Pensions Planning: The NUMBER

kempiejon

fistfulofsteel said:

If my number is significantly less than the state pension, should I save for a private pension at all?
.....
should I assume that won't exist by then?

I'm 37. Self-employed since leaving education with a SIPP of around £30k (and cash savings a few times that figure). No target retirement age but I'd like to do as little work as possible from now until death.

Why wait until state pension, forget that. You are fortunate to live inexpensively. If you can get in a position where your income outstrips your meagre expenses; the larger the better (in theory though don't endure a miserable existance) then pile the surplus into an effective, low-cost investment vehicle. In time you'll be set to never work again. ISA not SIPP as you'll want access before 55.
I started at about your age having spent the previous decades in and out of work playing and having fun more than going for position in the rat race. Permanent full time work became optional to me within just over a decade and I never bothered with a massive income or high status/reward job. 

julicorn

kempiejon said:

fistfulofsteel said:

If my number is significantly less than the state pension, should I save for a private pension at all?
.....
should I assume that won't exist by then?

I'm 37. Self-employed since leaving education with a SIPP of around £30k (and cash savings a few times that figure). No target retirement age but I'd like to do as little work as possible from now until death.

Why wait until state pension, forget that. You are fortunate to live inexpensively. If you can get in a position where your income outstrips your meagre expenses; the larger the better (in theory though don't endure a miserable existance) then pile the surplus into an effective, low-cost investment vehicle. In time you'll be set to never work again. ISA not SIPP as you'll want access before 55.
I started at about your age having spent the previous decades in and out of work playing and having fun more than going for position in the rat race. Permanent full time work became optional to me within just over a decade and I never bothered with a massive income or high status/reward job. 

I generally agree, but would say 'ISA and SIPP' rather than 'ISA not SIPP'. Ideally you want your ISA to bridge the gap until you are able to access your SIPP, but not much more than that. 

kempiejon

Oh of course. ISA and SIPP but as that needs >£20k of disposable income I made some assumptions about @fistfulofsteel The tax deferal will add about 6% to the SIPP but I found the age access too restrictive for my plans so focused on ISA until my 50s. My ISA income is larger and currently free of income tax. My SIPP would be taxed if I took any more from it so I stay for now within allowances.

robatwork

The NUMBER according to L&G is £1700 pcm. 

https://www.legalandgeneral.com/workplace/campaigns/quick-read/happiness-in-retirement/?cid=emlProactive-Happiness-MTo50-Jan25

Weirdly they base their other figures on the fact this will be annuity income. I only have my experience from talking to friends, and a gut feeling, but I expect well under 50% of retirees will take a full annuity. Happy for someone who knows actuals to let me know what the percentages are of drawdown vs annuity when it comes to DC pots. 

vacheron

robatwork said:

The NUMBER according to L&G is £1700 pcm. 

https://www.legalandgeneral.com/workplace/campaigns/quick-read/happiness-in-retirement/?cid=emlProactive-Happiness-MTo50-Jan25

Weirdly they base their other figures on the fact this will be annuity income. I only have my experience from talking to friends, and a gut feeling, but I expect well under 50% of retirees will take a full annuity. Happy for someone who knows actuals to let me know what the percentages are of drawdown vs annuity when it comes to DC pots. 

it also looks like the happiest retirees are happy to retire at 67 with the resulting immediate access to their state pension.

Personally I am not ‘happy’ to wait that long! 😁

onlyconnect

robatwork said:

The NUMBER according to L&G is £1700 pcm. 

https://www.legalandgeneral.com/workplace/campaigns/quick-read/happiness-in-retirement/?cid=emlProactive-Happiness-MTo50-Jan25

Weirdly they base their other figures on the fact this will be annuity income. I only have my experience from talking to friends, and a gut feeling, but I expect well under 50% of retirees will take a full annuity. Happy for someone who knows actuals to let me know what the percentages are of drawdown vs annuity when it comes to DC pots. 

I will be retiring on modest means, and the annuity option doesn't really make sense for me. I would only consider an index-linked annuity and it wouldn't be enough. Whereas on drawdown I could take 5% per year for 20 years which gets me close to the "comfortable" income (and probably above as I plan to continue some work) and if the investments grow maybe for longer than 20 years, after which I probably will not care as much.

MeteredOut

onlyconnect said:

robatwork said:

The NUMBER according to L&G is £1700 pcm. 

https://www.legalandgeneral.com/workplace/campaigns/quick-read/happiness-in-retirement/?cid=emlProactive-Happiness-MTo50-Jan25

Weirdly they base their other figures on the fact this will be annuity income. I only have my experience from talking to friends, and a gut feeling, but I expect well under 50% of retirees will take a full annuity. Happy for someone who knows actuals to let me know what the percentages are of drawdown vs annuity when it comes to DC pots. 

I will be retiring on modest means, and the annuity option doesn't really make sense for me. I would only consider an index-linked annuity and it wouldn't be enough. Whereas on drawdown I could take 5% per year for 20 years which gets me close to the "comfortable" income (and probably above as I plan to continue some work) and if the investments grow maybe for longer than 20 years, after which I probably will not care as much.

Have you modelled the investments falling during those 20 years and what that means for your 5% withdrawals? eg, what if it fell 20% in years 5 and 15.

QrizB

onlyconnect said:

I would only consider an index-linked annuity and it wouldn't be enough. Whereas on drawdown I could take 5% per year

At 65 you can get an RPI-linked annuity paying nearly 5% and never have to worry about inflation, sequence of returns or running out of money.

https://www.hl.co.uk/retirement/annuities/best-buy-rates

onlyconnect

MeteredOut said:

Have you modelled the investments falling during those 20 years and what that means for your 5% withdrawals? eg, what if it fell 20% in years 5 and 15.

If the value of the investments collapse I will have less money but I will be fortunately mortgage-free and have SP plus small DB pension to live on. I totally get the value of an annuity in delivering certainty versus greater risk but when I've looked at the figures it hasn't seemed worth it for me, for some others it will be perfect of course.

kempiejon

I've dismissed annuities but they do indeed seem a good solution for some. I know a guy who got very excited when the rates rose a year or so back. Buying a 5% RPI product does have that certainty. I just want more.
In fact I was just talking about sequence of returns, inflation and asset allocations just this morning. With a view to 30 years retired it's stupid to do think I can do anything other than cautious guessing. I do have a good handle on the next 5 years though and will keep that outlook and updating the plans.