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

michaels

MallyGirl wrote: »

I am aiming for something near £2m between us as a couple across DC pensions and ISAs. No DB pensions for either of us. That is at 60. This gives us what I think we need plus what we want to be able to enjoy some travel and leisure time.

Interesting, for us 1m at 55 would be quite sufficient and we would definitely put more value on extra years of retirement over more money in retirement but 5 less years of it. (All values assumed to be in 2018 pounds)

hugheskevi

50-60% of your current income is usually considered a good benchmark to aim for. This assumes you have paid off your mortgage and the majority of any outstanding debts though. (MAS Andrew - DipPFS)

This is not consistent with the Pension Commission benchmarks at lower income levels. The Pension Commission figures were later update by DWP in this report.

DWP calculated those with gross income up to £12,000 p/a (in 2012) should aim for a replacement rate of 80% whilst those with gross income over £50,000 should aim for 50%.

When you consider the average pension pot in the UK is around 30,000 your doing very well with regards saving towards your retirement subject to your income expectations.

The average is around £30,000 but this varies hugely by age.

Median private pension wealth is £34,500 but for those aged 25-34 the median is £10,000 whilst for those aged 55-64 the median is £90,000. The 3rd quartile figure for those aged 55-64 is £343,600.

Source: Wealth in GB, July 2014 to June 2016

Quick warning though. Accessing your pension before 55 will usually be treated as an unauthorised payment by HRMC and could be subject to a 55% tax charge.

Unless you are one of the many people with protection from the changes to minimum pension age. For example, the c500,000 Civil Servants in service in 2006.

Alice_Holt

Andrew - DipPFS,

Have a careful read of this.
http://monevator.com/try-saving-enough-to-replace-your-salary/

I favour a combination of strategies to replace a salary -
a) A pension (state pension or an annuity) to provide a base guaranteed level income to cover essential expenditure.
b) Investing in one's human capital to derive a continuing part-time / self-employed income from activities that interest and engage. This has the additional advantage of maintaining social interaction and intellectual interest after SPA.
c) Building up savings (within both retirement funds and ISA's) to provide both security for late life, and the luxury to enjoy early and mid retirement years to the full. My estimate would be a figure of £500k as a good target to aim at (dependent on circumstances).

Puddylove

I have to admit I have no money in a 'pension pot' so find it hard to understand what a pension pot of, say £500k will mean in income terms. Y'all sound rich though.

I'll not be rich - but I'll have the following;
Full state pension
TPS pension of about £4K per year
USS pension of around £5k a year DB (current, increasing by £800 pa)
Paying extra into the DC part of the USS (is that a 'pension pot equivalent?)
Putting £200 a month into S & S ISA - started this last year.


Not sure how this compares to normal people? I've got another 15 plus years to go until I retire.

Apodemus

Oh, no! Not another of these simplistic MAS questions! This is seriously harming the previously good reputation of the MAS! Has someone gone off on holiday leaving the interns in charge?

If we assume no DB or DC pensions and no State Pension, I would want to save between £790k and £1.2m to fund our retirement as a couple.

Our planning is on the basis of needing 50% of main earner’s salary and 100% of spouse’s salary.

Depending on actual retirement date(s) for my wife and I we will need somewhere between £0 and £100k to cover the shortfall to state pension age and probably a further £100k or so to cover for the shortfall caused by accessing DC and DB pensions early.

michaels

Puddylove wrote: »

I have to admit I have no money in a 'pension pot' so find it hard to understand what a pension pot of, say £500k will mean in income terms. Y'all sound rich though.

I'll not be rich - but I'll have the following;
Full state pension
TPS pension of about £4K per year
USS pension of around £5k a year DB (current, increasing by £800 pa)
Paying extra into the DC part of the USS (is that a 'pension pot equivalent?)
Putting £200 a month into S & S ISA - started this last year.


Not sure how this compares to normal people? I've got another 15 plus years to go until I retire.

And yet your 9k of db pension is one equivalent to a pension pot of at least 300k so turns out that you are probably pretty much as rich as we'all sound!

Edit and your extra 800 per year for 15 years will push your pension up to a similar value to a 1m DC pot so y'all is well loaded.

justme111

Albermarle wrote: »

This figure only applies if you have a good income when working , with some spare money every month to go into savings, pensions etc
If you have a low paid job and struggling to make ends meet , then you need close to 100% of earnings in retirement otherwise you will not cope.

If you have a low paid job , pay mortgage and spend on children then chances are you will be better off on a state pension than during working life so no need to make any pension provision unless wanted to retire early

Spreadsheetman

The OP's question is a good one to ask people that haven't thought about pensions at all to start them thinking about it.

It's actually a really tricky question to answer once you go into it in depth and it is also completely dependent on individual circumstances.

crv1963

Spreadsheetman wrote: »

The OP's question is a good one to ask people that haven't thought about pensions at all to start them thinking about it.

It's actually a really tricky question to answer once you go into it in depth and it is also completely dependent on individual circumstances.

It is a good question and when one of my sons asked what I was doing when I started (very late) our pensions planning I asked him the same question- as did his boss! He was 20 years old, now coming up 22 he's got 13% of his salary going into his pension, his boss advised him to use the company pension and he has maximised his employer contribution, started a LISA (aiming for a house).

My other son has not increased his employer pension contributions beyond the minimum, but has a plan to be FIRE by 45- he's got his own path and plans.

A lot of people never even think of pensions other than what they'll get at SPA, so anything that provokes discussion and planning is positive in my view. A lot of people have a fatalistic view of either there will be no pension when I get to 70 to I'll not live long enough to enjoy it so why worry about it? Not realising that their destiny is actually in their own hands.

Stubod

The basic OP question is very "open" as it depends on the age that you want to retire, and how much you already have in pensions and how much you want to spend?

For us we wanted to finish at about 60 and we have some "guaranteed" pension, then more or less full state pensions at 66. We aimed for about £500,000 in savings before we felt "comfortable", as this should provide an ongoing total "income" of about £30k to start and then increasing with inflation...(hopefully..)