Retirement Living Standards - what will my pension buy me?

bluenose1

westv wrote: »

Unlike others I am quite impressed with the level of detail provided in the report. You may not agree with their budgets for each category but they explain where they come from and exactly what is included.

Yes, I agree. Whereas I may not pay out for the Funeral plans we have other expenditure such as Everton season tickets which I appreciate is not the norm for most retirees. Season tickets not supporting Everton that is;).
I think it is a really useful exercise for all to write down their anticipated expenditure in retirement, will obviously all be unique but so easy to forget to cost something in.
Think they should have mandatory, employer pension talks/ guidance every few years as I know most people aren't told anything. I know when young may not be interested but the penny drops eventually that we will all get old.

shinytop

bluenose1 wrote: »

Yes, I agree. Whereas I may not pay out for the Funeral plans we have other expenditure such as Everton season tickets which I appreciate is not the norm for most retirees. Season tickets not supporting Everton that is;).
I think it is a really useful exercise for all to write down their anticipated expenditure in retirement, will obviously all be unique but so easy to forget to cost something in.
Think they should have mandatory, employer pension talks/ guidance every few years as I know most people aren't told anything. I know when young may not be interested but the penny drops eventually that we will all get old.

Same here, I think it's a good piece of work. Although the 'essential powertools' category seems to be missing for some reason.

Alice_Holt

Having initially missed this thread, I also started a thread on this topic as I thought the “comfortable” retirement income figure rather high.
It implies a much, much higher than the average salary for a working age person / couple is necessary for them to be "comfortably off" - since costs at that stage in life would include mortgage repayments, pension contributions, commuting to work, and (maybe) bringing up a family. (These costs being excluded from the (net after tax) numbers stated in the report).


I fear that the thought of having to accrue £587,116 as a DC pension pot (detailed on the linked page) , to arrive at this income number might actually dissuade some people from trying.

It would certainly be rather dispiriting on a DC pension with, say, a salary of £30k (a figure above the average earnings number), if advised that a pension pot equal to almost 20 times annual salary was needed to achieve a "comfortable" retirement.

nigelbb

Nebulous2 wrote: »

They assume you're mortgage and rent free. They say that is how most people enter retirement, but you need to add on housing costs if you expect to have them.

What proportion of pensioner households are renting? By no means all pensioners are home owners with mortgage paid off. Rent would make a significant difference to those figures.

nigelbb

Alice_Holt wrote: »

It would certainly be rather dispiriting on a DC pension with, say, a salary of £30k (a figure above the average earnings number), if advised that a pension pot equal to almost 20 times annual salary was needed to achieve a "comfortable" retirement.

I'm not sure that someone on a salary of £30K is ever going to be able to have a pension of £33K which apparently is what is needed to achieve a "comfortable" retirement.

GibbsRule_No3.

I am renting and will be until Idie, so know from friends and sister, who already own their properties that I need/needed more for my retirement than they did. My SP will pay for my rent. Luckily I don’t drive so no car to maintain, don’t smoke or drink either, so no need to factor that in. I do like a holiday or two and will use savings for those in early retirement and hope the savings lasts until I don’t want to take holidays. Other pensions should cover a fairly comfortable retirement for a single person, heating will be the worse cost. Pension should amount to around £20,000 so not really much less than now when working.

Linton

In as much as these things are meaningful, the figures look reasonable to me as ballpark estimates. They indicate that a single person relying solely on State Pension is going to find life very difficult, which is what some people I meet tell me is the case.. A couple on £47500 can certainly live very comfortably. Anything much more than that gets you into the living in luxury position where you can consider several foreign holidays every year, eating out at expensive restaurants whenever you feel like it etc etc without worrying about running out of money.


However each of us is different. The important thing I believe is that retirement should not mean a drastic change in standard of living. In practice this means that you should aim to maintain the same level of available income, minus some of the major expenses that wont apply. However your extra freetime will add to your costs, even if its only things like extra heating. So dont cut too much from your work income when estimating your retirement needs.


Putting more into your pension will mean less available income when at work, but more after retirement and the reverse if you put less. The trick is to get the balance right.

JoeCrystal

nigelbb wrote: »

What proportion of pensioner households are renting? By no means all pensioners are home owners with mortgage paid off. Rent would make a significant difference to those figures.

I will need to have to rewatch the panel video but I believe that the answer she gave to that particular question that 73% of the pensioners do not pay rents/mortgages - ish.

Zero_Sum

nigelbb wrote: »

What proportion of pensioner households are renting? By no means all pensioners are home owners with mortgage paid off. Rent would make a significant difference to those figures.

I think most who rent, the rent will be paid via housing benefit.
Although with the housing situation in London & SE, that could change for a lot of millenials.

Parking_Trouble

Linton wrote: »

In as much as these things are meaningful, the figures look reasonable to me as ballpark estimates. They indicate that a single person relying solely on State Pension is going to find life very difficult, which is what some people I meet tell me is the case.. A couple on £47500 can certainly live very comfortably. Anything much more than that gets you into the living in luxury position where you can consider several foreign holidays every year, eating out at expensive restaurants whenever you feel like it etc etc without worrying about running out of money.


However each of us is different. The important thing I believe is that retirement should not mean a drastic change in standard of living. In practice this means that you should aim to maintain the same level of available income, minus some of the major expenses that wont apply. However your extra freetime will add to your costs, even if its only things like extra heating. So dont cut too much from your work income when estimating your retirement needs.


Putting more into your pension will mean less available income when at work, but more after retirement and the reverse if you put less. The trick is to get the balance right.

Linton pretty hits the spot for me.

My pension is around a third of my work income but because I've seriously saved for retirement over the final years of work we've already got used to easily living on a lower budget.

I only stopped work when I knew the figures stacked up and without a noticeable drop in living standards. I've got 4.5 years until SPA and 3.5 years for a couple more small DB schemes to reduce drawdown on wife's SIPP or my savings. Her SIPP will fund some exotic holidays. Her SPA is another 10 years away so not thinking about that yet.

The key thing is how you want to live in retirement (obvious I know) so you really have to properly plan for it.

Stopping work and scraping by seems pointless to me as is too big a fall in the living standards you are used to. We have made sensible cuts in most of the frivolous spending. Kids have left home so some bills reduced. Saving has stopped.

My spreadsheets tell me we can maintain living standards with a lot less income than we had when I was working.
If we can't remain in 'comfortable' or better then I've made a very big mistake.