What are you aiming for as an annual pension for you?

ratechaser

camelopardis said:

BLB53 said:

We are all going to have to make big adjustments to lifestyle to avoid climate crisis.

So, no big cruises or Winter skiing trips, no hopping on a plane at the drop of a hat, maybe a modest electric car, low carbon activities such as walking and holidays closer to home.

It will be a virtue to live simply so, for me, I would suggest £12K incl state pension should cover it. Maybe a bit more in London...

Well, I guess you called this correctly, except it came rather sooner and wasn't climate crisis 

Steady now, I'm not quite ready to give up on the winter ski trips, but yes, clearly international travel will be a lot more challenging once the lockdown ends. We are likely going to be the pariahs of Europe and possibly the world due to how bad the impact has been in the UK.

But to bring this back on topic, what the past couple of months has shown is that I'm probably overestimating the pension income that we will need once we do finally give it all up. Right now we're spending less than half what we usually would, what with no travel, no commuting, no daily 'city prices' expenses for food and drink, no eating out, no pubs, and so on. Plus DIYing jobs that I'd previously have paid someone else to do.

Perhaps I've already retired and my employer just hasn't cottoned on yet 

coyrls

ratechaser said:

But to bring this back on topic, what the past couple of months has shown is that I'm probably overestimating the pension income that we will need once we do finally give it all up. Right now we're spending less than half what we usually would, what with no travel, no commuting, no daily 'city prices' expenses for food and drink, no eating out, no pubs, and so on. Plus DIYing jobs that I'd previously have paid someone else to do.

I wouldn't take the last couple of months as a benchmark for what you will spend in retirement, unless you are planning for a particularly miserable one.

ratechaser

coyrls said:

ratechaser said:

But to bring this back on topic, what the past couple of months has shown is that I'm probably overestimating the pension income that we will need once we do finally give it all up. Right now we're spending less than half what we usually would, what with no travel, no commuting, no daily 'city prices' expenses for food and drink, no eating out, no pubs, and so on. Plus DIYing jobs that I'd previously have paid someone else to do.

I wouldn't take the last couple of months as a benchmark for what you will spend in retirement, unless you are planning for a particularly miserable one.

Agreed, several things that I will spend again on. But plenty that will also fall away completely in retirement. Even eating out will be cheaper if we choose to go on the quieter days (with offers) rather than just the Friday/Saturday nights we opt for while working. And of course future travel will be cheaper as it will be outside the school hols.

Point being I've never really been one for budgeting in detail so the last couple of months have been an interesting observation of relatively cheap living. Even if the Waitrose/M&S food bill has gone through the roof!

Thrugelmir

ratechaser said:

Thrugelmir said:

ratechaser said:

Silvertabby said:

When calculating your pensions, please do consider how much the survivor will have to live on when the inevitable happens.

Not so much nowadays ( I hope) but I've heard of far too many cases whereby the husband's single life annuity (taken out because it gave the highest monthly pension on retirement) ceased on his death, leaving the widow on nothing but means tested State benefits.

Very valid point of course, but that said, how many people actually buy an annuity these days? I can understand the attraction of knowing you have a guaranteed income for life, but the rates are hardly attractive...

I'd much rather take on a degree of investment risk and go the drawdown route.

Where are you intending to invest the fixed interest element of your pot to achieve a reasonable return? 

I'm not sure I understand the question. I currently have the majority of my DC pots in lower risk investments, and I will probably rebalance towards equities at some point. Right now though I'm content with performance.

I'll rephrase the question in that case. What's the underlying natural yield on your fixed income holdings? 

ratechaser

Thrugelmir said:

ratechaser said:

Thrugelmir said:

ratechaser said:

Silvertabby said:

When calculating your pensions, please do consider how much the survivor will have to live on when the inevitable happens.

Not so much nowadays ( I hope) but I've heard of far too many cases whereby the husband's single life annuity (taken out because it gave the highest monthly pension on retirement) ceased on his death, leaving the widow on nothing but means tested State benefits.

Very valid point of course, but that said, how many people actually buy an annuity these days? I can understand the attraction of knowing you have a guaranteed income for life, but the rates are hardly attractive...

I'd much rather take on a degree of investment risk and go the drawdown route.

Where are you intending to invest the fixed interest element of your pot to achieve a reasonable return? 

I'm not sure I understand the question. I currently have the majority of my DC pots in lower risk investments, and I will probably rebalance towards equities at some point. Right now though I'm content with performance.

I'll rephrase the question in that case. What's the underlying natural yield on your fixed income holdings? 

Well performance has been just over 10% between the main 2 gilt funds (that account for about 75% of my total DC pension value) since I switched to them last August. Average annualised performance over the past 5 years has been around 10% as well.

The over 15 year fund has done rather better than the index linked one...

True natural yield (which for a gilt fund would really be the average of the underlying gilt holding coupons) is far harder to calculate and isn't even part of the fund factsheets. Looking at the top 10 holdings on the over 15 year fund for example suggests an average coupon  of around 4%, but of course the fund won't have bought in at par value so it's not really useful information, unless I'm missing something?