I'm an idiot.

crv1963

Kmh120 wrote: »

Thank you all so much. I am feeling such a pratt atm and I'm really grateful for your kind words and support. My Dad has been saying to me for years that I need to sort my pension but I've been on a partcularly low income until recently, and then I figured that with Auto Enrolment all would be ok. What an idiot I am !

To answer some of your questions

1. SRP - I've gone into the government's website and it says I'll have £164.35 a week from 15.12.2028 as long as I pay into it for 3 more years. So you're right. I won't retire at 65, it'll be when I'm 67. So that gives me an extra 2 years from my original (yet again) eroneous calculations, to save up/pay into a pension!!

2. Auto Enrolment. I currently pay in 5% of my earnings - I earn £24,000.00 a year. My employer pays in 3% ( this is not going to increase) Its paid into a SIPP. Would I be best off upping my contribution rather than paying into another yet to be set up pension? And paying in as much as I can? As I said it tells me that at 65 I'll get a lump sum of £18,000.00 which it works out will give me an annual annuity of £555.00 :rotfl::mad::eek:

3. I own my own home. No mortgage. Freehold.

4. I have 6 months emergency fund saved up - I havent yet done the 'how much do i need to live on in 2028' calculation - that scares me

5. Oh and i'm assuming that my Council Pension from years ago ( which will pay me £2,700.00 per year) is closed now...is that how it works?

Thank you all again for your support. Any help I can get, will be good. I don't feel so alone now!

Sophie

So you're going to have in 2028 £2700+£8500+£550= £11750. If that is enough for your planned needs great. Most calculators say you need around 66% of your 24k salary so 16k pa pension.

So you have a 4k shortfall pa plus whatever tax you need to pay- currently that would be around £800 pa so you ideally need to plan for a 5k shortfall pa.

One way to try to plug this gap would be to use S&S ISA, put as much as you can into them, including from 2021 your £2700 pa council pension. This way the income/ draw down would be tax free and your pension income of 11750 would also be tax free. Ok you wont get the uplift on the way in as you're saving from taxed earnings but it is not taxed on the way out.

Alternatively put more into a SIPP get the uplift and pay the tax on the way out taking the view that you have gained 20% uplift.

You have to bite the bullet and work out how much retirement income you need.

OldMusicGuy

The simplest option would seem to be to save more into your SIPP because of the tax relief you will get (if you can). The money is actually payable at any point after 55, not at 65. You can take money out at any time after 55 (but doing so has implications for how much you can continue to pay in).

You need to understand a bit more about SIPP options because it is highly unlikely you would buy an annuity, they are very bad value. Most people with SIPPs draw cash out gradually while the rest remains invested and thus (hopefully) grows. So you will have a pot of £x,000 that you can use to supplement your pension income from SP and your local govmt pension.

You should go to the Pensionwise website here: https://www.pensionwise.gov.uk/en. This explains the options you have to take the money from your SIPP. You should also set up an appointment with Pensionwise. It is free and they will explain all the options you have with regard to all your pensions (but they will not give you any advice).

So next steps are to understand more about the current pension you are saving into and work out those numbers to see how much you will need. It looks like your base income will be around £11,300 in today's terms, but that will be linked to some measure of inflation (which is good). If you retire at 65, will you be able to live on £11,300 plus whatever you have saved up (in savings and your SIPP)?

Anonymous101

Don't be too hard on yourself. You've identified a problem and are doing something about it now so kudos to you.

I say that understanding your expenditure is definitely the first step. I understand that is might be scary but its the most accurate way to see where you are with things. Get yourself a spread sheet set up or even just jot it down on a pad but you need to calculate how much money you are spending now per year.
This will allow you to identify area's you might be able to cut costs and therefore save more now and also calculate how much income you need in retirement. As others have said most calculators suggest 66% of current income but this can be misleading if you are saving a large percentage now or have recently had a payrise. Working out how much you need a year really is the only way.

Once you've worked that out I'd list out all your existing pensions. For me these fall into two categories. Ones that give you a guaranteed income, State pension and any DB schemes (like your council one) and then any DC schemes which will give you a lump of money to either draw down or buy an annuity. I'd concentrate on the guaranteed income ones first as these may go a long way to meeting your annual costs.
The DC ones are a little more complicated as buying an annuity isn't great value at the moment but may still be the best route depending on where the DB schemes sit against your costs.

IMO its essential that you understand your costs, don't worry about predicting what 2028 prices will be just yet, and where your current pensions and savings are. Once you know that it will be far easier to hatch a plan to get you where you want to be. You may even be pleasantly surprised. Don't be too down if its bad news though. Much better to know now that nearer the time when you can't do anything about it! :money:

crv1963

I think you've had some good advice and planning is better now than at 65!

We (I), worked our number out by adding all essential outgoings that won't ever go away- council tax, utilities, food etc. Then added a bit on reckoning heating etc will increase as we spend more time at home. Then added choice spending- running a car, meals out, hobbies and basic holiday. Arriving out our basic must have number.

Then we added further choices- long haul holiday annually for ten years, running two cars, having more dogs- our would like number.

Then we added a couple of long haul holidays, additional hobby spending (tropical marine fish keeping can be expensive, as can training dogs to herd sheep) and so arrived at our luxury retirement number.

The luxury number is our aim but so is retiring before SRA so we're reckoning that for us the would like number will be our best compromise as we then get into time vs savings/ pension income.

Play about with some figures, you are in a good position already, nearly 1k pm pension income already in the bag is good. Do not worry about what others have or don't have, it is what works for you that matters. I read with interest what others do and some numbers are large and good on them for thinking ahead, use some of their advice and ideas to better your own position.

LHW99

Oh and i'm assuming that my Council Pension from years ago ( which will pay me £2,700.00 per year) is closed now...is that how it works?

Do you mean an LGPS pension? This is salary related ("DB").
Is the £2700 the estimate of what you will get when you retire?
You will not be able to add more to this (unless you go back and work for the council again in future), but it is a good thing to have as a "risk free" addition to state pension. Don't fall for any unsolicited phone call offering to transfer it or "review" it!

cloud_dog

Kmh120 wrote: »

2. Auto Enrolment. I currently pay in 5% of my earnings - I earn £24,000.00 a year. My employer pays in 3% ( this is not going to increase) Its paid into a SIPP. Would I be best off upping my contribution rather than paying into another yet to be set up pension? And paying in as much as I can? As I said it tells me that at 65 I'll get a lump sum of £18,000.00 which it works out will give me an annual annuity of £555.00 :rotfl::mad::eek:

Is this taken from net pay or gross pay?

Also, do you know if your company operates 'salary sacrifice'? If it does then this would mean additional national insurance savings on any contributions (or increased contributions)

Kmh120 wrote: »

5. Oh and i'm assuming that my Council Pension from years ago ( which will pay me £2,700.00 per year) is closed now...is that how it works?

Is it possible to defer your LGPS by a few years so as to coincide with your actual retirement. By this I mean is there a financial benefit / uplift, and is it worth considering in your position? This from the LGPS website:

Payment of deferred benefits at or after your Normal Pension Age

If you do not take early payment of deferred benefits under either of the above two methods the deferred benefits will be paid from your Normal Pension Age unless you opt to delay payment beyond that age.

If you take your deferred benefits after your Normal Pension Age your pension will be increased by 0.010% for each day payment of your pension is delayed beyond your Normal Pension Age. In addition a 0.001% increase will be applied to any automatic lump sum you receive in respect of any pre 1 April 2008 membership for each day that lump sum is drawn later than age 65.

Silvertabby

“ 5. Oh and i'm assuming that my Council Pension from years ago ( which will pay me £2,700.00 per year) is closed now...is that how it works?
Originally posted by Kmh120

cloud_dog wrote: »

Is it possible to defer your LGPS by a few years so as to coincide with your actual retirement. By this I mean is there a financial benefit / uplift, and is it worth considering in your position? This from the LGPS website:

Payment of deferred benefits at or after your Normal Pension Age

If you do not take early payment of deferred benefits under either of the above two methods the deferred benefits will be paid from your Normal Pension Age unless you opt to delay payment beyond that age.

If you take your deferred benefits after your Normal Pension Age your pension will be increased by 0.010% for each day payment of your pension is delayed beyond your Normal Pension Age. In addition a 0.001% increase will be applied to any automatic lump sum you receive in respect of any pre 1 April 2008 membership for each day that lump sum is drawn later than age 65.

If this deferred LGPS pension is indeed 'old' then your normal pension age - ie, the age from which no early retirement reductions apply - could be 60. If this is the case, then it wouldn't make sense to defer because the miniscule late retirement increases (3.65% per year) will never compensate for the loss of the pension not taken.

Is this £2,700 a year a recent quote - or have you taken it from the statement you were given when you left the LGPS? If the latter, then your pension will have increased in line with cost of living increases since you left.

Kmh120

You guys are the best and you're SO good for me. :beer: THANK YOU!

I have taken the plunge and worked out what my yearly outgoings are. Scary stuff!!

Council tax, water, gas & electric, tv licence, home and contents insurance, b/band, mobile phone, car tax, RAC, MOT & service, car insuarnce, food, personal bits ( hair....I'm a girlie girl!)

I've added it all up and I get to around £8500.00 per year

I havent included dentist, specs and scripts....nor holidays....who has money for holidays??!!:j

Can anyone think of anything else I need to factor in?

1. Yes I mean LGPS and yes the £2700.00 per year is as at August 2018. I'm not sure if I should take this at 60 and squirrel it away....it seems that if I defer taking it til I'm 67 it doesnt increase much.

2. My Auto Enrolment SIPP is taken as a salary sacrifice from my gross pay. I'm coming to the conclusion (what do you all think??) that I should just add as much as I can to this SIPP which is run through Black Rock something or other. Rather than take out another pension somewhere else.

Again thank you all....I am feeling MUCH less scared now. And whilst I'll never ever be rich, at least I'm not letting my Dad down too much ( by not having listened to him earlier!);)

kidmugsy

Silvertabby wrote: »

If this deferred LGPS pension is indeed 'old' then your normal pension age - ie, the age from which no early retirement reductions apply - could be 60. If this is the case, then it wouldn't make sense to defer because the miniscule late retirement increases (3.65% per year) will never compensate for the loss of the pension not taken.

Yes; if deferment is to be used to increase a pension then the one to defer is the State Retirement Pension: the increase there would be 5.8% p.a. (rather than 3.65%). I suspect the case for this is pretty marginal unless the person can also wangle a tax advantage out of deferring.

Silvertabby wrote: »

Is this £2,700 a year a recent quote - or have you taken it from the statement you were given when you left the LGPS? If the latter, then your pension will have increased in line with cost of living increases since you left.

A happy thought, especially if receipt of this pension let the OP contribute more to her present AE pension or a personal pension of some sort.

bspm1

Kmh120 wrote: »

You guys are the best and you're SO good for me. :beer: THANK YOU!

I have taken the plunge and worked out what my yearly outgoings are. Scary stuff!!

Council tax, water, gas & electric, tv licence, home and contents insurance, b/band, mobile phone, car tax, RAC, MOT & service, car insuarnce, food, personal bits ( hair....I'm a girlie girl!)

I've added it all up and I get to around £8500.00 per year

I havent included dentist, specs and scripts....nor holidays....who has money for holidays??!!:j

Can anyone think of anything else I need to factor in?

1. Yes I mean LGPS and yes the £2700.00 per year is as at August 2018. I'm not sure if I should take this at 60 and squirrel it away....it seems that if I defer taking it til I'm 67 it doesnt increase much.

2. My Auto Enrolment SIPP is taken as a salary sacrifice from my gross pay. I'm coming to the conclusion (what do you all think??) that I should just add as much as I can to this SIPP which is run through Black Rock something or other. Rather than take out another pension somewhere else.

Again thank you all....I am feeling MUCH less scared now. And whilst I'll never ever be rich, at least I'm not letting my Dad down too much ( by not having listened to him earlier!);)

We do and we don't have an awful lot more than you have forecast for yourself.