Pensions Planning: The NUMBER

kev2009

I can't work out how people are meant to save these figures. I'm single and I can only dream of having 800k pension pot..... from recent predictions I'd be luck to have half that so not sure how I'd manger and I can't see the state pension going up to be a nice add on to private pensions.

Kev

barnstar2077

kev2009 said:

I can't work out how people are meant to save these figures. I'm single and I can only dream of having 800k pension pot..... from recent predictions I'd be luck to have half that so not sure how I'd manger and I can't see the state pension going up to be a nice add on to private pensions.

Kev

Some people, with well paying jobs, will save up a million or more and then take a calculated percentage from that money to live on every year, with the hope that the pot never runs out, and that there is still a million or more left when they pop their clogs.  If you have the money, then great, you can have a whale of a time, taking multiple holidays a year and have some in the bank in case you need to go into a care home etc.  Every eventuality will have been thought of and money allotted, just in case. 

There is also the other method, where you spend your pot until it runs out, or you die. You need only a fraction of the money, and you can front load your withdrawals.  This method works particularly well if you die at a suitable age, but could leave you without much if you should live to be a hundred!  If you don't have a lot, but want to retire before state pension age then this is the way to go really (assuming you can live on not much more than the state pension at a later date.)

If you retired five years before state pension, gave yourself a £20k salary and then topped up your state pension afterwards to a similar number, you could make it into the latter half of your eighties with a starting pot of £300k.

You pretty much have to just cut your cloth accordingly.  I wouldn't compare yourself to people with million pound pots though, I would imagine they are on far above the UK average wage to begin with (for the most part.)  The same way I don't worry about the fact that I am not staying in a five star hotel when I go camping, which I happen to enjoy a great deal!

kimwp

kev2009 said:

I can't work out how people are meant to save these figures. I'm single and I can only dream of having 800k pension pot..... from recent predictions I'd be luck to have half that so not sure how I'd manger and I can't see the state pension going up to be a nice add on to private pensions.

Kev

It's not about whether you are single, it's about how much you earn and how much you spend. A single person could be earning £70k and a couple earning £45k between them. A couple could have four dependents and the single person have none. Or vice versa. A single person taking home 30k and spending 15k will have more in their savings than a couple taking home £140k and spending £130k.

It's the same with paying off your mortgage. Paying off an £80k flat and putting up with a 20 yo dated bathroom, not buying all the gadgets and nursing your existing ones along is very different to paying off the mortgage on a 500k five bed, with increased bills, cleaner, gardener and new kitchen every ten years. Yet people in the big houses look amazed when someone else pays off their mortgage.

A couple does gets the advantage of two lower tax thresholds instead of one and splits the living bills, but they also have to share that living space....pros and cons!

LHW99

Did Vanguard consider that UK pensioners are going o have access to the SP, which means an ~£11k pa index-linked-ish income base, which would need quite a number of £000's to replace (and which therefore doesn't need to be included as part of the pot size)?

NoMore

LHW99 said:

Did Vanguard consider that UK pensioners are going o have access to the SP, which means an ~£11k pa index-linked-ish income base, which would need quite a number of £000's to replace (and which therefore doesn't need to be included as part of the pot size)?

yes they did
 How much do I need to save for retirement? (vanguardinvestor.co.uk)

Our calculations assume each individual qualifies for the full state pension, which is currently £11,500 a year. Remember, income from pensions is taxed at your normal rate of income tax, so the figures below show the amount you’d need to fund each retirement living standard after tax has been deducted.

westv

Don't we all have pension pots close to the figures anyway? 

swindiff

If the DB multiplier is 20x I am a bit short by the age of 60, if it is 30x I will be quite a way over it
Not a high earner for most of my career.  Just got into the higher tax bracket last year at the age of 53.  Fortunate I know to have a DB pension, but for the last 5 or 6 years I have also been salary sacrificing 25% into DC pension.

LHW99

NoMore said:

LHW99 said:

Did Vanguard consider that UK pensioners are going o have access to the SP, which means an ~£11k pa index-linked-ish income base, which would need quite a number of £000's to replace (and which therefore doesn't need to be included as part of the pot size)?

yes they did
 How much do I need to save for retirement? (vanguardinvestor.co.uk)

Our calculations assume each individual qualifies for the full state pension, which is currently £11,500 a year. Remember, income from pensions is taxed at your normal rate of income tax, so the figures below show the amount you’d need to fund each retirement living standard after tax has been deducted.

Crumbs!  That's going to put some people off even trying IMO.

It's one thing being realistic, but it really needs to be realistic in both directions. Someone earning £60k pa plus is likely to have different needs / wants in retirement to someone who has been on minimum wage all their life. That person may well find that a full NSP plus autoenrollment provides funds that would enable their normal lifestyle to continue, without reaching a pot anywhere near that level.

grahamgoo

LHW99 said:

NoMore said:

LHW99 said:

Did Vanguard consider that UK pensioners are going o have access to the SP, which means an ~£11k pa index-linked-ish income base, which would need quite a number of £000's to replace (and which therefore doesn't need to be included as part of the pot size)?

yes they did
 How much do I need to save for retirement? (vanguardinvestor.co.uk)

Our calculations assume each individual qualifies for the full state pension, which is currently £11,500 a year. Remember, income from pensions is taxed at your normal rate of income tax, so the figures below show the amount you’d need to fund each retirement living standard after tax has been deducted.

Crumbs!  That's going to put some people off even trying IMO.

It's one thing being realistic, but it really needs to be realistic in both directions. Someone earning £60k pa plus is likely to have different needs / wants in retirement to someone who has been on minimum wage all their life. That person may well find that a full NSP plus autoenrollment provides funds that would enable their normal lifestyle to continue, without reaching a pot anywhere near that level.

Every article or video I see seems to use the PLSA retirement living standards numbers as a basis for how much of a pot somebody might need.
But everybody's number is going to be different and for a large number the PLSA figures are way higher than they need to be.
I haven't read the report but it suggests the moderate RLS for a single person increased 34.3% in the year 2022-23 alone.  I know inflation has been high but I'm not sure how they arrive at some of these amounts.

NoMore

The whole point of this thread (all 257 pages of it) is to work out your OWN number, the PLSA is irrelevant for that.