Pensions Planning: The NUMBER

Silvertabby

michaels said:

Silvertabby said:

Don't forget to factor in the cost of paying someone to do the jobs that you happily do now, but won't be able to do or will enjoy doing in the future.  Cleaning, DIY and gardening in our case. 

Not sure 'happily' is quite the right word but I get your point

'Happily' is DIY for him, gardening for me.  Cleaning is just a 'necessary' although we've got the divide down to a fine art - for example, he hates cleaning windows, but doesn't mind the ironing (a glass of beer and a war film on the telly and away he goes..) while I don't like ironing but don't mind cleaning windows.  Good exercise for keeping 'bingo wings' at bay! 

We share the cooking as well.  

Sea_Shell

Our household chores are split pretty evenly between wet and dry.

DH does wet, I do dry.

I'll let you figure out which is which 😉

michaels

Sea_Shell said:

Our household chores are split pretty evenly between wet and dry.

DH does wet, I do dry.

I'll let you figure out which is which 😉

Hmm - wondering where the steam iron fits....

Pat38493

michaels said:

Phossy said:

For home maintenance I've used a 'rule of thumb' I've seen stated in a few places and that  is to budget at least 1% / annum of your homes value.

For white goods, tv, computers etc I use a number based on full replacement every 5 years (so 20% of their current cost per year)

Not sure the 1% is that valid, the identical house can vary in value by 5x or more depending where it is in the UK, whereas maintenance costs probably only vary by up to about 50%.

Also the idea that 'white goods' and electronics only last 5 years is a really sad indictment that we live in a 'throw away' economy with built in obsolescence/design life.  Was just checking, our 'bedroom TV, demoted from the lounge, is 16 years old

Does your accrual sit in any particular part of your assets or is it somehow deducted at the top?  

What I mean is, do you always keep enough cash outside the pension for your needs, plus the accrual amounts, or do you deduct the accrual from what is still inside the pension?

This is an issue I have been wrestling with recently.  Let's say I want to have a pot of £20K for various capital expenses - the idea is to keep that pot at roughly 20K, continuously.

I've considered several ways of doing this including keeping the £20K actually in a separate pot (either inside or outside the pension), or like yourself having a kind of paper accrual for it.

At the moment I am kind of double counting as I am budgeting to set aside the £20K at the start, but then top it up by about £4K per year ongoing.  

The other thing I am trying to account for, is that spending out of that £20K can be deferred if there are poor market conditions and/or I want to avoid going through a tax band that year.

michaels

For me it is entirely notional, I have a total annual spend number of £x which includes £y of accrual towards big item spend.  I am generally 'ahead' in that I don't spend as much as the accrual but don't have any specific pot where I put this underspend ready for when it is needed.  Of course if we suddenly decide on a new car or new kitchen or whatever I will then effectively 'owe' money to the big one off accrual pot.  I do believe in efficient markets so am not subject to not wanting to withdraw particular assets because markets are 'low'.

In terms of drawdown, I will use the tax thresholds to guide my withdrawals even though the higher rate threshold is above my £x, extra above spend goes into an isa in the same asset mix as the pension it comes out of.  Thinking behind this is that the threshold is frozen and if we get a bout of inflation I will end up having wasted allowance now whilst having to draw at higher rate later, especially once state pension has cut in.

Pat38493

michaels said:

For me it is entirely notional, I have a total annual spend number of £x which includes £y of accrual towards big item spend.  I am generally 'ahead' in that I don't spend as much as the accrual but don't have any specific pot where I put this underspend ready for when it is needed.  Of course if we suddenly decide on a new car or new kitchen or whatever I will then effectively 'owe' money to the big one off accrual pot.  I do believe in efficient markets so am not subject to not wanting to withdraw particular assets because markets are 'low'.

In terms of drawdown, I will use the tax thresholds to guide my withdrawals even though the higher rate threshold is above my £x, extra above spend goes into an isa in the same asset mix as the pension it comes out of.  Thinking behind this is that the threshold is frozen and if we get a bout of inflation I will end up having wasted allowance now whilst having to draw at higher rate later, especially once state pension has cut in.

OK so effectively if you decide to make a big spend in one year, you will look like you are over budget in that one year, but it will even out over the decade or so.

michaels

Exactly although I do keep a running count so have some idea of how much we can 'spend' on one offs, it is not entirely random and needs to fit inside our 'little number'

Ibrahim5

We have never had a new kitchen or bathroom and I don't think we ever will. We just replace and repair items as needed. Everything always works perfectly, it's just appearance that suffers I suppose. We do have some neighbours who suddenly put a skip outside and throw the entire contents of a bathroom or kitchen in it. I think it's partly money saving and partly environmental for us. Throwing all that good stuff away. We have just refurbished our bathrooms for about £500 each. They look great, well to us anyway. Probably not the height of current bathroom fashion! Never really budget at all for this sort of stuff.

LL_USS

Ibrahim5 said:

We have never had a new kitchen or bathroom and I don't think we ever will. We just replace and repair items as needed. Everything always works perfectly, it's just appearance that suffers I suppose. We do have some neighbours who suddenly put a skip outside and throw the entire contents of a bathroom or kitchen in it. I think it's partly money saving and partly environmental for us. Throwing all that good stuff away. We have just refurbished our bathrooms for about £500 each. They look great, well to us anyway. Probably not the height of current bathroom fashion! Never really budget at all for this sort of stuff.

Likewise, I don't think I have the need to "upgrade" kitchen, bathrooms that already look fine for us... just repair and replace what's broken or change a few things for hygiene reasons.

Sarahspangles

LL_USS said:

Likewise, I don't think I have the need to "upgrade" kitchen, bathrooms that already look fine for us... just repair and replace what's broken or change a few things for hygiene reasons.

We’re moving soon and I know the estate agent is going to put ‘needs updating’ on ours. It’s a family house so I know the next owners will want another toilet and maybe an en suite, and in some of the scenarios the reconfiguration would include a utility room. It’s pointless us updating it.

We're likely to buy a ‘needs updating’ ourselves and as I’ve never had a new kitchen or bathroom I’m hoping to have that experience and then live long enough for it to be back to ‘needs updating’ by the time the next owners are viewing.