Pension at 47

Cook_County

hugheskevi wrote: »

One can make the observation, but I question making it as one of the initial comments to a sensible post by a new user. I think it makes the discussion board seem rather unfriendly, which a few new users seem to have been commenting about recently :undecided

Noted and appreciated.

peterg1965

CLAPTON wrote: »

if you want an extra indexed linked pension at 60 of 8k pa (broadly equivalent to civil service) then you will get about 3% of you capital i.e. you would need a 'pot' of 8000/3% = £266,000 (check aout annunity rate for full inflation linking with spouse benefits)

so as a first approximation you would need to save a little less than 266,000/13 = 20,400 per annum (I haven't added any interest over the years, if you want a safe pension pot then you can factor in about 1% growth pa in real terms)

and yes one can make an observation that 'final' salary fully indexed linked pensions are very expensive.

That doesn't sound right to me, unless I am missing the point. A pension pot of £266K, invested within a SIPP for instance, would give a £66.5K Tax Free lump sum and if the remainder is placed in drawdown, c£200K, could then yield about £14k Max a a year - 120% GAD rate. So to preserve the capital you could reasonbly take say £10K a year and even increase that by say 3% a year to maintain the pot size and to account for some modest inflation.

So, if the OP managed to accrue a pot of £266K he would more than comfortably achieve he aims, in fact my point is it doesn't have to be that big, particularly if he doesn't take the lump sum.

CLAPTON

peterg1965 wrote: »

That doesn't sound right to me, unless I am missing the point. A pension pot of £266K, invested within a SIPP for instance, would give a £66.5K Tax Free lump sum and if the remainder is placed in drawdown, c£200K, could then yield about £14k Max a a year - 120% GAD rate. So to preserve the capital you could reasonbly take say £10K a year and even increase that by say 3% a year to maintain the pot size and to account for some modest inflation.

So, if the OP managed to accrue a pot of £266K he would more than comfortably achieve he aims, in fact my point is it doesn't have to be that big, particularly if he doesn't take the lump sum.

could you quote an guaranteed return of 14k inflation linked for a 200k pot

if you're saying you might achieve that over the next 30 year well that's another matter as of course you might not.

getmore4less

For the risks of a pot running out there was an interesting discussion on the Fool.

http://boards.fool.co.uk/the-value-of-extra-years-of-work-12015858.aspx

peterg1965

CLAPTON wrote: »

could you quote an guaranteed return of 14k inflation linked for a 200k pot

if you're saying you might achieve that over the next 30 year well that's another matter as of course you might not.

That was not the point I was making, it just seemed a little excessive - £200K to support an inflation linked £8000 pa. Of course, it were in finitum it is probably not that far off, but for a pension pot over a realistic 25-30 year period it does look a bit much. I think the £8K figure was quoted by the OP to make his annual pension up to £35K a year, a large sum and getting on for 1.5 times the current average UK salary. If you can happily survive on £35K at 65 I doubt you will need that much at 95 so it would be entirely realistic to accept a gradual erosion of the pension pot over time to support a more modest income much later in life.

So bottom line, for me and in my view, £200K is not the sort of sum required to support a drawdown of £8K per annum.

CLAPTON

peterg1965 wrote: »

That was not the point I was making, it just seemed a little excessive - £200K to support an inflation linked £8000 pa. Of course, it were in finitum it is probably not that far off, but for a pension pot over a realistic 25-30 year period it does look a bit much. I think the £8K figure was quoted by the OP to make his annual pension up to £35K a year, a large sum and getting on for 1.5 times the current average UK salary. If you can happily survive on £35K at 65 I doubt you will need that much at 95 so it would be entirely realistic to accept a gradual erosion of the pension pot over time to support a more modest income much later in life.

So bottom line, for me and in my view, £200K is not the sort of sum required to support a drawdown of £8K per annum.

35k may or may not be an excessive pension
at person of 95 may or may not need/want to spend money

my point is what is 'pot' is needed to meet the requirement to be broadly comparable with a final salary indexed linked
and over 200k is required to meet that specification

bristol_pilot

As a basic rate taxpayer and without a significant employer contribution, I question the wisdom of using pensions to save for retirement. Without these incentives, access to capital becomes more valuable IMO. I think the OP should get a new job first, then if not in the 40% club and not getting an employer contribution to a pension then saving in an ISA or even property would be preferable.

bristol_pilot

Cook_County wrote: »

Rant --- I begin to understand why Cameron wants to cut out this nonsense that gave civil servants these kind of gold plated promises!

The rant is entirely unjustified. I work in the private sector and don't have access to a civil service pension, but on the other hand earn about twice what I would in the public sector for an equivalent job.

And I got the impression that £35k was the salary, not the pension, so it's hardly a king's ransom.

1425

Dear all,
thank you all for your contributions. There seems to be some confusion and I suspect that it was my fault. What I want to achieve is a final yearly pension of about £16,000 per year so that I can retire as planned at 60. That would be the equivalent of a 40 year pension had I remained employed by the Civil Service. My pension will be frozen at 26 years, when at 60 I will get a lump sum and an annual pension of approx £8,000. I do not want a pension of £35,000 per year (although that would be lovely!!). I also know that I cannot contribute to a pension that will give me a lump sum. I will have to make do with the small lump sum I get from my Civil Service pension.

Lastly I really appreciate the people who supported me in response to the rather unhelpful and uncalled for post from Cook-County. I am certainly not a fat cat Civil Servant. I am a hard working Chief Immigration Officer earning £30,000 a year with a shift disturbance allowance of £4,500 per year for the privilege of working 15 hour night shifts in Calais outside in the freezing cold winters looking after 15 staff each shift and securing the borders for our well deserving UK residents. Like Many Civil Servants I have accepted a lower salary than many in the commercial world for the same levels of responsibilities in favour of a reasonable pension and a safe job. The latter is now not the case as many of us are facing redundancy. So I have decided to jump rather than be pushed. I hope that sets the record straight. Rant over!!!!!

A final note - what is a SIPP?

Shimrod

1425 wrote: »

Dear all,
thank you all for your contributions. There seems to be some confusion and I suspect that it was my fault. What I want to achieve is a final yearly pension of about £16,000 per year so that I can retire as planned at 60. That would be the equivalent of a 40 year pension had I remained employed by the Civil Service. My pension will be frozen at 26 years, when at 60 I will get a lump sum and an annual pension of approx £8,000. I do not want a pension of £35,000 per year (although that would be lovely!!). I also know that I cannot contribute to a pension that will give me a lump sum. I will have to make do with the small lump sum I get from my Civil Service pension.

You should be able to take a lump sum investment from any other pension you start (unless there are some odd rules involving the civil service pensions I'm not aware of).

I'm not clear whether you get the lump sum from the civil service pension regardless or whether you are opting to take a lump sum and a reduced pension. If the latter, at point of retirement it may actually be better for you to take a larger civil service pension (which will be index linked) and take the lump sum solely from your defined contribution pension.