What number are you aiming for - solely DC pot

Pile_o_stone

If I’m understanding this correctly, it’s not feasible to expect more than 4% return on investments but this thread seems to be full of pension pot millionaires. Unless MSE is full of lottery winners or people earning £+200k a year, then how did these people acquire DC pensions of £1m plus without huge gains?

coyrls

Return on investment is different from a sustainable drawdown rate that is initially calculated as a percentage of the total portfolio and then increased by inflation each year, regardless of the underlying performance of the portfolio.

Prism

Pile_o_stone said:

If I’m understanding this correctly, it’s not feasible to expect more than 4% return on investments but this thread seems to be full of pension pot millionaires. Unless MSE is full of lottery winners or people earning £+200k a year, then how did these people acquire DC pensions of £1m plus without huge gains?

I have seen between 7-8% rather than 4% over the last 25 years or so, and a chunk of that was in a old fashioned high fee (by todays standards) default multi asset fund. Going forwards, who knows.

Pile_o_stone

Prism said:

Pile_o_stone said:

If I’m understanding this correctly, it’s not feasible to expect more than 4% return on investments but this thread seems to be full of pension pot millionaires. Unless MSE is full of lottery winners or people earning £+200k a year, then how did these people acquire DC pensions of £1m plus without huge gains?

I have seen between 7-8% rather than 4% over the last 25 years or so, and a chunk of that was in a old fashioned high fee (by todays standards) default multi asset fund. Going forwards, who knows.

Investors on forums always seem to make huge gains, always seem to be out if the market just before a corona crash or a banking crash and always seem to be millionaires by the time they’re in their 40s. It’s amazing really, I just wish I knew their secret.

cfw1994

Prism said:

Pile_o_stone said:

If I’m understanding this correctly, it’s not feasible to expect more than 4% return on investments but this thread seems to be full of pension pot millionaires. Unless MSE is full of lottery winners or people earning £+200k a year, then how did these people acquire DC pensions of £1m plus without huge gains?

I have seen between 7-8% rather than 4% over the last 25 years or so, and a chunk of that was in a old fashioned high fee (by todays standards) default multi asset fund. Going forwards, who knows.

I've not got numbers going back that far....but checking the fund sheets of the ones I've used for many years, the past 10 years annualise out between 7.6% & 14% - annual management fee (the only fees on this workplace Aviva scheme) are all below 0.33%.  
Of course I have recently swapped to a couple of Baillie Gifford funds - similar areas, higher charge (1%) but the numbers on those are 14.2% & 21.5% (American).....
OF COURSE things could depress for some time - no-one has that crystal ball, right?  - but overall, I think hoping for an average north of 5% isn't unreasonable for the next 10 years.   
My hope would be to exceed 10%, but who knows!

georgehere

P-O-S
there's probably a few ways that large pots have been accumulated that are not necessarily all about large gains. Over the years, it has been possible to put quite large sums into pensions so there will be a number of folk who have been able to invest inherited sums into pension pots. Another possibility is that folk have converted sizeable DB pensions to lump sums, that they now consider their pension 'pot'. A DB of £25k/annum would convert potentially to a £1m+ pot.
And then there will be disciplined savers, with strong investment returns. Couples with combined pots ... etc
Of course overall, you are right, these numbers are well above average, but not necessarily driven by astute investment.

kinger101

Pile_o_stone said:

Prism said:

Pile_o_stone said:

If I’m understanding this correctly, it’s not feasible to expect more than 4% return on investments but this thread seems to be full of pension pot millionaires. Unless MSE is full of lottery winners or people earning £+200k a year, then how did these people acquire DC pensions of £1m plus without huge gains?

I have seen between 7-8% rather than 4% over the last 25 years or so, and a chunk of that was in a old fashioned high fee (by todays standards) default multi asset fund. Going forwards, who knows.

Investors on forums always seem to make huge gains, always seem to be out if the market just before a corona crash or a banking crash and always seem to be millionaires by the time they’re in their 40s. It’s amazing really, I just wish I knew their secret.

I suspect there's a bias on these forums to people who've made a point of saving early and heavily for retirement.  Someone with a good job able to put £1000 a month away for over 3 decades could be hitting the £1M figure.  So would someone who came into capital via inheritance and diverted it into a pension via salary sacrifice.  I'll be happy with half that figure, though SP+DP will be more than half my requirement.

I think most posters on here are genuine, but I've definitely come across blatant BSers.

Mistermeaner

Pile_o_stone said:

If I’m understanding this correctly, it’s not feasible to expect more than 4% return on investments but this thread seems to be full of pension pot millionaires. Unless MSE is full of lottery winners or people earning £+200k a year, then how did these people acquire DC pensions of £1m plus without huge gains?

I can only answer for my self - this is not bragging just answering a question;
from age 25-32 i started a graduate job earning 21k and enjoyed modest promotion finishing on 35k. I saved the default minimum into company dc scheme and left that job with about 35k in my pension pot
At around age 32 i took a new job with a starting salary of 44k, that due to historic db schemes paid 21% as employer contributions into dc scheme so started accumulating money faster. I enjoyed rapid promotion and by 36 was earning about 100k (depending on bonuses) .
Despite all the pay rises my life style barely changed (except for a bigger house that's full of kids) and the last 5years I've paid in 200k in total using carry forward 
Today I'm age 40 and my pot is worth 350k last time I looked which feels pretty comfortable given my age and the fact I'm still paying in 40k a year for the foreseeable future due to my expenditure being low - nobody got wealthy spending all their salary !

We've put as much as we can in my partner's pension which now sits at 100k plus we have some isas and Lisa's which puts our collective total at 500k 
That's half a million at ages 35 and 40 
We've certainly enjoyed some good stock market growth post 2008 and I've earned quite well but not for most of my career and in fact taken a pay cut recently for a less stressful job. Partner doesn't work current -  our joint income pre tax is now 85k

The key for us has been controlling spending - don't swell your lifestyle as your career progresses -  especially not on !!!!!! like fancy cars clothes and watches 

Our plan is to loosen the purse strings only when we are comfortable retirement is covered rather than trying to catch up near the end

Sleep at night !

shinytop

Pile_o_stone said:

If I’m understanding this correctly, it’s not feasible to expect more than 4% return on investments but this thread seems to be full of pension pot millionaires. Unless MSE is full of lottery winners or people earning £+200k a year, then how did these people acquire DC pensions of £1m plus without huge gains?

Having a reasonably well paid job, not having expensive tastes, starting a family and buying a house early and (the most important one) not getting divorced.  But not everyone on here is loaded, and £25k p.a. with a paid for and very energy efficient house isn't at all bad. 

 

Pile_o_stone

georgehere said:

Another possibility is that folk have converted sizeable DB pensions to lump sums, that they now consider their pension 'pot'. A DB of £25k/annum would convert potentially to a £1m+ pot.

I agree with this, and I have pals who work in the NHS and other public sector jobs with huge DB pension pots. I just thought that this thread was going to be about the unfortunates like myself who missed out on that gravy train and have had to make do with the paltry DC pensions with quite derisory employer contributions (5-20%DC  instead of 30 to 40%DB) and being at the mercy of market crashes and ‘golden boy’ share dealers instead of guaranteed returns.  I thought it would show the stark difference between the type of retirement a (taxpayer funded) public sector  worker is going to look forward to opposed that which a private sector worker will have. Instead everyone here seems to have a £1m D.C. pension on a par with DB ones. All I can say is that this has not been my experience, nor that of my ‘real-life’ peers.