The Double Pension Effect

Spreadsheetman

OldMusicGuy wrote: »

The big difference today is that far fewer people have a DB company pension that will provide a healthy level of risk-free, inflation linked income. So the "double pension" doesn't exist for many people.

LV published research recently that showed the average pension pot for people aged 45-54 was £71,342. Not enough to fund early retirement unless they have other income sources.

That's spot-on re. DB pensions. Quite a lot on this board still appear to have them, but that is reducing as time goes on and more DB schemes close. I never got a sniff at one in my career in the private sector.

That average £71k would probably yield £2.5k-ish per annum so a pensioner would have circa £10k inc SP. That is not much unless the person was living a very spartan life.

redux

lisyloo wrote: »

Is that his money or theirs? (They May still be getting pensions themselves)

I make the payments for my MIL but it’s her money from the sale of the marital home.

If that’s purely his money then he must have an enormous pension after tax.

He sold the family business to the foreign partner for presumably a few million quid.

But my point isn't really that some people are richer than most of us, but that a calculation that maybe there is just about enough to retire on can be confounded by care costs for oneself or other family.

lisyloo

redux wrote: »

He sold the family business to the foreign partner for presumably a few million quid.

But my point isn't really that some people are richer than most of us, but that a calculation that maybe there is just about enough to retire on can be confounded by care costs for oneself or other family.

I don’t think most people can consider their parents care costs, which increase and have an unknown end date.

We considered a top up but because we couldn’t commit to an increasing, unknwon term for multiple parents we could not consider it.

lisyloo

AnotherJoe wrote: »

I think it's pointless trying to cater for that sort of eventuality. You'd wreck the rest of your life trying to save and invest enough, you'd have to save enough not just for parents but yourself and partner as well. Save enough for a decent retirement for yourselves which is hard enough for most.hope that if the moment arrives parents house will cater for their care, for a while at least.

You can’t sell a house whilst one of them is living in it though.
You could take a loan against equity but it would be expensive or you could consider downsizing if the other is capable of making the move but sometimes they are not and might be reliant on the adaptions they’ve already made (like a stairlift for example).

We would not have been able to sell or downsize in our case. IT was already a small flat with a custom disabled bathroom.

But agree most people can’t cater for parents care costs especially if a couple (like us) have 4 parents between them.

bostonerimus

I'm lucky to have a DB pension and as a UK expat working in the US for the last 30 years I had to pay into the US Social Security and I took the opportunity to keep paying UK voluntary national Insurance. I'm currently receiving payments from my works DB plan, at 62 I will be able to get my US Social Security and then at 67 my UK state pension should kick in. So by realising in my mid 20s that I could contribute to essentially two state pensions I now have a large surplus of guaranteed income in retirement.

There was a time when people could rely on 3 sources of retirement income: a DB pension; state pension; and savings. Now the DB pension has mostly disappeared or people have been tempted by high CETVs to take the risk of converting it to a pot of cash that can go up and down in value. So the safe feeling of having two guaranteed sources of income from a DB and SP is becoming less common.

bostonerimus

redux wrote: »

He sold the family business to the foreign partner for presumably a few million quid.

But my point isn't really that some people are richer than most of us, but that a calculation that maybe there is just about enough to retire on can be confounded by care costs for oneself or other family.

I agree. The provision of elderly care in the UK has really been messed up since my grand parents spend their last few years in an old aged home back in the 1970s that I think was paid for by either the NHS or the local authority...or a combination. My parents or grand parents never had any worry about the cost.

So either we need to provide elder care on something like the NHS and everyone pays a bit of tax through their entire life to pay for it or we have regulated private insurance policies to pay for it. I'm in the US and in my mid 30's I bough a "long term care" policy through my employer with a big US insurance company, The premium is $28/month and the benefit is a lifetime max of $360k to wards residential or doctor require in home care.

AnotherJoe

bostonerimus wrote: »

I agree. The provision of elderly care in the UK has really been messed up since my grand parents spend their last few years in an old aged home back in the 1970s that I think was paid for by either the NHS or the local authority...or a combination. My parents or grand parents never had any worry about the cost.

So either we need to provide elder care on something like the NHS and everyone pays a bit of tax through their entire life to pay for it or we have regulated private insurance policies to pay for it. I'm in the US and in my mid 30's I bough a "long term care" policy through my employer with a big US insurance company, The premium is $28/month and the benefit is a lifetime max of $360k to wards residential or doctor require in home care.

I dont know what it costs in the US Boston, but over here that would pay for maybe 4 years in a home.

lisyloo

AnotherJoe wrote: »

I dont know what it costs in the US Boston, but over here that would pay for maybe 4 years in a home.

That depends on where you are (London being higher) but that’s quite an expensive home considering min income is £160 per week and very often AA which is £86 approx.

I’ve just worked out that would last my 7.5 years in my MILS case of £200 pension, £86 AA, £925 fees and £25 personal spend (and yes I did convert to gbp).

The average stay in residential/nursing care is 26 months.
The majority won’t last 4 years but there are a few outliers.
I’d say that would cover the majority outside of London.

It difficult to come up with an absolute guarantee and that would be a trade-off in insurance premiums. Would be nice if the insurers would give an unlimited guarantee.

p00hsticks

bostonerimus wrote: »

So either we need to provide elder care on something like the NHS and everyone pays a bit of tax through their entire life to pay for it or we have regulated private insurance policies to pay for it.

And/or we make more efforts to encourage and support children in looking after their elderly parents whereever possible, as used to happen much more in the past.

I appreciate in some cases the medical needs are too severe, and in other cases where the parents aren't that elderly or had children late the children may not have reached retirement age themselves and are still holding down full time jobs, but it's something I recognise I may have to take on if and when my parents start struggling to cope.

blisteringblue

This is very much what my plans are. I've done well with CETV and have a nice pot, this will be heavily used from 55 to 65 when I have a small DB and then State Pension at 67 which will in effect be a 12K pa backstop when the DC pot isn't being as heavily drained.

I'm not planning on taking much more than safe drawdown anyway, but I'm also not planning on leaving the DC to anybody, its for our retirement spending, as I have told my parents to spend everything they have now.