Is your pension pot going to be large enough?

setmefree2

Procrastinator333 wrote: »

That post makes no sense. You start off telling me I'm wrong. And then at the end you note you are doing exactly what I'm suggesting.

1) Pensions are a tax wrapper. If you don't like stock market investments, put your pension in to cash and guilts (though I think that is a bad idea). You will attract a similar ish, maybe slightly lower rate of interest to that which you save on the mortgage. But as you are getting interest on £200, instead of saving it on £80, you will be better off.

2) I'm not suggesting everything gets put in to one investment or one stock market. But find me a stock market that lost 60% of it's value over a 30 year period?

3) If you hate fees, pick the lower fee bearing investments. Basic cash, guilt and trackers have very low fees if you look around.

4) Tax - 25% tax free lump sum. After that, the first piece of it will be tax free as it is unlikely the state pension will have caught up with the start of the tax band. So a fair chunk of it will be tax free.

The choice of £80 off your mortgage, or £200 in your pension. It is a complete non-choice. Anyone who thinks otherwise is wrong. Not taking a pension and maxing out company matching contributions is nothing but a costly mistake. But then I get to the end of your post and it looks like that is exactly what you are doing anyway? So I'm not even sure if you disagree.

Sorry:(

It's me who is confused. Are you saying that it is always best to pay into your pension Vs POTM (paying off your mortgage) or only when contributions are matched by your employer?

If you are saying that it is always best to pay into you pension, but only when those contributions are matched by employer's contributions, then we are in agreement. But a non matched £80 into a pension pot versus £80 POYM is another story.

ninky_2

chucknorris wrote: »

We are in the same position, in fact we have recently given ourselves a bit of a talking to about spending more on ourselves.

The thing is though we have simple tastes and are quite satisified with our lives. For example we don't tend to buy expensive cars, the car I have now is a Vauxhall Zafira which I bought for cash at a car spupermarket when it was one year old and we will keep it until it becomes unreliable (about 10 years old from past experience) then go out and buy another one year old car. Yet most of my friends have cars that cost about 3 times as much and trade them in after a few years.

a year old zafira? see to me that is quite posh. we've bought our cars from car auctions. the first cost 350 quid and lasted over 3 years - always got through the mot and ran like a dream. we've gone a bit extravagant now and spent over 2k!

Marine_life

I think whether you need to retain the same amount of earnings in retirement is somewhat a moot point and entirely related to how much income you have now or should i say how much disposable income you have now i.e. if you are spending most of you current earnings on necessities then you are likely to need to retain a large chink of that.

Factor in also that whilst in retirement some expenses will go down (travel, work lunches etc), others will go up e.g. hobbies, heating for the home etc.) It will also depend on whether you just want to get by or whether you want some luxury in retirement (I know which I want).

If i look at my own case - I prefer to work backwards from current earnings rather than bottom up:

Current take home pay is 17,000 per month (I know its a lot but I worked hard at school)

Of that we save 5,000 per month (so that will not be needed in retirement - the saving I mean).

We spend around 36,000 per year on school and university costs (i.e. around 3,000 per month).

The final big chunk is around 2,300 per month on the mortgage.

So that leaves 6,700 per month which effectively represents our current lifestyle. To put it another way lets call it 75,000 per annum after tax :eek:. I suspect that once we downsize our home and revert to one car that cost will come down to around 60,000 per annum (for a very comfortable retirement) which is what I am factoring into my calculations.

chucknorris

ninky wrote: »

a year old zafira? see to me that is quite posh. !

Not when it gets to years 8 to 10 (or beyond, although I haven't got that far yet). My last car was a mondeo that I bought with delivery mileage only. I sold that when it was 10 years old for £215! (it was a real bargain for the buyer) but because we have a dog and my wife finally got into cycling the versatile space of a zafira was so much better for us that I broke my rule and changed the car before it became unreliable.

chucknorris

Marine_life wrote: »

Current take home pay is 17,000 per month (I know its a lot but I worked hard at school)

That's over 386k salary a year, what do you do?

I would have thought that salary meant that you had worked hard at university, in your professional exams, then in the early and mid years of your career rather than merely 'school'. Or are you talking about a different currency than £'s?

avantra

The last government wanted all of us to be freelancers by encouraging businesses to run a very lean business model were workers are changing jobs every couple of years, so saving in a pension or having multiple pensions to look after is complicated.

They raided the state pension and allowed an uncontrolled housing bubble to take hold.


With the current gov making education more expensive and vocational training almost vanish I would say that the current generations of 20 to 30 probably looking to start and set aside ,around the time they set a foot hold on the housing ladder (which is in the early 40's).

Marine_life

chucknorris wrote: »

That's over 386k salary a year, what do you do?

I would have thought that salary meant that you had worked hard at university, in your professional exams, then in the early and mid years of your career rather than merely 'school'. Or are you talking about a different currency than £'s?

I am an accountant.

Yes I worked hard for a long time (school, university, professional exams). I also worked hard at work and climbed my way up the ladder. Throw in a bit (a lot?) of luck and being in the right place at the right time and I am where I am today.

However, I am a UAW and running very hard to catch up (go to Wikipedia and type in "Millionaire next door" for the definition of UAW)

chucknorris

Marine_life wrote: »

I am an accountant.

Yes I worked hard for a long time (school, university, professional exams). I also worked hard at work and climbed my way up the ladder. Throw in a bit (a lot?) of luck and being in the right place at the right time and I am where I am today.

However, I am a UAW and running very hard to catch up (go to Wikipedia and type in "Millionaire next door" for the definition of UAW)

I'm a PAW although I/we earn far less than you we have acquired much more than one might suspect (which came from a combination of salary, investments and business profit)

chucknorris

RenovationMan wrote: »

I used to think that I would never see a state pension, so I contracted out and paid a substantial amount into my company pensions. I'm now reaching the conclusion that I will receive a state pension (though probably not until I am 70) and so I do factor this into my calculations.

You can get a state pension forecast here. This will show you how many qualifying years you have (you need 30) and how much state and SP2 (state second pension, formerly SERPS) that you have built up.

I have a SIPP that contains the various DC (defined Contribution, or 'Money Purchase') company pensions that I have been in over the years. As I moved from one company to the next, usually every 3 or 4 years, I joined the company pension scheme and transferred my pension from my former company into it. My new employer has a DB (defines Benefit, or 'Final Salary ') scheme and I couldnt transfer into this so I opened a SIPP and moved all my DC money into that.

My DB is a 1/60th FS, so at my current salary it pays a pension of £1000 per year for every year I work at this company. I have been here 2 years for far and intend staying for as long as they run the FS pension.

Another part of my pension provision is my house. Currently we live in a 5 bed family home and I intend downsizing this to a 2 bed stone cottage, releasing tax free cash that I will drip-feed into ISAs.

I can't imagine where we will end up, but I don't think we wil stay in Dorking as it's commuter town and there would be benefit in selling up and downsizing more by area than actual size. Possibly somewhere by the sea. Possibilities are Devon or Cliftonville (near Margate, although not sure of the quality of this area)

LydiaJ

There was a scary article in yesterday's Telegraph illustrating just how expensive care in old age can be, if you happen to get the kind of disease that kills you slowly.