RE: First Pension aged forty

marathonic

jamiefly wrote: »

Balanced portfolio:

40% State Pension
40% Throwing yourself at the mercy of means tested benefits
20% Silver

Against my...

40% State Pension
40% Private Pension (contributing £10k annually, optimistically hoping for £2.50 per £1k contribution monthly income from aged 55)
20% PMs

Different approach; same outcome - a balanced portfolio.

His approach now should be to make do and mend; reduce outgoings/debts and introduce some self-sufficiency (get an allotment and/or solar hot water system (if he owns the home (not too big I hope) he expects to retire in). Once he has got his house in order he should then look to pension savings which fall outside of working age calculations for means-tested benefits should he fall on hard times.

My personal opinion is that state pension should not form part of a persons retirement planning if they are more than 15 years from state pension age. It's too much of a variable with changing rules, etc.

For example, someone at 45 could now plan for retirement at 55 and for the 25% lump sum to be used to cover the shortfall in income until the state pension age. However, what if the state pension age is further increased AFTER they retire at 55 and that 25% has to cover them for 15 years as opposed to 12? Or what if the tax free lump sum was removed altogether?

For the young, it'd be very prudent to work out an income that would allow you to some of the little luxuries in life WITHOUT the state pension and, if the state pension still exists when you retire, you'll have an added bonus of going on cruises, taking grandchildren on holidays, buying a grandchild their first car or whatever else you'd like to do.

Of course, for those starting late, this type of planning is not possible so the best advice is to pump as much as possible into a private pension and hope for the best.

The new pension rules are attempting to remove a lot of the means testing that is currently in place - just so you are aware.

At 30, my planned allocation by retirement will be:

70% Private Pension
30% Investment Property (current mortgage will be paid off by 55)
0% State Pension (a bonus if it still exists)

marathonic

Another, more condensed way to put it is:

"If you can afford to live on the new flat rate state pension come retirement, would you prefer £25 per month from 40 until 67 or a meditteranean cruise every year from 67?"

Jack_Griffin

Hey marathon man, no car but no budget for transport, ermmm some mistake surely.

Also your house maintenance component is ridiculously low, I reckon £25/week is more like.

Rethink needed.

WobblyDog

I don't think this has been mentioned yet: do you know whether your employer will increase their contributions if you increase yours?

It's worth finding out what your employer's maximum contribution is, and trying to contribute enough to get that, because they are effectively doubling every pound you put in.

marathonic

Jack_Griffin wrote: »

Hey marathon man, no car but no budget for transport, ermmm some mistake surely.

Also your house maintenance component is ridiculously low, I reckon £25/week is more like.

Rethink needed.

That budget was purposely set low to show how little you'd end up with on state benefits. More expenses would only further prove my point.

Transport - assumes free bus pass or no need for transport as a pensioner (your kids may have a car and take you anywhere you need to go - just as my mother does with my grandmother).

House maintenance was made low but there's an emergency fund component there too (although even both combined are low).

Anyway, without nit-picking the budget, the point still stands - £60 per month would make a big difference to a pensioner with only state benefits as an income.

Jack_Griffin

By the time my auntie & uncle got to mid 80's, using a bus was not something they could practically do, they used taxis sparingly or paid for carer assisted shopping at about £12/hr with a lift to the shops. It ain't that simple when you get old.

marathonic

Jack_Griffin wrote: »

By the time my auntie & uncle got to mid 80's, using a bus was not something they could practically do, they used taxis sparingly or paid for carer assisted shopping at about £12/hr with a lift to the shops. It ain't that simple when you get old.

That's true - but my point is, even on the absolute BARE MINIMUM expenditure that you could possibly have when you retire, the state pension won't go very far.

Spudsey

WobblyDog wrote: »

I don't think this has been mentioned yet: do you know whether your employer will increase their contributions if you increase yours?

It's worth finding out what your employer's maximum contribution is, and trying to contribute enough to get that, because they are effectively doubling every pound you put in.

Yes they will match every % I put in. not sure about the maximum will check.

somethingcorporate

Spudsey wrote: »

Yes they will match every % I put in. not sure about the maximum will check.

Tell me where else you get a 100% return for your money?

You're missing out on free money from your employer there and given you get tax relief that £1 from your employer is only costing you 80p or 60p in your pocket.

Jack_Griffin

marathonic wrote: »

That's true - but my point is, even on the absolute BARE MINIMUM expenditure that you could possibly have when you retire, the state pension won't go very far.

Yes, but I think it barely covers the essentials. I was arguing the £30 you found would be gobbled up by costs you haven't accounted for. Back to Uncle & Auntie, they paid a gardener £25/month in the summer and went to the hairdressers.. bang, thats half the spare cash you claimed to find gone!

And I'm also arguing the older you get the less likely you are to be able to manage your affairs well.

For any sense of comfort or security in old age you need an additional pension and savings. The more you have the easier it will be!