Pension pot for £15k

robatwork

Was listening to moneybox the other day and heard a teacher say they would retire on £15k per year.

That got me thinking as to, assuming that £15k was a typical teacher's annual pension, what kind of pension pot someone on a defined contribution scheme would have to build up in conditions today to get that kind of pension?

I am trying to teach my children about aspects of finance, including the need to start a pension early, and part of that is careers advice. I know it's a bit of a finger-in-the-air calculation, but I am trying to work out how much more someone would need to earn to fund a DC scheme to match the DB that a government employee gets.

Can someone familiar with the annuities market give me ballpark figures on any of the above.

tia

kidmugsy

robatwork wrote: »

Was listening to moneybox the other day and heard a teacher say they would retire on £15k per year.

The teacher's £15k p.a. is index-linked. Suppose he's 65 and has no use for a widow's pension. Yesterday morning's paper gives the annuity rate as about 3% so you're looking at half a million. If he happens to have a State pension, of course, you could subtract that from the £15k - but perhaps he was assuming the State pension was on top of the £15k.

I've made no allowance for a lump sum because I don't know whether teachers get one.

somethingcorporate

Have a play here: https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

£400-500k is about right.

princeofpounds

Yep it's not a bad end-of-career bonus is it?

Thrugelmir

somethingcorporate wrote: »

£400-500k is about right.

Hence the continuing property fad. How many people have the inclination to spend their working lives towards accumulating such a sum?

kidmugsy

princeofpounds wrote: »

Yep it's not a bad end-of-career bonus is it?

It's back pay rather than a bonus.

kidmugsy

Thrugelmir wrote: »

Hence the continuing property fad. How many people have the inclination to spend their working lives towards accumulating such a sum?

If you don't it's all right; you just get your fellow taxpayers to stump up for you.

MRMX9

kidmugsy wrote: »

If you don't it's all right; you just get your fellow taxpayers to stump up for you.

Yes – its generous – but then a teacher earning above £45k now pays 11% of their salary in pension contributions rising to 12.5% for headteachers (before tax relief).

So the employees have paid for a proportion of the costs out of their earnings since becoming a teacher.

Its not the fault of teachers – blame those who are responsible for the collapse of private pensions. It’s a bit like blaming the blind and disabled getting benefits for the banking collapse and government deficit!

gadgetmind

Thrugelmir wrote: »

How many people have the inclination to spend their working lives towards accumulating such a sum?

Um, me?

And everyone else without a "money tree" DB pension who wants to retire early.

gadgetmind

MRMX9 wrote: »

a teacher earning above £45k now pays 11% of their salary in pension contributions rising to 12.5% for headteachers (before tax relief).

Peanuts compared to what those in the private sector (most of whom can only dream of £45k+) would have to pay to get the same end result.

robatwork

As there are obviously some teachers on this thread can we be more specific. For example for how many years would an average (yes, I know) teacher work to get a 15k annual pension? Let's say this teacher ends up typically as a deputy head at an upper school (we have 3 levels in my part of the world).

Once we know this I can plug some numbers into a calculator, make some assumptions about investment growth, and come up with some sort of comparison.

For the sake of a very coarse measure, if I invested £1000 monthly (gross) into a pension fund over 30 years, that would be £360,000, that would hopefully have grown to about the £500,000 with compounding.