Pensions Planning: The NUMBER

marklv

PipPip wrote: »

In my plan I am assuming that my wife and I will need an income of around £50k pa gross of tax. That comes from nothing more than assuming that we will be able to live comfortably on about 50% of our current income. Future annuity rates are clearly unknown but I have been assuming that I will need total pension pot and assets of somewhere around £1m to £1.2m in todays money. I'm not in a final salary pension scheme, defined contribution. I'm 39 years old and expect I will want to retire at 60, straight after my youngest child, who is 9 months old today, will finish university (assuming he goes!). Today if I include half equity on our home (which I know you should not do but its quite a large house and we will downsize when we retire and probably retire overseas), all the equity on an overseas holiday apartment, all my pension, shares, share options and cash I believe I'm about 40% to my retirement goal. Still a long long way to go but 21 years of work should do the trick if it does not do for me first!

£50k a year as a combined pension? Hugely ambitious and certainly way above what you need for a comfortable retirement. Why do you need so much when you are in your 60s? Your mortgage will have been paid and you won't have kids to spend money on. You could live perfectly adequately on half of that.

marklv

ERICS_MUM wrote: »

But, how many people will actually end up with a 2/3rds pension in the future ?


Linda xx

Not many. It takes 40 years of continuous service with an employer that provides a final salary pension at 1/60th of final salary. People retiring now and in the next 15-20 years will be the last ones to have this possibility. Even in the public sector the existing 'gold plated' pensions will eventually be phased out. In any case, as has already been pointed out, it is the numerical pension that matters, not a percentage of salary. E.g. a high court judge on £180k a year simply does not need a 2/3 pension in order to live his retirement even very comfortably - if he retires on 1/3 of his salary he will still have a pension of £60k a year, whch is more that the overwhelming majority of the population earn as a full time salary, let alone a pension! On the other hand, a nurse on say, £25k a year, would have only a paltry £8,333 a year as a pension if she retired on 1/3 of her salary. So it's clear that salary related pensions are infinitely more important to lower paid employees than senior professionals/managers.

I see the future of work as consisting of spells of temporary contracts followed by gaps of unemployment. Employers don't like the hassle of having to employ people on a permanent basis, unless they are based in India and earn 1/3 of the equivalent UK salary. Welcome to the modern world!

jamesd

marklv, one reality of the human condition is that people judge how well off they are by what they are used to. For someone in PipPip's situation 50% of current income would probably feel like a substantial drop in living standard. And would be. For someone on median income and used to living more frugally that would be a very generous lifestyle indeed. It's one of he interesting wrinkles of human psychology, just like the one that has those who are poorest being most likely to make choices that will continue to keep them poor, like using savings accounts instead of investments, or overpaying on mortgages instead of investing. For people in general there's a strong preference for certainty of outcome even where the average result of the uncertain outcome is considerably better. People also tend to hate losing money more than they like making money, another variation on the low risk and staying poor theme, since it discourages people from investing if they have a bad year.

You're right about the relative importance of final salary pensions for lower paid workers. The destruction of the UK final salary pension system by withdrawing the relief on dividend payments in his first budget may well turn out to be Gordon Brown's enduring legacy and most notable and damaging act for the majority of people.

maggieann155

jamesd wrote: »

marklv, one reality of the human condition is that people judge how well off they are by what they are used to. For someone in PipPip's situation 50% of current income would probably feel like a substantial drop in living standard. And would be. For someone on median income and used to living more frugally that would be a very generous lifestyle indeed. It's one of he interesting wrinkles of human psychology, just like the one that has those who are poorest being most likely to make choices that will continue to keep them poor, like using savings accounts instead of investments, or overpaying on mortgages instead of investing. For people in general there's a strong preference for certainty of outcome even where the average result of the uncertain outcome is considerably better. People also tend to hate losing money more than they like making money, another variation on the low risk and staying poor theme, since it discourages people from investing if they have a bad year.

You're right about the relative importance of final salary pensions for lower paid workers. The destruction of the UK final salary pension system by withdrawing the relief on dividend payments in his first budget may well turn out to be Gordon Brown's enduring legacy and most notable and damaging act for the majority of people.

couldn't agre with you more. when you're not well off in the first place relatively there's so much more to lose. if you lose that, then you re left with nothing at all. thats why the poorest stick with safety.

i'm early retired from nursing, which was only possible because of my final salary pension, and i have to admit, the new 30 years NI contributions amendment. my husband earns £22000 gross p.a and my pension is £5125p.a. we are waiting for pension forecasts for when he is 60 in 2 years time and each year after until 65 then we can make some decisions on his retirement age.he has been with the same company for 36 years so far, but i think the scheme was changed to CARE in 2004. we'll have to see how that works.
as you can see, our earnings aren't major now, but it is all relative. as long as we can cover all necessary bills, and get out camping quite often (over 55's get cheaper rates out of season with the camping club!), then we' ll be quite happy.

PipPip

jamesd wrote: »

marklv, one reality of the human condition is that people judge how well off they are by what they are used to. For someone in PipPip's situation 50% of current income would probably feel like a substantial drop in living standard. And would be. For someone on median income and used to living more frugally that would be a very generous lifestyle indeed. It's one of he interesting wrinkles of human psychology, just like the one that has those who are poorest being most likely to make choices that will continue to keep them poor, like using savings accounts instead of investments, or overpaying on mortgages instead of investing. For people in general there's a strong preference for certainty of outcome even where the average result of the uncertain outcome is considerably better. People also tend to hate losing money more than they like making money, another variation on the low risk and staying poor theme, since it discourages people from investing if they have a bad year.

You're right about the relative importance of final salary pensions for lower paid workers. The destruction of the UK final salary pension system by withdrawing the relief on dividend payments in his first budget may well turn out to be Gordon Brown's enduring legacy and most notable and damaging act for the majority of people.

£50k is just a fairly arbitrary number I picked, being a bit under 50% of our current joint income. It may well be too much, but we travel a lot now, have lived in 5 different countries between us and I don't imagine this travel bug will go away. Probably better to aim high. The alternative is to aim low and go out tomorrow and trade in my old Ford Focus banger for a shiny new Porsche. But I think missus would have something to say about that option. Also I would like to aim high and retain the possibility of retiring earlier. I have two friends who are retired already, one aged 39 and the other aged 45. They are both bored stupid though so I can't see it lasting. Before you ask they are an ex investment banker (boo, hiss) and an ex hedge fund owner (double boo hiss, throw rotten eggs...).

Gatser

marklv wrote: »

Council tax = £1,400
Water = £250
TV = c.£500 assuming you get a Sky basic package
House and contents insurance = £300
Landline phone = £300

I make that around £2,800 or so - make it £3,000 tops. The thread starter also earmarked £4,500 a year for utilities, which seems plenty to me, as gas and electricity would most likely not exceed £1,000 a year.

No, I estimated £4,500 for Bills/Utilities which includes Gas, Electric, Water, Council Tax, Phones, Internet, House Insurances.

zygurat789

marklv wrote: »

, as gas and electricity would most likely not exceed £1,000 a year.

When did you last check your bills?

bendix

marklv wrote: »

£50k a year as a combined pension? Hugely ambitious and certainly way above what you need for a comfortable retirement. Why do you need so much when you are in your 60s? Your mortgage will have been paid and you won't have kids to spend money on. You could live perfectly adequately on half of that.

Who died and made marklv the arbiter of someone else's definition of comfort?

If the guy is aiming for £50k pension income, it's entirely his concern based on his needs, his feelings and his rational judgement.

That you might think it excessive says more about you than it does about him.

PipPip

By the way, my step father retired at 49 with an annual salary of just over c£50k pa from his gold plated government final salary scheme. At 49 years old they offered him an early retirement package that included accruing his rights under the scheme up to the age of 65, calculated using a generous thoeretical annual salary increase to this assumed calculation date and from retirement guaranteed to increase at the rate of annual government salary increases for life. As a member of the public I was disgusted with this waste of taxpayers money but since he's in my family and paid for my university education I felt obliged to be pleased for him. So now aged 63 he has been retired for 14 years. His garden looks great.

MS_Dolphin

Pobby wrote: »

10 or so years ago I dreamt at early retirement. Now with less than 4 years to go I have the feeling it`s not what I want. My plan is to either work a couple of days a week or run a part time business.

My wife is 61 in 2 years and was horrified when I asked her if she was going to retire. Far too young was her reply. So if she works part time, like me, I think that would be a good arrangement.

I was talking to a pretty fit pensioner the other day. He said that sitting around watching the TV wasn`t his way of doing things. From what he said he has a fair income but does 3 or 4 part time jobs. A bit of cleaning, posing for art classes and so on.

What I think is nice is that if you have enough coming in without work then a bit of part time would surely buy a good few luxuries.

For me its not whether you retire or not, but having the number that gives you the choice as to retire or carry on working - that's a personal and individual choice, so no right or wrong.

For me, i don't feel the need to carry on working and I've got enough of an imagination to find things to do without sitting around watching TV.