Pensions Planning: The NUMBER

SarahB16

michaels said:

I was planning on having 50k pa gross in 24/25 increasing with inflation (ie index linked DB and annuity) to give me a real terms 42.7k.

Problem is, given the income tax threshold freeze, by 31/32 although the gross will have stayed the same in real terms, the net will have fallen to 40.4k in constant prices terms, about 5% less.

Or looked at another way, it would be the same as the basic rate of income tax having been 26% in 24/25 rather than 20%.  What a lie it is (from all parties) that they won't increase income tax.  Imagine the outcry if they had indexed the thresholds but increased the rate payable by nearly 1% pa every year  which is actually completely equivalent.

Although I'm still many years away from retiring (forecast for 2034) I'm very mindful of what you have highlighted too.  My plan is also to not draw from my pension more than the basic rate of tax threshold.  Whilst I'm still contributing to pensions (benefitting from 40% tax relief) I would not wish to contribute much more and instead now also saving in S&S ISAs.  

No point getting 20% tax relief on pension contributions to then pay 40% tax when drawn down. 

LL_USS

SarahB16 said:

Although I'm still many years away from retiring (forecast for 2034) I'm very mindful of what you have highlighted too.  My plan is also to not draw from my pension more than the basic rate of tax threshold.  Whilst I'm still contributing to pensions (benefitting from 40% tax relief) I would not wish to contribute much more and instead now also saving in S&S ISAs.  

No point getting 20% tax relief on pension contributions to then pay 40% tax when drawn down. 

My pension (defined benefit) will be small but looks like it will still be enough for survival when i retire between 57-60; I only contribute extra just enough into the investment pot to be tax efficient - the rest comes to take home pay to use and save in ISAs. I feel we don't know what's going to be here that far down the line, whilst ISAs stay mine in a tax wrapper, to be used any time. Indeed we don't trust the general assumption "put money in pension and draw down when you should have a lower income tax band during retirement compared to now when you work" any more.

Archerychick

Twentytwothousand said:

£40k.  But having read all these comments I'm wondering what on earth we'll be spending it on.  Energy costs alone are £4,200 in this house.  And that's after the insulation, new windows, lobbies etc.   That's to support two adults (and some additional support for a disabled son). We only run one car, and one dog...

Crickey £4,200 a year in energy!? I assume you’ve checked this isn’t a fault meter, or billing issue?

MallyGirl

Archerychick said:

Twentytwothousand said:

£40k.  But having read all these comments I'm wondering what on earth we'll be spending it on.  Energy costs alone are £4,200 in this house.  And that's after the insulation, new windows, lobbies etc.   That's to support two adults (and some additional support for a disabled son). We only run one car, and one dog...

Crickey £4,200 a year in energy!? I assume you’ve checked this isn’t a fault meter, or billing issue?

Mine was similar till I got solar panels and a battery 

LHW99

Archerychick said:

Twentytwothousand said:

£40k.  But having read all these comments I'm wondering what on earth we'll be spending it on.  Energy costs alone are £4,200 in this house.  And that's after the insulation, new windows, lobbies etc.   That's to support two adults (and some additional support for a disabled son). We only run one car, and one dog...

Crickey £4,200 a year in energy!? I assume you’ve checked this isn’t a fault meter, or billing issue?

Storage heaters? We had that problem for 20 years!

westv

MallyGirl said:

Archerychick said:

Twentytwothousand said:

£40k.  But having read all these comments I'm wondering what on earth we'll be spending it on.  Energy costs alone are £4,200 in this house.  And that's after the insulation, new windows, lobbies etc.   That's to support two adults (and some additional support for a disabled son). We only run one car, and one dog...

Crickey £4,200 a year in energy!? I assume you’ve checked this isn’t a fault meter, or billing issue?

Mine was similar till I got solar panels and a battery 

Mansion? Multiple rooms will cost more.

MallyGirl

westv said:

MallyGirl said:

Archerychick said:

Twentytwothousand said:

£40k.  But having read all these comments I'm wondering what on earth we'll be spending it on.  Energy costs alone are £4,200 in this house.  And that's after the insulation, new windows, lobbies etc.   That's to support two adults (and some additional support for a disabled son). We only run one car, and one dog...

Crickey £4,200 a year in energy!? I assume you’ve checked this isn’t a fault meter, or billing issue?

Mine was similar till I got solar panels and a battery 

Mansion? Multiple rooms will cost more.

Definitely not - draughty Victorian detached with 3 beds and a big attic room. 17 radiators, even if mostly turned off, means many metres of copper piping to distribute and lose heat along the way.

MrsG2006

I've currently got just over 6 years until I retire.  I am going to go at 60 as I have my Armed Forces Pension come into effect then.  If I continue to pay into my current pension until I retire, then I am looking at £31,500 total annual income plus lump sum of £85000 combined from all of my pensions.  I have £20k in a cash isa and am hoping to put another £20k, so hopefully I should be ok. My problem is I like my holidays to the sun, and spend most of my salary on holidays, but I'll surely be able to get a wee holiday in at least once a year when I retire.  

barnstar2077

MrsG2006 said:

I've currently got just over 6 years until I retire.  I am going to go at 60 as I have my Armed Forces Pension come into effect then.  If I continue to pay into my current pension until I retire, then I am looking at £31,500 total annual income plus lump sum of £85000 combined from all of my pensions.  I have £20k in a cash isa and am hoping to put another £20k, so hopefully I should be ok. My problem is I like my holidays to the sun, and spend most of my salary on holidays, but I'll surely be able to get a wee holiday in at least once a year when I retire.  

Sounds like a great retirement to me!

Roger175

An update on our NUMBER.

For the 3rd year running we have been accurately monitoring our spending using a phone App. The last year’s results are in, which shows we spent £40,495. Our budget (based on the previous years) was £41k, so very pleased with that.

Expenditure was remarkably consistent on a category-by-category basis. A few up’s and downs which we were expecting, for instance our aging dog cost us £2,750 last year (and that’s after insurance payments), but she had various issues including a tumour removal and we were expecting this. Holidays/entertaining cost us £10,620, but this included attending 2 weddings and 5 breaks including 3 separate European visits (Switzerland, Italy and Austria).

We run 3 cars (don’t ask!), 2 of which were replaced this year with nearly new ex-dem models, but that capital expenditure is accounted elsewhere.

A quick analysis of our essential spending suggests £30k - £31k could be easily achievable if push came to shove, but then again, the retirement pot has a very healthy balance and could sustain a higher level of expenditure with very little risk.