Comfortable Pension for a Single Person

JillyC8

kev2009 wrote: »

Hi,


My understanding was you only get the 25% tax free when you actually take your pension and therefore start receiving a income from your pension.

Kev

From Money Advice Service website:

"You can use your existing pension pot to take cash as and when you need it and leave the rest untouched where it can continue to grow tax-free. For each cash withdrawal, normally the first 25% (quarter) is tax-free and the rest counts as taxable income."

kev2009

Hi JillyC8,

hmm interesting, i thought you had to draw your pension to take the 25% tax free.

Will have to bear it in mind, thanks!

I'm too far off retirement atm but my online tool with pension provider predicts a larger than 250k pension pot but still only predicts 9.5-10.5k a year pension with a 3% rise each year and that's with 0% to a partner etc.... I realise they say that until you get to say 10 years from retirement, the numbers dont mean anything but i'd have thought i would have got more than 10.5k from my pension but will have to see, i guess rates soo low etc at the moment, its hard to predict.

Kev

MrSaver96

Very interesting thread!

One question I always ask myself is how long you need to plan for retirement. So do you make sure you have enough until you 80, 90, 100? Or do you make sure you have enough to last indefinitely?!

JillyC8

kev2009 wrote: »

Hi JillyC8,

hmm interesting, i thought you had to draw your pension to take the 25% tax free.

Will have to bear it in mind, thanks!

I'm too far off retirement atm but my online tool with pension provider predicts a larger than 250k pension pot but still only predicts 9.5-10.5k a year pension with a 3% rise each year and that's with 0% to a partner etc.... I realise they say that until you get to say 10 years from retirement, the numbers dont mean anything but i'd have thought i would have got more than 10.5k from my pension but will have to see, i guess rates soo low etc at the moment, its hard to predict.

Kev

In that case you're doing ok by my standards :-).

One really positive thing is that you have a long time to plan ahead.

Flim

...plan to spend spend spend until 80, leaving about £100k invested for emergency fund, also have equity in the house, then live off pensions...at least that’s the plan....

JillyC8

MrSaver96 wrote: »

Very interesting thread!

One question I always ask myself is how long you need to plan for retirement. So do you make sure you have enough until you 80, 90, 100? Or do you make sure you have enough to last indefinitely?!

Some would say on here that you should plan indefinitely, but for me, it's more important to have the healthiest income up to around age 75 than to worry so much about having thousands to spend when all you might want to do is watch Countdown and drink tea :-).

JoeEngland

JillyC8 wrote: »

I read a lot on these boards and am often surprised at how much people 'need' to live on in retirement.
Of course this depends on lifestyle choices, but for a single person who is a non-drinker, occasional holiday maybe once a year somewhere like Spain, small car, no mortgage and living a fairly simple lifestyle, I wonder what opinions are on here with regard to how much a year pension one would need?

You should be able to roughly work out the cost of essentials by looking at your current bills and factoring in some extra costs of heating, electricity and water when you're retired. After that it's what level of discretionary spending you'd want, and some contingency for other costs (house repairs, replacing car, dental bills etc).

Terron

kev2009 wrote: »

Hi JillyC8,

hmm interesting, i thought you had to draw your pension to take the 25% tax free.

Will have to bear it in mind, thanks!

I'm too far off retirement atm but my online tool with pension provider predicts a larger than 250k pension pot but still only predicts 9.5-10.5k a year pension with a 3% rise each year and that's with 0% to a partner etc.... I realise they say that until you get to say 10 years from retirement, the numbers dont mean anything but i'd have thought i would have got more than 10.5k from my pension but will have to see, i guess rates soo low etc at the moment, its hard to predict.

Kev

I have six pensions. One is a SIPP out of which I have took £5k last year and £3k this year tax free That is only around 1/10th of the total I could take tax free out of it.


The others are less flexible, at least directly I could have transferred them into the SIPP, but there were reasons not to. A couple have GARs of 10.6%. I have a final salary pension that I plan to take this year taking the 25% tax free, partly from the AVC. I also have a hybrid one that my IFA is trying to arrange so that I take the full DB pension, take 25% of that from the non-DB part and transfer the rest to my SIPP.


There are rules for the predictions that you can be given so that it is possible to compare pensions fairly. However they are not as good at actually predicting what you will get. They have to assume that you will take an annuity, but annuities are currently not a good idea for most people. On the other hand they assume that you will get a pay rise ever year. I got only one from 2003 to 2013.


Using drawdown raher than an annuity a reasonable rule of thumb is that you can take 4% of your fund each year and increase it according to inflation. 10kpa plus inflation rises is actually pretty close to what they are predicting for you. Of course the fund is likely to grow ahead of inflation especially if you continue to contribute. They are taking that into account and I was not.

fly-catchers

Would be on about £12500 annual DB pension if I left now. Currently 61 and the SP would kick in at 66. Because of being contracted out I am currently 4 years short of the maximum SP but could buy the missing years later on I assume.
Doing my sums once I get my full pension rather than have it fully taxed at the moment because I am still working. It will cover all my monthly outgoings and leave a bit. But would need to take money from my savings for unexpected purchases and repairs. But do have a reasonable amount though not huge in various savings and S&S ISA. I also intend to resume my hobby of growing and selling tropical plants both as a hobby and for some extra cash. My current work hours have tended to make me neglect that side of my life.
But still find actually pulling the plug and finally leaving harder than expected and already falling into the one more year trap!

theoretica

I look at retirement budgeting in a different way - looked at my life in my late 20s and realised I liked the thought of working for roughly 35 years and planning for retirement of about 35 years - so every year of earning needed to pay for two years of living. This focussed my mind about saving, and about only being able to spend money once - now or later.