What number are you aiming for - solely DC pot

[Deleted User]

Mistermeaner said:

Deleted_User said:

That’s not “reality”. That’s a random prediction.  Predictions are not worth all that much. Even less when there is no period of time specified or whether its in real terms. 

its not random ; a number of studies have shown that a safe withdrawal rate from a pot of money during retirement is 3-4% of the original starting value. This allows for increasing your withdrawal each year by inflation and the pot lasting about 30 years ish
Its as good a rule of thumb as any
Look at it another way... a 10% withdrawal rate would more or less guarantee running out of money in around 11-15 years ish

Sorry, I misunderstood your original comment. Thought  you were predicting future returns.

Albermarle

. Or at least I was until the government whipped away my annual allowance to almost nothing, which is effectively a huge tax hike. Yes, it's a good kind of problem to have, I've done well in recent years. But I am in a very insecure profession, so that won't always be the case and you now get unfairly punished by the system for for earning money in large bursts (which is precisely what pensions were supposed to provide - a system of smoothing earnings over time).

The annual allowance is £40K pa , which is approx 60% more than the average annual wage . Also you can carry forward unused allowance for three years , which should help to cope with an irregular income.

Before you get too worried about being 'unfairly punished'; the UK has one of the most generous  regimes in the world when it comes to tax sheltered savings .

Amateurretiree

I’m a retired nurse, took early retirement at 55. My DB pension is around 14000 pa. I hope to live to about 80 and keep myself in good health. I thank my lucky stars every day.

michaels

Amateurretiree said:

I’m a retired nurse, took early retirement at 55. My DB pension is around 14000 pa. I hope to live to about 80 and keep myself in good health. I thank my lucky stars every day.

Single life annuity age 55, lpi indexed of 14k would cost 850k from a DC pension pot, or assuming you had worked for 35 years your pot would be worth about 24k for each year you had worked.

You are right to think yourself lucky.

princeofpounds

Albermarle said:

. Or at least I was until the government whipped away my annual allowance to almost nothing, which is effectively a huge tax hike. Yes, it's a good kind of problem to have, I've done well in recent years. But I am in a very insecure profession, so that won't always be the case and you now get unfairly punished by the system for for earning money in large bursts (which is precisely what pensions were supposed to provide - a system of smoothing earnings over time).

The annual allowance is £40K pa , which is approx 60% more than the average annual wage . Also you can carry forward unused allowance for three years , which should help to cope with an irregular income.

Before you get too worried about being 'unfairly punished'; the UK has one of the most generous  regimes in the world when it comes to tax sheltered savings .

No, it’s not 40k if you’re hit by the taper. I suppose the allowance carry-forward will help if I manage to earn another similar bonus after some normal years, but it didn’t help this time around.

I’m not too ‘worried’ - thanks for the sarcastic concern  - but just because I am a high earner recently (and believe me this level isn’t normal) doesn’t make this treatment fair. 

If I earned exactly the same amount over two years I would be able to put 80k into my pension. Because it happened in one year, I can only put in ~20k. Given the rate of earnings we are talking about, I am being taxed ~27k extra because of this anomaly. To be clear, this isn’t a rich vs. poor issue; you shouldn’t try to make it one. Fairness should be a universal principle, it’s not the same thing as charity.

As for the UK retirement savings framework being generous... yeah it’s not bad. But it’s dramatically unfair in several key respects. 

It’s far too biased in favour of DB pensions with its fantasy LTA allowance calculation, essentially awarding DB pensioners the right to build up twice the pension pot they would be allowed under a DC system. That’s a million quid of lifetime tax avoidance granted to the highest DB earners right there.

It’s also far too biased in favour of older people, who have been allowed to build up pension pots much larger than anyone younger will ever be permitted to. You might as well just slap a special tax on younger people to sustain boomer middle class lifestyles in retirement. 

barnstar2077

"What number are you aiming for - solely DC pot"

Half the posts are about DB pensions.

Dandytf

barnstar2077 said:

"What number are you aiming for - solely DC pot"

Half the posts are about DB pensions.

Including my earlier post -unintentionally.
though I constantly think of DB+DC as my DC is only a few years, in progress.  

Zorillo

If I had 120k in my pot at 40, and contributed £12k a year (increasing with inflation each year), invested in 100% global equities for the majority of the intervening period and then tapered to 60% in the last five years, what sort of ballpark could I hope to arrive at aged 65?

El_Torro

Zorillo said:

If I had 120k in my pot at 40, and contributed £12k a year (increasing with inflation each year), invested in 100% global equities for the majority of the intervening period and then tapered to 60% in the last five years, what sort of ballpark could I hope to arrive at aged 65?

Short answer: We don't know

Longer answer: It would be good for you to have a look at a Pension Calculator (HL have a decent one, for example https://www.hl.co.uk/pensions/pension-calculator) and play around with the numbers. 

Bear in mind that a lot of Pension Calculators (including the HL one) take a theoretical inflation figure into account (HL uses 2.5%) and quote you numbers in today's money, rather than what the value of the pot will be in 20 years time (or whatever timeframe you use).

Don't forget to use the Advanced Options, which lets you adjust the annual growth rate.

Zorillo

Yes I tried that on a couple of sites and had answers ranging from £275k and £1m, neither of which seemed right. 

That link suggests £600k which is roughly what I am aiming for in today's money I think. 

Thanks.