Is your pension pot going to be large enough?

ninky_2

IveSeenTheLight wrote: »

I'm not obsessed about the size of my pension pot, but I do want to ensure that my family are provided for.

There comes a time in life when you want to ensure that you've done a good job and provided good oppertunities for your children.

If that means a little sacrifice (and I don't mean being so frugile as not to enjoy life) then so be it.
There are many enjoyable things in life that don't cost a lot or indeed if anything.

I've done a lot of travelling in my time, many oppertunities through work which my family have also benefitted from.
One thing I will probably do though is a lot more travelling when I'm retired and can enjoy things at a more slower pace.

i can imagine things are very different if you have children.

IveSeenTheLight

Procrastinator333 wrote: »

So then you could opt for drawdown instead, therefore keeping ur pot invested and earning those higher returns.

And with your cash outside of a pension, you are starting 40% behind the pension pot.

That's the thing about pensions, it's so restrictive.
You can drawdown 25% tax free, virtually handcuffing you to taking an annuity whereby it then becomes an insurance scheme to cover your likely lifetime.

These schemes (I'm so using the right terminology here) are intircately calculated such that inevitably they are biased on the behalf of the pension pot and most will not likely see the return on their investment.

The governments talk about bringing flexibility into pensions, well they have a long way to go in my opinion.

IveSeenTheLight

ninky wrote: »

i can imagine things are very different if you have children.

It so definately is.
We also benefitted from planning for our children, living off a single wage for nigh on 10 years before the children came along.
This allowed us to be in a really good financial position (whilst occasionaly being frivelous) such that we are now reaping the benefits.

I couldn't contemplate bringing up my children where both parents were forced to work, farming out the kids to nursery, enslaved unto debt getting by just each month.

Procrastinator333

IveSeenTheLight wrote: »

That's the thing about pensions, it's so restrictive.
You can drawdown 25% tax free, virtually handcuffing you to taking an annuity whereby it then becomes an insurance scheme to cover your likely lifetime.

These schemes (I'm so using the right terminology here) are intircately calculated such that inevitably they are biased on the behalf of the pension pot and most will not likely see the return on their investment.

The governments talk about bringing flexibility into pensions, well they have a long way to go in my opinion.

That doesn't then handcuff you to taking an annuity. You can opt to drawdown the rest instead. Quick look on the link below and you could take 8% of your por if you wanted to this year. So assuming the £285k was after the 25% tax free, you could then draw an income of £22,914 from it. And keep the rest invested as you wanted. Plus by using drawdown you pass on any unused pot when you pass away.

The only thing a pension really stops is blowing the lot in one go.

Procrastinator333

IveSeenTheLight wrote: »

These schemes (I'm so using the right terminology here) are intircately calculated such that inevitably they are biased on the behalf of the pension pot and most will not likely see the return on their investment.

Of course they are. An annuity provider is not going to pay out amounts that on average will end up costing them money. All annuities and especially index linked annuities are a form of insurance. Different people have different levels of risk aversion. For some, security is more important than every last £.

But I come back to what started me posting in this thread. There is simply nothing that beats matched contributions from employers in terms of long term savings. After that, it does of course become more debateable and individual preference. But matched contributions are simply miles ahead of everythign else. Might as well burn money if you don't take them when available.

IveSeenTheLight

Procrastinator333 wrote: »

There is simply nothing that beats matched contributions from employers in terms of long term savings. After that, it does of course become more debateable and individual preference. But matched contributions are simply miles ahead of everythign else. Might as well burn money if you don't take them when available.

I can agree with this and would make the same recommendation

Procrastinator333 wrote: »

That doesn't then handcuff you to taking an annuity. You can opt to drawdown the rest instead. Quick look on the link below and you could take 8% of your por if you wanted to this year. So assuming the £285k was after the 25% tax free, you could then draw an income of £22,914 from it. And keep the rest invested as you wanted. Plus by using drawdown you pass on any unused pot when you pass away.

The only thing a pension really stops is blowing the lot in one go.

It's not about blowing it all in one go, it's about greater flexibility on your investment and as you point out, being able to pass on that investment to non dependants ( I certainly don't want my children to still be dependant) when I retire.

I started paying into a company pension scheme when I was 20.
47 years later when the schemes mature, I won't have the total flexibility I should have on a matured investment

ninky_2

IveSeenTheLight wrote: »

It so definately is.
We also benefitted from planning for our children, living off a single wage for nigh on 10 years before the children came along.
This allowed us to be in a really good financial position (whilst occasionaly being frivelous) such that we are now reaping the benefits.

I couldn't contemplate bringing up my children where both parents were forced to work, farming out the kids to nursery, enslaved unto debt getting by just each month.

good for you. this has been a factor in why i/we have decided not to have them. it's not as if the world needs anymore and unless you can provide financially and have enough parental free time (not childminder / nanny time) to care, nurture and enjoy them i really don't see the point.

IveSeenTheLight

ninky wrote: »

good for you. this has been a factor in why i/we have decided not to have them. it's not as if the world needs anymore and unless you can provide financially and have enough parental free time (not childminder / nanny time) to care, nurture and enjoy them i really don't see the point.

Very honourable of you and I would have done the same.
We are about to have child no 2 and we've decided not to have anymore, exactly for financial and emotional decisions

N1AK

IveSeenTheLight wrote: »

As my retirement age is 67 according to the government, I'm not expecting to live beyond 93 and would rather enjoy more in my early retirement days whilst needing less further on.

The question isn't whether you expect to live beyond 93. What you need to know is what you'll do if you live to 95, 100, 105 etc? Pensions provide a level of insurance which a fixed investment can't. If you don't need that security, then of course a pension loses one of its benefits.

Personally I've gone for a pension because of the tax and employer benefits related to it. We've got a salary sacrifice scheme at work, so in return from losing ~5% from my take home pay, I get 10% of my gross pay paid into a pension. I lose ~£100pm in pay, and get ~£300pm in pension contributions.

I wouldn't pay into a pension scheme that didn't include so form of employer contribution though. I'd rather stick the money into a S&S ISA.

IveSeenTheLight

N1AK wrote: »

The question isn't whether you expect to live beyond 93. What you need to know is what you'll do if you live to 95, 100, 105 etc? Pensions provide a level of insurance which a fixed investment can't. If you don't need that security, then of course a pension loses one of its benefits.

I'm not advocating the opposit either, but I would like to consider that I may wish to do more at 67 than I would at 97.

Can you tailor pensions to receive a greater annuity in the earliers years compensated by less in later years? I doubt it.

N1AK wrote: »

Personally I've gone for a pension because of the tax and employer benefits related to it. We've got a salary sacrifice scheme at work, so in return from losing ~5% from my take home pay, I get 10% of my gross pay paid into a pension. I lose ~£100pm in pay, and get ~£300pm in pension contributions.

I wouldn't pay into a pension scheme that didn't include so form of employer contribution though. I'd rather stick the money into a S&S ISA.

Totally agree, I can see the benefits of employer contributions and I do have such a pension.
I'm simply questioning the choices available after investing for 45+ years