Is you salary / house out performed by your pension.

lisyloo

If lower rates of drawdown (than 4%) need to be used and one expects a long life then is there a massive difference between a safe level of drawdown and taking an annuity?
I don’t have any dependents to leave my money to.

bostonerimus

lisyloo wrote: »

If lower rates of drawdown (than 4%) need to be used and one expects a long life then is there a massive difference between a safe level of drawdown and taking an annuity?
I don’t have any dependents to leave my money to.

Well it depends on rates and returns. The cruel truth is that with rates so low annuities are expensive ways to fund retirement and most people can't afford the certainty of an annuity and have no choice but to take the riskier route of drawdown from an invested portfolio.

There are lots of thing's working against retirement planning today; the small levels of employer contributions; high fees; poor investing knowledge and the growth of other fixed costs like university fees, day care etc. Of course there are some positives too for those with enough money to save; high ISA and pension contribution levels and generous dividend and capital gains tax allowances. But the recent pension reforms seem to have increased the risks that savers have to take to fund retirement and provided a far larger pool of money for firms to charge fees on.

Paul_Herring

The cruel truth is that with rates so low annuities are expensive ways to fund retirement and most people can't afford the certainty of an annuity and have no choice but to take the riskier route of drawdown from an invested portfolio.

It isn't an either/or proposition - one can purchase an annuity with part of the fund to guarantee a base-level of income, and drawdown the remainder.

bostonerimus

Paul_Herring wrote: »

It isn't an either/or proposition - one can purchase an annuity with part of the fund to guarantee a base-level of income, and drawdown the remainder.

I completely agree as that's essentially what I did. But you have to be in a position to afford to do this and also be able to plan appropriately. If you have a small pot with respect to your income needs even partial annuitization might seem too expensive. Of course people should have the income floor of the state pension and that is now even more important with the reduction in the number of DB pensions around.

lisyloo

bostonerimus wrote: »

I completely agree as that's essentially what I did. But you have to be in a position to afford to do this and also be able to plan appropriately. If you have a small pot with respect to your income needs even partial annuitization might seem too expensive. Of course people should have the income floor of the state pension and that is now even more important with the reduction in the number of DB pensions around.

I’m 50 and lucky to have no major health isssues but I have starteD to get aches and pains. Others in stressful jobs have said it gets difficult mid 50s.
My mum and dad both had to stop work mid 60s due to more major health concerns.
I think there are issues with workings til state pension age (mine is 67) certainly full time and obviously in some professions.

I understand the principle of working longer and have no issue with equalisation between men and women but we may have a high proportion. Medically retored or on benefits before state pension age.

I am planning to stop much early but the maths says later and everyone else says do it as soon as possible so that’s going to be a tough call.

bostonerimus

lisyloo wrote: »

I am planning to stop much early but the maths says later and everyone else says do it as soon as possible so that’s going to be a tough call.

Make sure you get the 35 years of SP contributions, then it's a balancing act between the size of your pension/ISA etc pot, your need for income, your desire to retire , how much you want to leave to heirs and ultimately your longevity. Early retirement can be possible with less savings if the spending side of the equation can be controlled and if large fixed costs like mortgages have been paid off.

I've been retired for 5 years and my average annual spending has been 20k GBP. So I estimate I'd want around 400k GBP to retire around age 60 if I was going to get full SP at age 67.

DairyQueen

like others, I don't think that the answers to these questions are indicative of being 'retirement-ready'. For example, how do you value a DB pension? (every public sector employee has one unless they were daft enough to opt-out).

Assuming the very favourable (LTA) valuation applied to DB pensions (x 20) is used, and assuming that dividends are included for the self-employed (a much more favourable tax treatment than salary):

A) No
Yes, Our pensions (excluding SP) - DB/DC/SIPP - plus other assets (ISAs/Cash) are collectively valued at almost three times our (mortgage free) properties (we have two small homes).

But then, we - age almost 60 and 62 - have reached the peak of the accumulation phase of life and will begin decumulation within the next couple of years

I would never include the equity in our homes as part of our retirement income planning (apart from for care home fees) unless we intended to downsize/equity release (we don't).

[Deleted User]

I hope I have understood the question. My pension is final salary and will give me more income than my current salary. This has happened because I left a well paid job and didn't want that level of stress / aggravation when I re-entered the work place so now earn significantly less than I did when I was in that pension scheme.


The value of my pension ( transfer value I guess ) is significantly more than my home and buy to let and land put together.


It matures when I am 58 so a few years to go before deciding what I'd like to do.

JoeEngland

lisyloo wrote: »

Obviously this is very much relate to age.
bear in mind average house value is around £260K and that you be owned by a couple
For a decent retirement you need at least £600k I’d say per person, so at some point in middle age you’d expect to reach B and later on reach A, strongly linked to age IMO.

I think it depends on what you mean by a decent retirement and starting at what age? We have a doable plan with less than 600k in total between the two of us. We'll only have a modest income, but we don't live an expensive life so that's certainly not an issue for me.