How much to live on

Albermarle

louby40 said:

Hi thanks for your advice. Pension advice from the Weslyan is free. Because my teachers pension is a combination of final salary  and career average schemes, when you access the calculators on the TPS website (of which I'm extremely familiar with) it can't always calculate what the pension amount would be if I took it early. It's a bit of a pain with the website. The Weslyan advisor have some sort of  program that can work it out for you. 

I did have more savings but during my chemo treatment and time off sick  my salary went down to half pay so I did have to dip into that.I'm now working on building that back up.

Ok it was not clear from your original post about how much you knew about the TPS. Many people are oblivious to their pension situation.
It sounds like you are in a much better place than you were a few years ago, which is great.
Although you have given your financial position in some detail, of course the other side of the coin is your current and planned future expenditure. You need a good handle on that to be able to judge how early you can retire.

louby40

I did work that out a few years ago - pre covid and pre cost of living rise and my breakdown is as follows

Gas/electric £1200
Mobile £300
TV licence £156
Council tax £1500
water £360
Car tax £160
Broadband £360
House Insurance £100
car insurance £250
food £250 a month / £3000 
TV eg Netflix and Apple Music (both of which is could get rid of ) £400 = approx £7800

Of course there is also
house maintenance 
car bills
clothes
petrol
gifts
days out
holidays

So I reckon I'm looking at £10-11k per year plus more if I wanted more extravagant holidays.
Im used to paying a LOT for holidays as I have no choice to take them other than in the expensive school holidays.

Cant wait until I can get a cheap flight somewhere and not pay silly money. 

Albermarle

I did work that out a few years ago - pre covid and pre cost of living rise and my breakdown is as follows

Your expenditure is quite low, but I did work that out a few years ago - pre covid and pre cost of living rise and my breakdown is as follows, but you need to update it , especially if you are looking ahead. Maybe add 15% to everything except the energy bill, which should be doubled.

With holidays, probably in reality you will not be far off needing £20K pa before tax by next year.

hugheskevi

I had cancer in 2021 and ongoing treatment until March 2022 & having a cancer diagnosis has  definitely changed my mindset. My teaching job has also been changed because of a separate ongoing additional health worry

Be aware of generous ill-health benefits within the Teachers' Pension Scheme, should you become unable to do your job in the future - noting in particular that these only apply to active members.

My current teachers pension statement says if I retire at 60 I get £31k lump sum and £17k a year pension.

You appear to be affected by the 2015 Remedy, so this is only one of the two options you will have at retirement. 

I don't want to work until I'm 60!

Be aware you do not have to take your pension when you retire - you can leave employment and have a deferred pension award which you can then commence at age 60 (or earlier if desired) to avoid (reduce) the actuarial reduction applied for early access.

My SP of £9k a year will be paid when I'm 67.

You have had a lot of contracted-out employment, so have you checked your State Pension forecast to confirm if you have a complete record, or if not, when you will reach full qualification?

My current dilemma is whether to sell my house and downsize (it's a 4 bed town house) so that I can pay off my mortgage OR stay in the house (which I love and is just how I want it) and then downsize when my remaining mortgage is £30k and use my lump sum to pay it off. I would then have a decent chunk of equity to invest and live off along with my teachers pension.

Why would you need a £30K lump sum from your pension to pay off the mortgage if downsizing? Wouldn't the difference in cost between the purchase price of a new house and the sale price of the existing house cover this? So no particular need to involve pension at all?

I would have thought that the consideration would be more around how long you would be able to live off the released equity before commencing your pension, thus reducing the actuarial reduction applied for early access.

It may even be desirable to keep the mortgage in place on a new property, thus extending the time you are able to live from non-pension assets, and so further reducing the actuarial reduction applied, before commencing the pension (and you could then use the lump sum to clear the remaining mortgage if you wished).

I have an appointment with a Weslyan pension advisor in April to find out how much I'd get if I retired earlier.

They are very unlikely to be able to give you a full picture including impact of 2015 Remedy on your pension, so you will only get a partial picture, at best.

GunJack

Albermarle said:

I am not an expert on the TPS, but with most of these types of schemes you can take them early, with a reduced lump sum and annual pension. You do not really lose out, you just get a lower pension for more years. 

I've made this point on many occasions... it's a DB pension, the total amount taken out over it's lifetime is really NOT relevant. If the reduced pension for taking it early is too low to live on, it makes early retirement a non-starter and so yes you DO lose out (on being able to retire earlier)..  

louby40

GunJack very true.
If my pension is £11k if I retire at 55 I can't afford to do that. The  Weslyan can give me a better estimate than the TPS website can as their calculators don't take into account being in both schemes.

louby40

Looking at my bank statements and doing a bit of calculating last night,  it looks like my monthly outgoings would be £1k per month so I need a £12-13k minimum pension to scrape by. 

Obviously more would be nice. 

Checking my state pension via the Gateway if I work for another year it says I get a full pension at 67.

If I did stop teaching I'd get a part time job doing something (not teaching) no idea what but would like to do something totally different and be able to forget about it at the end of the day. It would give me a bit of extra income, an ongoing routine and add a bit of human contact. 

Then at least I could see if I could survive on a much lower income. 

This board is a revelation and I've lived reading how people are content and coping on a realistic pension.

Kim1965

louby40 said:

GunJack very true.
If my pension is £11k if I retire at 55 I can't afford to do that. The  Weslyan can give me a better estimate than the TPS website can as their calculators don't take into account being in both schemes.

Are your health issues affecting your abilty to work? Can you apply for ill health retirement? Potentially you may be able to get the pension paid unreduced or even enhanced?
 

Albermarle

louby40 said:

Looking at my bank statements and doing a bit of calculating last night,  it looks like my monthly outgoings would be £1k per month so I need a £12-13k minimum pension to scrape by. 

Obviously more would be nice. 

Checking my state pension via the Gateway if I work for another year it says I get a full pension at 67.

If I did stop teaching I'd get a part time job doing something (not teaching) no idea what but would like to do something totally different and be able to forget about it at the end of the day. It would give me a bit of extra income, an ongoing routine and add a bit of human contact. 

Then at least I could see if I could survive on a much lower income. 

This board is a revelation and I've lived reading how people are content and coping on a realistic pension.

Do not know if you have seem this very long thread. The OP is in a different position to you but there is a lot of insight in living on a low budget and many comments on the wisdom of doing so, when you could afford more by working longer.
It's time to start digging up those Squirrelled Nuts!!!! — MoneySavingExpert Forum

DT2001

I have taken quite a few weeks to read through this thread and can understand the sentiment expressed by a few about the pensions board. While it seems to have many high earning IT professionals it does also have some excellent threads from those on much lower budgets. There is a wealth of knowledge to be tapped but also occasionally a clash of views! 

Turning to the OP’s question I hope my 3 generations overview will be of some use.

My mother was widowed at 69. My father was still working as they had suffered a few financial set backs (redundancy and business failure following property collapse). They owned a bungalow in the south east. My mother’s income was about £8k p.a. from 2000 - 2015 backed up by a lump sum of £50k that she had inherited. At the beginning I said she should do whatever she wanted as we could utilise equity release later on. She was definitely on the downslope of the pensioners U spending pattern. When her dog died she didn’t get another, she stopped driving and restricted time away to the U.K. By the time she downsized to a retirement flat in 2017 she still had £25k of her inheritance left. Then her expenditure started to increase with increasing care requirements and finally she spent about 15 months in a nursing home (average just over £1k per week) - all self funded. She did what she wanted and downsized to meet her housing requirements (rather than raise money).

Our children were all given £3600 gross to start pensions by MIL when or soon after they were born. The eldest has just finished his apprenticeship and has started paying into a self employed pension. The other children are aware of their funds and see annual statements and are already aware of options which will be available when starting employment, post Uni. It seems a general awareness of finance is taught at school so starting off in the right way is more likely now.

Compared to many on here we are disorganised in our approach to pensions and retirement.
Lockdown meant I was able to work out a rough ‘basics’ budget however with 2 children at Uni and 2 others at home I know it is at best an estimate (£1500 p.m.). We have both been self employed (me very much p/t as primarily a stay at home Dad) for 25+ years. We live well within our means and the excess (above basics) is then used to fund travel and investments. Our income varies quite a lot so my retirement plans quite happily incorporate a variable income. My OH enjoys her varied work and will continue as long as she wants to. She has 2 small DBs which will pay £4K p.a. in 2 years time. I have a DB pension of £9k which changes in 2 years to GMP and then half will not increase and half by CPI max 2.5%. I took this early (without fully understanding the consequences at GMP age) however the income, bar one year, has been tax free and the fund was showing a shortfall at the time. We both have entitlement to full SPA (me in 3 years and OH in 9). I have set aside funds to bridge the gap between now and OH taking SP. This pot reduces whilst OH continues to work and gets added to investments. I intend to take natural income from our investments and any surplus will be paid to the children on a regular basis to take advantage of the IHT relief. I hope to build a very energy efficient house  to drop costs and provide a healthy house. I expect, if we live long enough, to see a typical U shaped spending pattern and am planning on that basis.