Another plan to critique

jamesd

mgdavid wrote: »

My gut-feel is to go for the increased SP, to mitigate your final para.

Better to do some deferral lump sum and some deferral increased income. The chance of living long enough to benefit outside the ranges I gave starts to drop quite quickly. But if you look at it as insurance against living along time it's not necessarily a bad idea to take the higher income anyway, particularly if you are from a family that tends to have long lives and are healthy.

You'll need to check the deferral rates when the flat rate state pension comes in. You do qualify for the 10.4% rate today but it's been announced that the flat rate gain for deferring will be lower. It's unclear whether those who reach state pension age will be able to continue deferring at 10.4% when the rate for new SP people has been decreased. This won't affect any deferring already done, just something to watch to be sure it stays a good deal. The rates discussed within the flat rate proposal aren't worth considering for most people because the payback times are too long.

atush

chucknorris wrote: »

Bloody hell, that means I don't have to make any decisions about deferring pension then. Just as well I hadn't thought too much about, it, it was only a passing thought.

there will be a 'deal' in deferring SP when you get to it just wont be a lucrative as today. So you might have to make a decision sometime int he future.

As for the TPS that is where you need to make decisions now. you need to save an plan hard so you dont take it early/reduced bevfore your scheme age (or not as early) as every month/year you can delay is extra money in your pocket for life.

kidmugsy

atush wrote: »

there will be a 'deal' in deferring SP when you get to it just wont be a lucrative as today.

It might be worth doing if you were to avoid 40% tax by deferring. Otherwise it's pretty hard to see who will take part, unless it's someone terrified by prospective inflation.

atush

Who isn't terrified of inflation once they aren't earning?

kidmugsy

atush wrote: »

Who isn't terrified of inflation once they aren't earning?

Much of the population, judging by the purchase of level annuities.

I must say that the people who believe they've "factored in" inflation by being seduced by a spreadsheet into entering 3% p.a. for it also make my hair stand on end.

atush

Much of the population don't even use whole of market, they just take the first offer from their pension firm.

I think they get pretty terrified 5-10 years down the line when their pensions no longer cover the necessaries.

Wilkins

kidmugsy wrote: »

Much of the population, judging by the purchase of level annuities.

I must say that the people who believe they've "factored in" inflation by being seduced by a spreadsheet into entering 3% p.a. for it also make my hair stand on end.

In my model I use 4.6%. This is 3.6% + 1% (just for good measure). The 3.6% figure comes from the BoE calculator for the last 30 years as an annualised average.


I choose 30 years since this is the approximate period over which I made most of my earnings and the forthcoming period over which I can reasonably be expected to live. Also, longer term averages are probably not too relevant owing to progressive structural changes in the economy.

kidmugsy

Wilkins wrote: »

The 3.6% figure comes from the BoE calculator for the last 30 years as an annualised average.

You don't happen to know the annualised figure for the 1970s, do you?

atush

I'd recheck that 30 year LE, as the older you are the higher your LE.

If when you were born LE was say 78 for men, when you were 20 it was higher, 40 higher again, 59 higher again. As you age (ie successfully by living and not dying) your LE goes up as it is based on all those who die in childhood, as children, teens and young (men especially). Once you have outlived the high risk years, your LE goes up quite a bit.

jamesd

atush wrote: »

I'd recheck that 30 year LE, as the older you are the higher your LE.

Life expectancy goes down as you get older, not up. Projected age at death goes up.

atush wrote: »

As you age (ie successfully by living and not dying) your LE goes up as it is based on all those who die in childhood, as children, teens and young (men especially). Once you have outlived the high risk years, your LE goes up quite a bit.

That's why cohort life expectancies starting at the age of retirement or current age if later are the ones to use for retirement planning. Those do not include the younger deaths but do include anticipated changes to life expectancy. The Office for National Statistics publishes these, most recently using 2010-based data. The one that should normally be used is the 2010-based cohort expectation of life, 1981-2050 Principal Projection United Kingdom but the high life expectancy variant might be useful for contingency planning.

The 2014 projections at some interesting ages for males are:

Age 50: 35.9 principal 39.6 high
Age 55: 30.8 principal 33.7 high
Age 60: 26.0 principal 28.2 high
Age 65: 21.6 principal 23.2 high
Age 70: 17.3 principal 18.5 high
Age 75: 13.5 principal 14.3 high
Age 80: 10.0 principal 10.5 high
Age 85: 7.0 principal 10.5 high
Age 90: 4.9 principal 5.1 high