How much do you think you’ll need to save up to retire on?

Apodemus

NewShadow wrote: »

All in all a very basic tool that does not give a realistic representation of how much someone might have to save to retire at anything other than SPA/scheme age but at least makes an effort to acknowledge there are a number of different products available.

6/10

Maybe 7.5/10 if I wasn't grumpy due to lack of sleep...

I was fully awake and came to similar conclusions. I’m not sure that anyone who wasn’t already clued-up on pensions would manage to get anything meaningful out of this, but it may be fine for simple DB + SP, Retire-on-state-Pension-date scenarios. (But what proportion of the population does that apply to nowadays?)

It doesn’t seem to let me do anything apart from take the 25%TFLS from my DC pension up-front and I would plan on that being used as part of the long-term draw-down strategy. It also seems to give a very high figure for an annual sum from the remainder of the DC pension - 6% return annually, which is three times what the company quotes on its annual statement and twice my own 3% scenario.

coyrls

Apodemus wrote: »

It also seems to give a very high figure for an annual sum from the remainder of the DC pension - 6% return annually, which is three times what the company quotes on its annual statement and twice my own 3% scenario.

I think the tool assumes that you will purchase a (no spouse?) level annuity with the remaining 75% of the DC pension. As has been pointed out there is no provision for specifying drawdown, UFPLS or for purchasing an index linked annuity or any other of the various flavours of annuity.

westv

The MAS pension calculator has been on their website for a number of years.

Money_Advice_Service

Apodemus wrote: »

I was fully awake and came to similar conclusions. I’m not sure that anyone who wasn’t already clued-up on pensions would manage to get anything meaningful out of this, but it may be fine for simple DB + SP, Retire-on-state-Pension-date scenarios. (But what proportion of the population does that apply to nowadays?)

It doesn’t seem to let me do anything apart from take the 25%TFLS from my DC pension up-front and I would plan on that being used as part of the long-term draw-down strategy. It also seems to give a very high figure for an annual sum from the remainder of the DC pension - 6% return annually, which is three times what the company quotes on its annual statement and twice my own 3% scenario.

westv wrote: »

The MAS pension calculator has been on their website for a number of years.

coyrls wrote: »

I think the tool assumes that you will purchase a (no spouse?) level annuity with the remaining 75% of the DC pension. As has been pointed out there is no provision for specifying drawdown, UFPLS or for purchasing an index linked annuity or any other of the various flavours of annuity.

Thank you all for your feedback. It was very much appreciated. It was interesting to hear your views with many of them replicating my own. Hopefully when the next opportunity to enhance the pension calculator comes along we can use the points you have highlighted to improve the functionally and user experience of the tool.

On another note what do you think of auto-enrollment? Has it been a success? Does it go far enough with regard the level of employer and employee contributions? or is it just an unnecessary strain on already stretched finances? Interested in hearing your views on the subject?

(MAS-Andrew DipPFS) #talkmoney

lisyloo

Alexland wrote: »

It really depends on when you intend to retire and what your asset allocation looks like but someone retiring at SP age might find an inflation linked 4% drawdown rate causes them to run out of money if they are in the upper proportion of lifespans or hit an unfortunate market return sequence.

I plan to retire a bit early and draw less than 3%

Alex

It also depends on whether you have other funds as well, for example a property to downsize from or other savings/investments in ISAs.


An annuity is an option later in life but not generally regarded as good value in your 50's.

NewShadow

Money_Advice_Service wrote: »

On another note what do you think of auto-enrollment? Has it been a success? Does it go far enough with regard the level of employer and employee contributions? or is it just an unnecessary strain on already stretched finances? Interested in hearing your views on the subject?

(MAS-Andrew DipPFS) #talkmoney

I broadly agree with these posters from earlier in the thread:

Alexland wrote: »

In some ways auto-enrollment is set at such low percentages that it is harmful in giving people the idea that it might be sufficient. If it is only enough to keep them off means tested benefits what's the point?

crv1963 wrote: »

I think that the Govt. aim is to get people to save enough to get them out of the "top up benefits", not necessarily get them to a meaningful pension. I speak to people in their 40s who tell me that as they have auto-enrollment pension "I'm sorted" a universal con in my view.

badmemory wrote: »

Unless something is done to improve auto enrollment it is going to be a disaster for a lot of people. There are too many people who do not understand financial matters much beyond can I afford to pay this bill. They are doing the right thing & contributing to a pension & often don't seem to realise that the small amounts that are going in will add up to such a small amount over 40 years that the pension company will be insisting on paying it all out at retirement age...

Auto enrollment should have been a really good idea, but this combined with the new state pension is going to leave a lot more people in poverty once they have to retire.

I would also be much more interested in hearing any information you have as to the effectiveness of the scheme.

Is there a document with worked examples of the returns which can be expected for an 'average' participant in the scheme and do they have the 50-60% pension provision you gave as the amounts to aim for earlier in the thread?

crv1963

Money_Advice_Service wrote: »

On another note what do you think of auto-enrollment? Has it been a success? Does it go far enough with regard the level of employer and employee contributions? or is it just an unnecessary strain on already stretched finances? Interested in hearing your views on the subject?

(MAS-Andrew DipPFS) #talkmoney

what do you think of auto-enrollment?

Auto-enrollment is a good idea poorly executed. It has too many people saving too little believing they are saving sufficient. There is too little promotion/ education of realistic levels of savings needed for retirement.

Has it been a success?

This depends on how you measure success- numbers enrolled then it could be argued possibly, numbers heading for a comfortable retirement then not, numbers likely to be lifted out of means tested benefits to supplement SP and so save future Govt. spending then probably yes.

Does it go far enough with regard the level of employer and employee contributions?

No. There needs to be a better explaination of the levels of savings needed as a percentage of wages in clear terms. Both employers and employees need to save more, with pensions promoted as part of the employment package not just the headline take home pay. Probably me just day dreaming with that one though!

is it just an unnecessary strain on already stretched finances?

Maybe it is a necessary strain on finances? But as always human nature is gratification now, not a delayed gratification it is basic psychology and unfortunately not going to change soon. Hence the promotion of consumer spending on credit etc over the last 50 years. On the other hand................if consumer spending was restrained by what people actually earn and only borrowing be for housing the economy would shrink and returns on investments be poorer so little economic growth!

I think that there is no appetite for a wider discussion, politicians won't tell us we're not saving enough and are doomed to poverty in retirement. Most aren't savvy enough to recognise they aren't saving enough. Those that do possibly can't increase savings because they either don't earn enough or are serving debt.

Terron

NewShadow wrote: »

3. I've just noticed in the assumptions it makes a 2.5% pa increase to payments based on assumed payrises - which is fine if the pension is a works pension and therefore linked to salary, not if the pension is a private pension or other pension provision outside of a scheme, LISA/ISA/SIPP. Those who do are more likely to set a 'rounded number' - 50/100/200 pm - and leave it at that amount long term without regular review

Even for those in work it may not be realistic. During the last 13 years I was paying into a works pension I got one rise of 3%.
I suspect that the assumptions are set by the government to make different projections comparable.

westv

Terron wrote: »

Even for those in work it may not be realistic. During the last 13 years I was paying into a works pension I got one rise of 3%.
I suspect that the assumptions are set by the government to make different projections comparable.

I'd suggest the assumptions are similar to many other calculators.

JoeCrystal

Money_Advice_Service wrote: »

On another note what do you think of auto-enrolment? Has it been a success? Does it go far enough about the level of employer and employee contributions? Or is it just an unnecessary strain on already stretched finances? Interested in hearing your views on the subject?

While it is a success in getting more people enrolled in the pension as never before and increasing their pension pots, there are few failings with the auto-enrollment. As you would already know, in next tax year, the employer is only contributing 3% while the employee is contributing 5%. I think that the level of the employer should at least match whatever the employee is paying into to make it straightforward and on the entire basic pay as well. Also, I think there should be a test in order to raise the contribution levels if needed rather than pulling numbers out of thin air based on an 18 years old starting a full time work with a DC pension scheme on national living wage (£15,268) to retire on 67% of the national living wage by SPA (including state pension since excluding it would be too expensive). We do want to give the young people starting work to have the best chance of saving up for a reasonable retirement income from the start after all.