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More fantasy figures.
Let's be generous and optimistic, since I'm in a good mood. Let's suppose that inflation is 3% and the return on investments is 2.5% more than that, i.e. 5.5%. The annuity pot is to be calculated on the same assumptions. How does it work out now?
I've thrown some figures into a savings calculator basically to come up with a pot of £100,000 over 45 years..
I've suggested savings will need to be increased annually to account for inflation wether I've made a massive error I don't know...
In an earlier post I suggested the government didn't really expect people to have healthy private pensions as it would take too much from peoples salaries..
I honestly believe they are trying to keep people out of the benefits system thats all..0 -
I don't need the lecture. My point was that temporarily getting lucky with "some" of your investments says nothing about long-term overall average returns, which is what we need to be talking about.RenovationMan wrote: »You are doing better than a 10% annual return with Premium Bonds? You'd better tell Martin Lewis because he thinks the return on premium bonds suck:
I could have used other examples. There was this oil exploration company... But let's not get distracted. What you think of my investments is beside the point, even supposing I'm telling the truth. For all you know, I might only have 3 months to live, though that might be another fib. I mean, it's not like we all believe everything you say."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
I've suggested savings will need to be increased annually to account for inflation wether I've made a massive error I don't know...
If you use a percentage of salary figure for pension contributions then savings will increase in line with salary increases. Whether salary increases are in line with inflation is another matter, but then we do live in a very wealthy democracy so people can always get a different job.
I realise the idea of 'bettering yourself' is alien on here because of course those with decent jobs were born into the arisocracy and were giften these jobs and have never had to wait tables or work in McDonalds while working their way through college, or indeed gained 'technicians' jobs on £8k when they finally graduated and had to work their way up through a profession.
Nope, they left school and all started out in (so-called) 'high-flying' jobs immediately at age 16. Others were born to be call centre staff and that is their lot until the day they die. We're in the modern day equivalent of serfdom once again. :rotfl:0 -
What you think of my investments is beside the point, even supposing I'm telling the truth. For all you know, I might only have 3 months to live, though that might be another fib. I mean, it's not like we all believe everything you say.
Strange how quick people are to 'rubbish' other peoples investment ideas and yet how upset they get when you critique theirs in turn. :cool:
I have to say that your rant was the oddest I've seen in ages and this is coming from someone who is subjected to rants from Graham Devon and shortchanged on an almost daily basis. Well done on that achievement! :rotfl:0 -
Which looks good, but doesn't mean anything, because it might not buy a loaf of bread. But let's not go there (though the danger is real), let's stick to tame inflation at say 3%.I've thrown some figures into a savings calculator basically to come up with a pot of £100,000 over 45 years..
To allow for inflation, it's not enough to increase contributions, you need inflation-beating returns on the money already in the pot. Putting it another way, the real rate of interest you can assume is only what's left over after subtracting inflation.
I figure that my generous 2.5% produces a pension of maybe £2K in today's money. Or maybe less.
As a rough rule of thumb we should probably think in terms of future annual pension yield being 2 to 3 times the annual contribution over 30-40 years. Certainly not 10 times, as in your example of £6000pa pension from £600pa contribution."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
Which looks good, but doesn't mean anything, because it might not buy a loaf of bread. But let's not go there (though the danger is real), let's stick to tame inflation at say 3%.
To allow for inflation, it's not enough to increase contributions, you need inflation-beating returns on the money already in the pot. Putting it another way, the real rate of interest you can assume is only what's left over after subtracting inflation.
I figure that my generous 2.5% produces a pension of maybe £2K in today's money. Or maybe less.
As a rough rule of thumb we should probably think in terms of future annual pension yield being 2 to 3 times the annual contribution over 30-40 years. Certainly not 10 times, as in your example of £6000pa pension from £600pa contribution.
You seem to want to include inflation in the modelling whilst assuming that the contribution into the pension scheme will remain at £50 a month for the entire period during which the pension is being contributed to...0 -
RenovationMan wrote: »ISAS should be used for pension planning once you have filled your personal pension to the point where you will be paying tax on it. With zero state pension and an £8k tak allowance (and with 25% tax free withdrawal) most people would not be able to build up a large enough pension pot to pay tax and so would not require ISA savings.
For a basic rate tax payer yes. But for a higher rate taxpayer the pension wrapper gives you tax relief at 40% and your pension income is only going to be taxed at 20%.
Having said that I still just dump the max into an ISA instead of putting it into pension as I can get the money out of the ISA if I want to.0 -
Which looks good, but doesn't mean anything, because it might not buy a loaf of bread. But let's not go there (though the danger is real), let's stick to tame inflation at say 3%.
To allow for inflation, it's not enough to increase contributions, you need inflation-beating returns on the money already in the pot. Putting it another way, the real rate of interest you can assume is only what's left over after subtracting inflation.
I figure that my generous 2.5% produces a pension of maybe £2K in today's money. Or maybe less.
As a rough rule of thumb we should probably think in terms of future annual pension yield being 2 to 3 times the annual contribution over 30-40 years. Certainly not 10 times, as in your example of £6000pa pension from £600pa contribution.
The £50 a month minimum contribution is a basic starting point for very low paid....those on £20,000 a year could easily contribute more..
In the two previous posts I've suggested an annual increase to payments...not £600 per year throughout a working life.
There's no mention of employer contributions either which come in very handy...and could easily swell your pot by a third..
I'ts obvious it won't be easy to achieve a generous pension as you'd need to contribute hundreds a month in your 20's..
If you were to chat to a few pensioners today I'm sure they'd tell you they don't receive any benefits because they have a small second pension..
I honestly believe this is the governments aim...theres people with no plans at all as we know...at least its a step in the right direction...
Its a pity individuals didnt have a portable pension pot as this would make it a bit easier to hit targets...its no good signing up to multiple plans.0 -
I know a lot of young people who should be putting more pension funds away, but they are getting squeezed right now. A lot work in call centres, and in the NW that doesn't often pay more than £20K unless you are management. At the last client site, 2 whole departments had a 10% pay cut effectively forced on them because a government contract had been cut back. It's a tough ask to make that back up.
That's evidence that SOME people are going to find it difficult to save sufficient to get them over a means testing threshold. That goes without saying. It's not evidence that saving for retirement is a bad thing nor does it take away from the fact that spending 100% of earnings over a working lifetime is very likely going to lead to a pensioner with a less than sunny disposition. Of course, it doesn't disprove an awful lot of people could save more if they understood the boundaries between need and want a little better.
When do you suggest a young person gives up on themselves? At what point they say to themselves that they'll never be able to do any better than they are already?
I don't think it's when they're 19 and working in a call centre. They've 50 years of a working life ahead of them - can you imagine the opportunities?0 -
Graham_Devon wrote: »Otherwise it's bubble fantasy stuff as I've said so many times. You can simply pluck a figure out of the air and suggest everything is indeed rosy. It seems I've rocked the bubble, that is all.
OK. You've rubbished the idea that someone on £30k can save £4k based on your application of real data.
Let's say I accept this. I'm going to ask again - how can people live on £26k but it's impossible for someone else on £30k to save £4k?
I'm also going to ask again what is the level of income your real world chap needs to earn before he can save £4k/ year?0
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