Top up pension or invest elsewhere?

Cazzledazzle

I am 47. I want to retire at 60. I have worked out that my old teacher pension works out at £10,296 per annum at 60. I would like to have a pension income of around £12,000. Please tell me if you think that is a naive amount? I don't have a mortgage.

When the state pension kicks in at 67, I should have a pension worth £20,016, including the state pension. I think this will be enough for me to live off. I don't have a mortgage.

I was looking into adding to my current NEST pension which is a minimal amount. My main aim is to get the 60 to 67 amount up to £12,000. I am not too bothered about upping the 67 plus amount. This means i am lucking to save around £14,000 for that time period from 60 to 67. If I add around £150 a month to my NEST account I can get my pension at 60 up to £12,000 a year over those 7 years (this includes dividing the lump sum by 7). However, this may needlessly be topping up the pension at aged £67 plus and I was wondering if there would of be a better way of investing this £150 a month to essentially accrue at least £14,000 over the next 13 years. I could achieve this by simply saving £90 a month over the next 13 years, but then maybe I should just push myself to invest £150 a month with NEST as that would top up my income including 67 onwards as well?

AnotherJoe

Can you live on £12k? That seems very low to me. From memory thats roughly what i spend on "essentials" eg utilities insurance food council tax clothes etc. it wouldnt leave anything for going out holidays hobbies.
You can test it by putting all income above £12k away and see how you get on with just £1k a month after tax to live on.

Yes, investing in another pension such as NEST to get the tax benefits since you could then spend that later without paying tax would be a good plan a lot of people do that.

lisyloo

£12k seems to low to me.
Personally I’d say £16k minimum, but it is personal.
For example if you own your own home and have no mortgage to pay then that makes a big difference.
I dont think you’d have any holidays or be going out much on £12k which to many people is pretty miserable.
You need to do some more detailed calculations for yourself as it varies between people and across regions.

Cazzledazzle

I don't know if you can live of £12000 a year, maybe I would carry on working a bit until 67 to supplement it? I have got to balance it all against my current needs. To me aiming for £12000 is something I can afford

Cazzledazzle

To make it to £16000 a year I would be looking for an extra £6000 a year over 7 years, so that would be £42000 I need to find over the next 13 years. That is £3231 a year, £270 a month. I wonder if I can do this?

MallyGirl

pension contributions give 20% tax relief so it is worth contributing what you can - maybe you will be able to get more than £12k for the years 60-67.

nigelbb

MallyGirl wrote: »

pension contributions give 20% tax relief so it is worth contributing what you can - maybe you will be able to get more than £12k for the years 60-67.

Pension contributions get tax relief at your highest income tax rate so could be 40% or 45% (41% or 46% if you live in Scotland).

MallyGirl

true but given the OP's figures basic rate tax seemed most likely

barnstar2077

I could easily live on 12k a year. I will have no mortgage or car when I retire and enjoy walking and cheap days out with friends. Most people on here will say 12k is too low, but it really depends on your expenses and life style. No one else knows that apart from you.

AnotherJoe

Cazzledazzle wrote: »

To make it to £16000 a year I would be looking for an extra £6000 a year over 7 years, so that would be £42000 I need to find over the next 13 years. That is £3231 a year, £270 a month. I wonder if I can do this?

If you can't, then by definition £12k won't be livable on because your current take home must surely be more than £12k plus 12 x £270 indeed it's probably more than £16k plus £12 x £270.

crv1963

Cazzledazzle wrote: »

I don't know if you can live of £12000 a year, maybe I would carry on working a bit until 67 to supplement it? I have got to balance it all against my current needs. To me aiming for £12000 is something I can afford

I think you are looking at this from an odd angle. I suggest you look at the what is your number thread. Work out what income needs you will have, we calculated three levels of retirement-

1) Base level- what income we need to pay all the bills, run a car and have annual holiday in EU plus current hobbies.
2) Mid level- as above running two cars, 2 EU holidays, odd long haul holiday explore new hobbies.
3) Luxury level- all the above, plus several long haul holidays of a month or more per year, able to help the next generation in a meaningful way.

We decided that we would aim for the luxury level, but be content if we ended up landing in the mid level. To achieve this we decided that I would work past my scheme notional retirement age (to 58) until I could gain no further benefit from working for current employer in pension building terms. We save monthly into a SIPP for Mrs CRV in addition to her NEST employer scheme.

We freed monies to add to her SIPP by looking at expenditure, doing the MSE things like changing utilities/ insurances etc. We also made sure we are living a life now as well as saving, if this means me working until I'm a little older than 58 then so be it. Our aim is to have enough to draw her SIPP to provide her an income until her SP starts so if it goes to zero that is not a problem to us.

Get a target income to aim for that you are happy with, not what your mate needs or others think is needed.