Comfortable Pension for a Single Person

True_Blue_64

I am about to turn 55 and will be leaving the corporate world in June. I have calculated my income needs as £1,700 pm after tax (as a single person). That should cover all my regular fixed, variable costs (no mortgage or other debts) and personal spending, although I do have other funds available to draw from in the future for long-haul travel, replacement car etc.

One of the best pieces of advice I have read on this board is to test the water by living off that income level for a period before retirement. I have done this for 18 months and it has given me the confidence to go for it!

As commented on earlier in the thread, the starting point has to be to work out your individual income needs. I would then recommend road testing the budget to make sure it is viable and ideally build in some reasonable slack/flexibility for the unforeseen.

JillyC8

happynot wrote: »

I also have had to gulp a few times on reading other threads with peoples plans for retirement and how to fund it. I do not think I am envious, in fact I feel lucky that I was able to leave working (since 18, in the NHS and at that stage tired, disillusioned and borderline ill )in my mid/late 50's and live on a modest pension. I have around £15000 per year, some savings and hopefully my state pension (not too high as I was contracted out almost all my working life).


It helps that I am mortgage free and not interested in far flung travel. I use my bus pass and hope to undertake various courses and travel within UK / Europe, mainly interested in history.


My plans are on hold at the moment (life's events) - time IS more important than money, but I would hate to have to be totally frugal and reliant on benefits.

I feel I can really relate to this, and it's such a relief to hear about the situation of someone who I would consider to be the majority regarding pension income (in my world at least!).

I've travelled a fair bit over the years but as I get older find I have lower appetite for overseas travel, plus I hate long haul flights. I'm looking forward to travelling more in the U.K. As there are so many places I've yet to see.

I need to work a few more years to qualify for the state pension, but I'll be checking my small DB pension every year to keep an eye on its progress. I haven't yet asked them for a quote on a reduced amount for taking it early, but doubt it will add up to enough as the final number at 65 is forecast at £7200 so to take it early wouldn't be worth it.

Makes total sense to experiment with living on less first... I'll be doing this in future once the teenagers are independent!

ajbell

I currently earn around £3k a month net but with mortgage paid and car paid for, I live on £550 per month for regular bills and let's say another £150 pm to cover insurances and misc.
All my hobbies require no expense and I live very comfortably, I will retire at 55 in the next 2 years with 2 DB pensions equivalent to £650k if I choose to take them that way.
Time is more important to me than money.

crv1963

BoxerfanUK wrote: »

There is no one size fits all. It all depends on individual circumstances but as others have said, the most important thing is to work out what expenses you will no longer have in retirement compared to now.

Work out what things you spend on now that you MUST HAVE in retirement and see if you can reduce these must have costs, such as, switching energy suppliers, car insurance, home insurance, Tv subs etc etc. It's amazing how many people stick with the same providers and end up paying through the nose year after year. These costs can really add up.

Then work out what you pay for now that you won't need in retirement, travel to work costs, other insurances, loans that may be paid off by then, can you buy a more economical car, or, do you even need a car?

The real biggie is housing costs, do you rent, have a mortgage, will that mortgage be paid off by the time you retire. There is a very good thread on this board about your 'number', meaning after you've worked out and rationalized all your projected expenses in retirement you will arrive at the 'number' you need to live comfortably.

Once you have your number you can work out what you need to do to achieve that, company pension, state pension, SIPP etc.

The state pension on it's own would be very difficult to survive on alone, even if you own your own home with no mortgage, but if you have other pension income/savings to supplement it then it can increase your financial comfort level greatly when state pension finally kicks in. Have you obtained a state pension forecast to see if you will get the full amount?

Also, what age do you plan to retire at? If this is before state pension age how will you bridge the gap between finishing work and getting state pension.

I retired last year at 59 and am fortunate to have what I consider to be a good DB pension. It's not in the league of some people on here who band about company pensions of 50-60K and 1.5 million pots and I have to admit sometimes reading their posts leaves me feeling somewhat inadequate. I don't begrudge it, good luck to them, but the figures they mention are fantasy land for the average working person. Having said that, I still feel very grateful and lucky with what I have. I know people with little or no pension provision and I really wonder how they will ever survive. I guess they'll have to work 'til they drop :sad:

I never really thought about my final salary pension as such because being Civil Service I couldn't really add to it and I knew it would be enough. I was satisfied with the financial projections I had made so I concentrated on overpaying our Mortgage. However, a few years ago I really got thinking about my wife's pension provisions and together we decided to do something about that. Thanks to this board we've been able to make a real positive difference to her pension and god willing if we survive long enough will be better off in retirement than we are now!!!

There are lots of regular posters on this board that must spend hours helping strangers like me with (sometimes) stupid questions but thanks to their help I have learned an awful lot (and still am) and will be eternally grateful to them, so thank you MSE posters :beer::A

Very much spot on. I also have a DB and we're concentrating our efforts on evening up or balancing my wifes' pension level. I too look with a dropped jaw at some figures, but like you I think to myself- well done, either for achieving the earnings or the savings levels needed or both!

Having spent a lot of time on here I have figured most people are aiming for 15-24k pa, which with the people I have met/ know who have retired with no mortgage seems to provide a decent level of lifestyle (to me) and the ability to enjoy themselves.

Our plans include a SIPP pot for Mrs CRV that hopefully will provide 6-8k pa to bridge the gap between her retiring and her SP starting at 67- it will if drawn at that rate be exhausted by then.

I too am amazed at the level of knowledge here and am grateful that others share it freely. I try to encourage others to look at what they want to achieve and plan to do so. My sons have decided that they are going to try to retire before SP (age 21 and 23 respectively) and have followed some of the tips here, a couple of people I work with are planning now (late 20s and mid 30s respectively) and thanks to knowledge gleaned here have started.

Us? We didn't start until my early 50s planning but still aim to retire on a decent (for us) income by the time I'm 58/59- so 3/4 years to go, sooner if we can. So we're living within our 24k pa budget for now, using everything extra to pay down debt- mortgage/ 0% credit cards/ car loan, purchase items to future proof as far as possible and get our home ready for retirement for us.

203846930

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?

Add up your 'fixed' bills such as rates/insurance/phone/fuel/gas/electric, etc then double the total and that should be enough to allow you to live normally and have some left over for holidays.


You'd be surprised how little you really need each month.

GibbsRule_No3

So long as the personal allowance keeps going up, thus I can pay less tax on my pensions, I’m hoping that the total pensions, two DB that rise with inflation (supposedly!) and SP, will not be that much less than I am taking home now, doing part time for the past three years as a trial run. I need to maintain this amount because I will always need to pay rent. The extra I am paying into a company stakeholder pension should be a little nest egg lump sum when I finish work as “treats” like holidays and new electronic goods. Hoping that lasts until my age and body won’t allow holidays. I don’t drive, smoke or drink. I moved to my age proofed home four years ago, with good public transport for when I cannot cycle and do long walks like now. Nearer where friends lived. There is just me and while I was going to retire in December this year, just before the SP kicks in next March I have had a change of heart, due to the three day week and the stakeholder Pension adding nicely to the retirement fund, touch wood still fairly healthy and active and doing the same job for last 48 years so I am staying put, no NI after March either. I am not deferring the SP but will save it as well as the stakeholder Pension. I think this lifestyle will keep me going as my job is an active one.

enthusiasticsaver

I think you need to bear in mind that in retirement although you may not alter your lifestyle there may be things you want to do which cost you now you have time to do them. We have found our fixed costs have stayed roughly the same as although we have higher energy bills due to heating the house during the day which we did not do when working we don't have commuting costs. I walk more locally now so don't use the car for short journeys as I have the time to walk rather than drive to save time.

Our leisure costs have gone up though as has our holiday bills and home improvement budgets. Those are not essential but we saved for early retirement from our mid twenties. We both retired at 58 and have a joint DB income of £34k gross due to increase to £38k gross next year. State pensions will add a further £9k in 2024 and £8.5k in 2026. No idea how this would transpose to someone single.

My suggestion is start a budget spreadsheet. We did this 5 years before retirement and worked out fixed costs like house bills, nice to have costs like running a car, meal out every month, a holiday a year, gym and NT membership and top end budget which is running two cars, three or more holidays a year and meals out every week and money to gift family. What your income and costs are at retirement determines the sort of retirement you will have.

Terron

I don't do detailled budgets. I've always got by by only spending money I have, from the time I was a student withdrawing £20 per week from the bank (no ATM until my second year) and later saving as the first thing I did from my money.



However, I have a good idea of what I need to live on. In 2013 at the age of 64 I lost my job.I used savings and an inheritance to go into BTL, so my monthly income went up in steps.


At first I was on contributory JSA - £300pm and had to top it up from my savings. Once I had my first property I had £400pm and still had to use savings for living.My secon d property took me to £900pm. That paid for day to day living but not annual bills. My third property took me to ~£1500 a month and I was comfortable living on that. Being unemployed I could not get mortgages and was getting tax rebates rather than paying it.I wasn't taking any holidays and was only eating out when I could do so cheaply.



So £18k pa was enough for me to live on comfortably. Maybe £19k now allowing for inflation.

BoxerfanUK

crv1963 wrote: »

Very much spot on. I also have a DB and we're concentrating our efforts on evening up or balancing my wifes' pension level. I too look with a dropped jaw at some figures, but like you I think to myself- well done, either for achieving the earnings or the savings levels needed or both!

Having spent a lot of time on here I have figured most people are aiming for 15-24k pa, which with the people I have met/ know who have retired with no mortgage seems to provide a decent level of lifestyle (to me) and the ability to enjoy themselves.

Our plans include a SIPP pot for Mrs CRV that hopefully will provide 6-8k pa to bridge the gap between her retiring and her SP starting at 67- it will if drawn at that rate be exhausted by then.

I too am amazed at the level of knowledge here and am grateful that others share it freely. I try to encourage others to look at what they want to achieve and plan to do so. My sons have decided that they are going to try to retire before SP (age 21 and 23 respectively) and have followed some of the tips here, a couple of people I work with are planning now (late 20s and mid 30s respectively) and thanks to knowledge gleaned here have started.

Us? We didn't start until my early 50s planning but still aim to retire on a decent (for us) income by the time I'm 58/59- so 3/4 years to go, sooner if we can. So we're living within our 24k pa budget for now, using everything extra to pay down debt- mortgage/ 0% credit cards/ car loan, purchase items to future proof as far as possible and get our home ready for retirement for us.

Hi crv1963. The thing I love about this board is it often makes me think in a different way. We all like to think we know what we are doing (or planning to do) with our finances and then someone on this board comes along and says something and it makes me question the plan I have in my head and then leads me in a different direction, or at least to investigate the possibilities.

As an example, We've been overpaying the mortgage for a few years now but 3 years ago we moved house so the mortgage went up by 50K. I ramped up the OP's and, as our mortgage was with Tesco they allow 20% OP's per year. We'd been on a two year fix @ 1.73% which finished at the end of last month. Last September we hit the 20% OP limit so the OP amount from Sept to March I saved into a separate e-saving account. That, and Feb/March council tax saving gave us £10.5K, so I called Tesco on 1st April and paid that off without penalty as we are now on the SVR.

The point I'm getting at is.....(sorry it's dragging on) After paying off the 10.5K this left us with a mortgage balance of 26K. I was originally planning on paying the remaining 26K balance off at the same time as paying the 10.5K to save the mortgage interest payments. THEN, I was reading another thread about lump sum pension payments and that got me thinking that my wife had over 34K in unused tax relief from 2015/16 that would be lost after 5/4/19.

Long story short. Instead of paying the remaining 26K off the mortgage to save a moderate amount of interest, she made a single contribution of £21,045 into her pension towards the end of March and within days the pension provider added basic rate relief of £5,261 to her pension. She will now claim another £5,261 higher rate relief from HMRC. In addition, for March she Salary Sacrificed down to minimum wage, the result being she has managed to utilize ALL her unused carry forward from 2015/16 and some of 2016/17.

So, instead of saving a piddly amount of interest on the mortgage by paying it off we have (or will have) gained £5,261 x2 + 10% employer NI rebate into her pension for sacrificing down to minimum wage in March. A complete no brainer really, but it took someone else's comments on another thread to make me rethink our own strategy and with the help and guidance from some of the pension & tax gurus on this board they saved us (or gained us ) a small fortune.

Now we are on SVR mortgage the OP's will pay the mortgage off completely in 12 months :j:j

Alice_Holt

I was fortunate to be offered redundancy and an early retirement package at age 51.

Although I hadn't anticipated this (so hadn't tracked my spending or trialed a period living on the equivalent of pension income), I had always contributed the maximum into a pension either though DB added years or AVC's.

I was surprised to find (as a single person) that I could manage well within my occupational pension. Currently this is £18.5k gross (having increased by RPI).
For the first years I calculated a detailed monthly budget / spend spreadsheet, and was careful to contain utility costs by having a water meter, switching energy suppliers, etc
Also surprisingly, my savings / investments increased by more than RPI (despite taking a slightly more conservative approach to asset allocation and fund selection, and using savings to fund house maintenance and car replacement).

My life changed in other ways. After a year or so, I started to volunteer at an advice charity. (Which I found much more satisfying than my previous line of work). This eventually lead to some funded part time paid roles at the charity.

I've now been drawing my state pension for 6 months. I'm still working part time, enjoy the work, get great satisfaction from successful outcomes achieved for our clients, and love working alongside some great colleagues.

Post SPA, I'm very financially comfortable My current income now includes the occupational pension, the state pension, a part-time salary, and a small annuity. This enables me to both fund SIPPS for my nieces, and continue to add to my own savings / investments for the eventuality of possible care costs.