Best thing to do with Pension Lump sum

annie_tanks

Who earns 65k? as the average wage is about 25k..I would guess most people cannot afford to save for a private sector pension,if you have some serious committmets such as a mortgage,and having kids.
I do admire those that can manage it, but why should they pay in 20% and more of a low wage when the public sector enjoy a much lower input for vastly more..

somethingcorporate

CLAPTON wrote: »

public sector pension are very very good deals

but
lets say she earns 65k (which would be needed if she gets a pension of 32k plus a large lump sum)

lets say some-one puts 20% of their income into a pension for 40 years

65k x 20% x 40 years = 520,000

ok I know the obvious limitations of my calculation but if people were realisitic about what is needed to be invested in pensions then people can make reasonable provision for their old age.
so not beyond the scope of possibility but nevertherless a lot.

That would be the final wage though Clapton, not the mean.

So assuming it was gained evenly throughout the career the pot would be 65 / 2 * 0.2* 40 = £260k. Quite a way off your figures!

Stargazer57

somethingcorporate wrote: »

That would be the final wage though Clapton, not the mean.

So assuming it was gained evenly throughout the career the pot would be 65 / 2 * 0.2* 40 = £260k. Quite a way off your figures!

Only if you assumed that no interest was earned. Clapton made the implicit assumption that interest was earned in line with salary growth, which for the purposes of this argument seems fair.

Going back to the thread although I see the argument that investment growth (less expenses, which don't seem to have been mentioned) may exceed the interest paid on the mortgage, I have to question whether the excess is sufficient to compensate for the risk of running what is essentially a geared portfolio. This is what hedge funds do, and they look for much higher returns. As a pensioner I would prefer to opt for the lower risk route of paying off the mortgage, investing the excess and sleeping happily each night.

jem16

bendix wrote: »

£100k lump sum and £32k per annum income! .

Very few teachers will see a pension this high. The average is just under £10k. The majority of ordinary classroom teachers will be on a maximum pension of £17k on current salaries.

Average for local government workers is just £4k.

There are always going to be higher earners who are fortunate to receive more.

Stargazer57

jem16 wrote: »

Very few teachers will see a pension this high. The average is just under £10k. The majority of ordinary classroom teachers will be on a maximum of £17k on current salaries.

Average for local government workers is just £4k.

There are always going to be higher earners who are fortunate to receive more.

The teachers scheme accounts for England and Wales show the average pension at March 2009 as £11,890 a year

as for teachers salaries, tda.gov.uk says
Starting pay compares well with other graduate professions. From September 2009, a newly qualified teacher will earn a minimum of £21,102 (£26,000 in inner London) but could start higher up the scale depending on previous experience.
so it is hard to see how the "majority" can be on £17k

Were you trying to inform other posters or merely win the argument? If so you have failed by using misleading data.

elmer

Average for local government workers is just £4k.

My Local government pension in 20 years time is predicted to be just over £2000.00 per year and is more or less the norm for all my colleagues.
I agree some local goverment pensioners will get big pay outs, but Fred Goodwin got an annual pension of £600,000.00 and thats the private sector.

If my "gold plated" pension is "downgraded" I will not be able to afford to retire.

Elmer

jem16

Stargazer57 wrote: »

The teachers scheme accounts for England and Wales show the average pension at March 2009 as £11,890 a year

My information came from here;

http://www.telegraph.co.uk/finance/personalfinance/pensions/7842767/What-is-a-public-sector-pension-worth.html

as for teachers salaries, tda.gov.uk says
Starting pay compares well with other graduate professions. From September 2009, a newly qualified teacher will earn a minimum of £21,102 (£26,000 in inner London) but could start higher up the scale depending on previous experience.
so it is hard to see how the "majority" can be on £17k

As I would expect the majority of retiring teachers to have reached the top of the pay scale which in Scotland is just over £34k, I based my £17k on that, assuming a full pension of 40/80ths. As it is a final salary scheme using a final salary figure seemed more relevant.

I doubt there would be many retiring teachers on newly qualified rates, do you?

Were you trying to inform other posters or merely win the argument? If so you have failed by using misleading data.

My intention was to inform. I certainly didn't use misleading data.

As to winning an argument which "side" do you assume I am on?

jamesd

The difference was how £17k was interpreted. You gave it as pension income while it was interpreted as working years income.

jem16

jamesd wrote: »

The difference was how £17k was interpreted. You gave it as pension income while it was interpreted as working years income.

I believe you're right James - it could be ambiguous. I have edited my original post to make it clear.

novice-saver

Getting back to the original question, trying to get 5% gross on savings is all well and good, but there is the issue of tax on the interest to consider.

If the ammount you pay for the mortgage exceeds the taxed returns from sufficient savings to pay off the mortgage, surely you should pay it off.

I did. Never looked back.

Without the mortgage to pay every month there is the opportunity to save, if you are worried about not having enough in the bank.