Pensions Planning: The NUMBER

gadgetmind

robin61 wrote: »

The budget in March is going to be interesting and I am ready to adapt and change strategy if I need to.

We've had wave after wave of attacks on private pensions, with more rule changes than most people can keep track of, so I'd kind of hoped that the tapering, PIP alignment and "mini PIP year" stuff was going to be allowed to settle in, but I know that's optimistic.

gadgetmind

cns06 wrote: »

(i.e £40k joint total income)

We're aiming a little higher, and indexing linking it so £xk in today's money on retirement and rising with inflation. Like you, our state pensions kick in a decade+ after retirement, and they are in there just to derisk our initial drawdown rate.

jgh

Gatser wrote: »

The NUMBER is how much income you need to "live comfortably"
So What's your number?

Because I'm currently paying /into/ my pension and paying a mortgage I need at least £12,000 a year to stand still and stay alive, but not paying off any debts. Once I cease to pay a mortgage and cease to pay /into/ my pension but be able to take money /out/ it drops to about £9,500. But again, that does not include paying off any debts. How much I need including paying off debts first needs to know how long those debts will be paid off over, and how much more debts are run up over the intervening period.

Wednesday2000

jaypeeuu wrote: »

Nobody seems to take in to account in the 50hr factor when planning for retirement.
The 50hr factor is the extra hours you will have each week to fill with activities which are rarely free, even sitting in the house reading a book in the winter will incur heating cost's.
Taking the other half out for the day can soon run up a bill of £100 and more with admission fees , lunch and a souvenir (at least that 's how much it costs with my other half!!!).
So it is essential to take this in to account as the hours we used to spend at work did'nt cost much
cheers:A

We are lucky in that my husband works for TFL so we both have free travel passes so we can go into London when we want and there are lots of free events and activities to do there. There are all you can eat buffets or we could just take a packed lunch for a picnic.

He works shifts now so one of us is always in the house so I think the bills should stay the same when we retire. Reading, walking the dogs, watching films and TV are all free/low cost.

We do spend quite a bit on quality food (and alcohol!) so that is one area we could definitely cut back on if we needed to.:)

patanne

The problem is that pensions are an easy target for tax changes. After all HMRC must have a fair idea of what they are 'costing' them. They acquired more tax than they expected to from the new pension freedoms (& we haven't finished the financial year yet). I'm sure I read that they had got 3 times what they expected. The problem is that that covered the 55 to 65 year olds. Next year they only have the 54 year olds who become 55. They are going to have to find another source for that money.

Wentthedaywell?

That's interesting, Marine Life. Do you know how Aussie costs of living compare to the UK? The outgoings on that site includes health insurance for instance.

I've always thought that I will need more money than my take-home pay now once I retire. I walk to work, take my lunch and don't need smart suits etc so no savings there; but I will be going out more, or heating my house for much longer.

At the moment I'm sinking a third of my gross pay into an AVC, so when I no longer do this, and no NI, pension contributions etc, I should actually be better off, even without the state pension that I won't get for another 6 years. But I'm leading rather a frugal life currently, saving as much as possible in these final 2 years of work. I would hope my retirement, without this saving pressure, would be more generous.

gadgetmind

patanne wrote: »

The problem is that pensions are an easy target for tax changes. After all HMRC must have a fair idea of what they are 'costing' them.

Nothing. The money they "lose" in tax relief isn't real money in the same way that the money that music companies lose to piracy isn't real money. It's an imaginary sum that can't be collected no matter how the rules are changing.

For example, HMG have changed the rules as of this April to taper the annual allowance. In response, I'm going to drop to a four day week and therefore pay £20k pa *less* tax than before the changes.

Come the next budget, I'm sure they'll attack again, and I'll respond. This response will again result in me paying less tax.

Or they could just keep things simple, let us save what we want into pensions tax free, and then collect the tax on the way back out.

atush

Wentthedaywell? wrote: »

That's interesting, Marine Life. Do you know how Aussie costs of living compare to the UK? The outgoings on that site includes health insurance for instance.

I've always thought that I will need more money than my take-home pay now once I retire. I walk to work, take my lunch and don't need smart suits etc so no savings there; but I will be going out more, or heating my house for much longer.

At the moment I'm sinking a third of my gross pay into an AVC, so when I no longer do this, and no NI, pension contributions etc, I should actually be better off, even without the state pension that I won't get for another 6 years. But I'm leading rather a frugal life currently, saving as much as possible in these final 2 years of work. I would hope my retirement, without this saving pressure, would be more generous.

but will you really need more? If you are no longer paying a mtg? No longer paying for NI? They should come to more than heating and the odd pint down the pub? would your income exceed your PA, ie will you pay any income tax?

So go on and work our your 'number'?

Marine_life

Wentthedaywell? wrote: »

That's interesting, Marine Life. Do you know how Aussie costs of living compare to the UK? The outgoings on that site includes health insurance for instance.

I've always thought that I will need more money than my take-home pay now once I retire. I walk to work, take my lunch and don't need smart suits etc so no savings there; but I will be going out more, or heating my house for much longer.

At the moment I'm sinking a third of my gross pay into an AVC, so when I no longer do this, and no NI, pension contributions etc, I should actually be better off, even without the state pension that I won't get for another 6 years. But I'm leading rather a frugal life currently, saving as much as possible in these final 2 years of work. I would hope my retirement, without this saving pressure, would be more generous.

....and therein is my point i.e. its impossible to generalize that someone needs two-thirds of their current salary. Really the only way to know what you will spend in retirement is to sit down and plan a detailed budget which reflects where you are today plus / minus the changes that retirement will make.

The biggest decision you will need to make is how much "buffer" you will need to lead a comfortable retirement where you don't have to worry about (1) Whether the money will run out (2) Whether you have enough to pay for the unexpected.

As an aside, actually in my experience (of a year living in Australia) is that their living expenses, particularly for food, are generally higher than those in Europe.

chiefie

I suppose for many it's a balance with how much and when. 2/3rds may be achievable but at a cost of waiting an extra 5-10 years. Everyone is different but for me it would be better to go early and if needed find something p/t until the sp kicks in.