What is a decent income?

Aytre

Hello,

I am in receipt of a police pension which I have been receiving for the last 5 and a half years.

I took it out at 48 and a half and I am now 54.

My take home income from this and a part time job in £2,000 and my bills, at the present time, are about £815.

My savings are 150,000 and my house is worth 470,000.

I am okay at the moment but am concerned that inflation may cause problems for us although people I have spoken to seem to think we are okay. What does anyone else think?

Thanks!

TcpnT

As you are in the enviable position of receiving an index linked public service pension I don't think you have much to be concerned about. You will presumably receive a state pension on top of this eventually, though if you retired at 48 you are unlikely to recieve the maximum possible amount. It would be worth getting your state pension forecase if you have not done so already and buying extra years of necessary to maximise the possible benefit. The state pension is also index linked and so largely protected against the effects of inflation.

Aytre

My part time job will give me a credit each year so should receive full state pension. I am just concerned that bills increasing will cause issues in the next few years

Albermarle

My savings are 150,000

If these are presumably cash savings , the interest achievable will normally lag behind inflation, so in real terms you will have a negative return on them . Having been lucky enough to be able to retire very early , then you hopefully have many years of life left and over those many years, inflation will eat at these savings slowly but surely .
The alternative is to invest them ( or part of them ) which means taking a risk but historically long term will provide growth above inflation. You can invest up to £20K a year in a stocks and shares ISA and you could also start a new pension as well and invest in that as you will get some tax relief as well, depending on how much you are earning currently . The fact you already have a police pension paying out is not an issue as far as I know.

DairyQueen

No offence but all of your retirement income is/will be guaranteed by the UK government and index-linked. It would also seem that your income will more than cover your expenses. How many people do you think can afford to take a PT job from age 48?

This is as good as it gets.

I am speculating that the one risk that you face is the possibility of not being able to supplement your police pension with earned income until SP kicks-in. If you lose your job then you may have to cut your cloth. This is a possibility that private sector workers face throughout their working lives and most do not have a £150k cushion of cash to fall back on when times get tough.

In the overall scheme you are extremely fortunate. I am not surprised that your mates have raised their eyebrows at your concerns. Those without a DB pension (including the majority of younger people) will have nothing resembling this kind of security.

Stop worrying and enjoy your very privileged position.

triplea35

Unless you retired on a medical your pension will not be index linked until you reach age 55. It is however backdated to your date of leaving so you should get a significant increase next birthday.
It has been linked to RPI but recently dropped to the lower CPI so future annual increases are not likely to be as high.

PennyForThem_2

Contribute to a SIPP. I have done that and built up an amount that will help pay for extras when and if I live long enough to need help or go into a nursing home.

If not used, then the SIPP passes to my children.

Thrugelmir

Are you mortgage free?

Brynsam

I'm grateful to anyone who works/has worked in the emergency service (thank you!), but I think it's a waste of time asking strangers who know next to nothing about you and your finances. Why would that give you any reassurance/cause for concern if you aren't listening to people who actually know you, your lifestyle, standard of living etc?

If you're that bothered, work longer hours and save more - but before doing that, try making a detailed spreadsheet recording your income and expenditure for the next year, and see where you could make economies if you feel you have to. It will also show you the areas where high inflation could impact on you.

jamesd

I assume that you have savings that aren't yet in a pension. That makes gross pensions equal to your whole gross part time pay a good move. Even if the only tax relief on the way in is 20% and it's taxed at 20% on the way out there's a 6.25% tax gain. In effect a quarter of the pay ends up with no income tax.

How are your savings invested?

With normal retirement investments - at least half in share funds - and the simplest of income drawdown rules could pay you about 3% of your pot increasing with inflation for life, so £4500 a year.

You probably don't need that because you'll get a state pension of about £8500 a year in today's money. If you wanted to use your pot to pay you that now it'd cost about 12 years of £8500 so about £102000 of your £150000. The remaining £48000 could add about £1440 for life.

Cost of living varies around the country and so do people's experience and expectations. Your income currently seems OK.

A big choice to consider is how much property you need. If you could buy a one bed flat for £120000 and have no mortgage the freed up £350000 could add £10500 a year to your income. Which would make you happier? Maybe something in the middle? Or living in a place with cheaper property to get more for your money?

Kentish_Dave

Decent income? In London about £100k per year. In Redcar about £30k per year.