for retirement is higher than the PLSA's.  Vanguard say a single person needs £804,194, PLSA website says £490,000 to £790,000 for a comfortable lifestyle.  PLSA do state their figure will be subject to changes as annuity rates change, and the PLSA report is from January 2024, but I just wonder where on earth this increasing target is going to end up.

Phossy

The target will end up in the bin, where it belongs. I hope WHICH publish an update to their analysis as it was based on thousands of retirees rather than the PLSA's which was on about a hundred, most of whom weren't retired!! Rubbish.