How much to live on

Frogletina

otb666 said:

basically i am not gonna cut myself short for parents when parents have 10 times savings to us As there is no guarantee of any inheritances in todays world

According to your post you have 30k in savings and your parents have 100k,  which does not equate to 10 times as much.

You have said you have income of 23k per annum including a DB. I doubt signing on in 5 to 10 years would yield any more income.

I'm confused by your previous post too.

drummersdale

Have just received my pension quote from My CSP - c£26,500 per annum with a minimum £74,500 lump sum up to a max of £131,000 should I decide to commute any. Mix of Classic and Alpha.  Due to start partial retirement 2.5 days in August - which should bring in £26,500 in salary.  Hope to work for another 3-4 years until wife is ready to retire - she should get around £18k per annum plus her lump sum.  Won’t get state pension for another 6 years (in my case) wife longer than that. Alpha pension should accrue a little more over the next few years and next April’s CPI uplift should be in the region of 5-6% (10% expected rate in September 22 but pro-rated). No NI on Pension so if my numbers are right should be on the same as I am now - or perhaps even a little more - but for 2.5 days. Hopefully my calculations are correct 🤞Not sure of the impact of the McCloud judgement and won’t know anyway until October 23 onwards so will worry about it then!

BooBoo77

drummersdale said:

Have just received my pension quote from My CSP - c£26,500 per annum with a minimum £74,500 lump sum up to a max of £131,000 should I decide to commute any. Mix of Classic and Alpha.  Due to start partial retirement 2.5 days in August - which should bring in £26,500 in salary.  Hope to work for another 3-4 years until wife is ready to retire - she should get around £18k per annum plus her lump sum.  Won’t get state pension for another 6 years (in my case) wife longer than that. Alpha pension should accrue a little more over the next few years and next April’s CPI uplift should be in the region of 5-6% (10% expected rate in September 22 but pro-rated). No NI on Pension so if my numbers are right should be on the same as I am now - or perhaps even a little more - but for 2.5 days. Hopefully my calculations are correct 🤞Not sure of the impact of the McCloud judgement and won’t know anyway until October 23 onwards so will worry about it then!

Great to hear you’ve got your quote now. Hope the figures are roughly what you thought.  I’m due to partially retire at the start of September and am waiting with baited breath for my quote. When I put in my figures to the Portal it says one figure and then when I click the button for actual current earnings or some such wording, it says considerably more. All for going at the same date, at 57 which is what I’ll be in September so I’m really keen to know which is the true figure. Like you I think the lack of paying out NI on the pension element should mean I have more in my pocket for working less days and the link to CPI should hopefully help. I’m a single parent with children just hitting teenage years so am hoping to have less work stress so I can deal with the teenage stress! Finding this board really helpful to work out what might be possible after partial retirement. At the moment I’m probably going to have to work on til SPA but at least it will be just 3 days a week. 

drummersdale

BooBoo77 said:

drummersdale said:

Have just received my pension quote from My CSP - c£26,500 per annum with a minimum £74,500 lump sum up to a max of £131,000 should I decide to commute any. Mix of Classic and Alpha.  Due to start partial retirement 2.5 days in August - which should bring in £26,500 in salary.  Hope to work for another 3-4 years until wife is ready to retire - she should get around £18k per annum plus her lump sum.  Won’t get state pension for another 6 years (in my case) wife longer than that. Alpha pension should accrue a little more over the next few years and next April’s CPI uplift should be in the region of 5-6% (10% expected rate in September 22 but pro-rated). No NI on Pension so if my numbers are right should be on the same as I am now - or perhaps even a little more - but for 2.5 days. Hopefully my calculations are correct 🤞Not sure of the impact of the McCloud judgement and won’t know anyway until October 23 onwards so will worry about it then!

Great to hear you’ve got your quote now. Hope the figures are roughly what you thought.  I’m due to partially retire at the start of September and am waiting with baited breath for my quote. When I put in my figures to the Portal it says one figure and then when I click the button for actual current earnings or some such wording, it says considerably more. All for going at the same date, at 57 which is what I’ll be in September so I’m really keen to know which is the true figure. Like you I think the lack of paying out NI on the pension element should mean I have more in my pocket for working less days and the link to CPI should hopefully help. I’m a single parent with children just hitting teenage years so am hoping to have less work stress so I can deal with the teenage stress! Finding this board really helpful to work out what might be possible after partial retirement. At the moment I’m probably going to have to work on til SPA but at least it will be just 3 days a week. 

Hi @BooBoo77 I had the same issue with the online calculator so I downloaded an excel one as it seemed easier to tweak and the figures were more what I expected.  Im
going to spend a week or two crunching the numbers to get the right permutation before I sign and then it’s no looking back! But yes the thought of working less time for more or less the same money is a big attraction! Hope yours goes through without any issues and you get what you’re expecting! 

Kim1965

I have some public sector db pension so please do not think im getting at any posters.
 The governments liabity to public sector(unfunded) pensions is 2 trillion pounds, roughly the same as the national debt.
 Are the current final salary and now career average pensions going to be replaced by dc pensions

hugheskevi

Kim1965 said:

I have some public sector db pension so please do not think im getting at any posters.
 The governments liabity to public sector(unfunded) pensions is 2 trillion pounds, roughly the same as the national debt.
 Are the current final salary and now career average pensions going to be replaced by dc pensions

The annual cost of paying unfunded public service pensions is about £50 billion.

Annual income from member and employer pension contributions is £48 billion. Although employer contributions are just money moving around the public sector.

If you change pensions over to DC the Exchequer still has to meet the £50 billion, but loses all the contribution income which now leaves the Exchequer and goes to a private pension provider.

So any change to DC would be a long-term project which would create a short and medium term funding pressure. Governments tend not to do very unpopular things which would only have a benefit in the very long run and costs money for many years to come. Although if a Government were to view it as a populist project stoking divisions from which it thinks it may strengthen its core support that may change things in favour of reform.

Kim1965

hugheskevi said:

Kim1965 said:

I have some public sector db pension so please do not think im getting at any posters.
 The governments liabity to public sector(unfunded) pensions is 2 trillion pounds, roughly the same as the national debt.
 Are the current final salary and now career average pensions going to be replaced by dc pensions

The annual cost of paying unfunded public service pensions is about £50 billion.

Annual income from member and employer pension contributions is £48 billion. Although employer contributions are just money moving around the public sector.

If you change pensions over to DC the Exchequer still has to meet the £50 billion, but loses all the contribution income which now leaves the Exchequer and goes to a private pension provider.

So any change to DC would be a long-term project which would create a short and medium term funding pressure. Governments tend not to do very unpopular things which would only have a benefit in the very long run and costs money for many years to come. Although if a Government were to view it as a populist project stoking divisions from which it thinks it may strengthen its core support that may change things in favour of reform.

Seems odd that almost all private db schemes are deemed unaffordable and yet government db schemes are still open to new members. 

QrizB

Kim1965 said:

Seems odd that almost all private db schemes are deemed unaffordable and yet government db schemes are still open to new members. 

Private DB schemes need to have enough assets today to fund their liabilities.

Public DC schemes don't.

hugheskevi

Kim1965 said:

Seems odd that almost all private db schemes are deemed unaffordable and yet government db schemes are still open to new members. 

It is all about accountancy and cash-flow.

An employer sponsoring a private sector DB scheme has to make good any shortfall, typically with a 10-15 year deficit repayment plan. The liabilities can be huge relative to the size of the employer, so they may not be well-placed to stand behind the scheme. They also have to use discount rates to calculate liabilities based on their investments, and the cost of pensions is included in accounts based on a discount rate calculated from high-quality corporate bonds.

Whereas the Government decides what discount rate it uses, and although liabilities calculated based on high-quality corporate bonds are reported in accounts they get very little attention. For example, the NHS pension cost on an accountancy basis is 62.2% of pensionable earnings, whilst the combined employer and employee contributions are 30.4% and it is the contribution rate which usually gets all the headlines. Most of the difference between the accountancy cost and contribution rate is due to the discount rate.

The private sector employer has to put real money into the pension scheme to ensure it is fully funded. The Government just pays out liabilities as they arise. That isn't necessarily bad, and may be more efficient as it avoids the cost and volatility of managing huge funds. But it can incentivise the Government to imbalance remuneration in favour of pensions - which cost money many years in the future - to keep pay low, which is an immediate cost. Private sector employers do not face this issue - whether they increase pay or pensions they have to pay for it immediately.

When a private sector employer closes a DB scheme they usually save money by replacing the scheme with a less generous DC scheme. Even if they contribute the same % they still reduce risk. So financially they have an incentive to move away from DB pensions and it is just a question of labour relations. Compare that to the Government would have to find up to an extra £50bn each year to move away from DB pensions, with savings arising in the very long run.

So it isn't so much about whether they are affordable or not (although in a literal assessment they are - they are a small % of GDP and the Exchequer can stand behind them, although that does not mean they are appropriate - the Exchequer can afford pretty much any single thing, but that doesn't mean it should fund everything). Rather, it is about solving the problem of how to continue to pay existing pensioners whilst not having the contribution income from member and employer contributions in the short to medium term. Pensions are not part of GDP and National Debt, whereas any borrowing to cover that shortfall would be.

GunJack

The way a DB pension is treated in the company accounts can be a major driver for private sector companies to move away from DB to DC. It's happening with ours at the moment - even though the DB is well funded and in surplus, they are closing it from next April and moving to a DC going forward because the DB "costs" 3 times the DC as far as the accounts are concerned, which makes the company look worse in it's overall financial outlook.

A very poor reason as far as the workforce is concerned, but the board and management are looking up & outwards rather than inwards. At least the deferred DB will continue to revalue at CPI+1.5% in deferment...