How much to live on

blue.peter

Wednesday2000 said:

That is the highest amount of pension he can get, £30,000 a year pension, and it reduces when he reaches state pension age.

It's worth double-checking (if you haven't already done so) that the increased pension does reduce at the actual state pension age applicable. Because the SPA is increasing and some schemes haven't yet caught up, there can sometimes be a gap. I was offered this - what my DB scheme described as the "levelling option". When I looked into it, I found that the date on which the pension would reduce was my 65th birthday. However, my SPA is 66, so this would have left me with a shortfall in my income between my 65th and 66th birthdays.

Wednesday2000 said:

All the other men he works with who have retired have taken the option with the lump sum as they have kids, mortgages, debts, but I said we don't need the lump sum option as we don't have anything to pay off. That is right isn't it? 

There are other possible reasons for wanting to take a lump sum than those that you list, but it's certainly possible that you won't want it. Not everyone does. I didn't take one, for example: I had no need of it. I suggest that you think carefully before making a decision. Are there any other possible reasons why you might want a lump sum? Moving house, new car, anything else? Do you have other savings that would cover whatever you might want or need?

[Deleted User]

Wednesday2000, are saying that the DB pension will be £30000 when your husband is 55? If that is the case that is a very reasonable amount for a couple to live on. After tax it is about £2200 a month. Have you done a budget looking at expenditure and income? Do you have savings to supplement income for a few years?
 
Would your husband still be receiving PIP after retirement? You also have £50000 in an AVC you can use. Why does his DB pension reduce at state pension age and if so so by how much?

Are you certain that you couldn't manage on that income? Just saying as a large number of people do manage post retirement on less, as well as some families. If you have read through this thread you will also find examples of others managing a good retirement on less.

There may need to be some compromises if your husband wants to retire to improve his quality of life (and indeed yours) especially in light of his past illness.

Best wishes with your plans.

Wednesday2000

Thanks, I just checked and his pension reduces in 2037 when he is 67 years old so that is okay.:)

You are right as we may want to move house again. I keep going back and forth on that, but we will have the AVCs and that goes up by about £6,000 a year so by 2026 we should have around £65,000 in them.

We did have to spend £10,000 on our roof this year as we bought an old house by the sea last year. That did shake me and I definitely would want us to have a cash buffer if something like that happened again after retirement.

I would like a totally modern new flat rather than an old house as I feel like it would be a much better way of living as my mobility will probably only get worse from now on and I hate gardening with a passion. We only got a house with a garden as we had two little dogs, but one of them passed away just as we offered on this house. My other dog is 12 this year so we wouldn't need outside space. I would rather go out to the beach, park or the woods rather than have a garden.

Albermarle

Wednesday2000 said:

I mean the amount he would get if he retired in 2026 would be £30,000 a year. He has four options when I have run the pension projections including two options with a lump sum, but I read that option 3 is the best one. That is the highest amount of pension he can get, £30,000 a year pension, and it reduces when he reaches state pension age. That won't be a problem that it reduces as he has over 35 years to qualify to get the full state pension. I checked it yesterday and it is something like £203 a week he will be getting.

All the other men he works with who have retired have taken the option with the lump sum as they have kids, mortgages, debts, but I said we don't need the lump sum option as we don't have anything to pay off. That is right isn't it? 

Whether to take a lump sum and a reduced pension, is a personal decision that depends on a number of factors.
As already said many have need of the lump sum. Another important factor is the ratio between the lump sum and the lost pension. Less than 15:1 is seen as poor, 25:1 is very good, Typically a private sector DB will be 20 to 22.
You should take into account that the lump sum is tax free as well
It is also affected by how good the pension is in terms of inflationary increases, spousal benefit etc.

In reality most take the lump sum, simply because they see the Pound Notes in their eyes, even if it is not such a good idea.
A smaller number ( like you and me) prefer to have the full pension/guaranteed income.

Albermarle

Why does his DB pension reduce at state pension age and if so so by how much?

This is not usual, but not unheard of either with private sector DB schemes. These schemes all have their own rules, within the basic legal framework. It is not a bad idea really if you get more before the SP, and less afterwards.

Sometimes it is an option, rather than written in stone.

Wednesday2000

[Deleted User] said:

Wednesday2000, are saying that the DB pension will be £30000 when your husband is 55? If that is the case that is a very reasonable amount for a couple to live on. After tax it is about £2200 a month. Have you done a budget looking at expenditure and income? Do you have savings to supplement income for a years?
 
Would your husband still be receiving PIP after retirement? You also have £50000 in an AVC you can use. Why does his DB pension reduce at state pension age and if so so by how much?

Are you certain that you couldn't manage on that income? Just saying a large number of people do post retirement as well as some families. If you have thread through this thread you will also find examples of others managing a good retirement on less.

There may need to be some compromises if your husband wants to retire to improve his quality of life (and indeed yours) especially in light of his past illness.

Best wishes with your plans.

Oh sorry, I missed your post. I keep going up and down stairs today to two different computers!

I get PIP, not my husband, but he is having tests now which depending on the results might mean he can claim PIP too.

As we had quite a lot of expensive work done to our house our savings have taken a hit. We are waiting to see if our insurance covers the work that needs doing, but the workman only came round this morning so he has to produce a report.

I'm not why his pension reduces at  state pension age, just that it does on most of the four options.

We probably could cut our spending, but I think we would prefer for him to wait until 55 to retire when I know we could definitely afford it then and we might not have our pets etc...This all depends on the results of our health checks as if it is bad news I am tempted to just reduce our spending drastically so he could leave work sooner. It is ironic that we both are waiting to see what the doctors say at the moment. I just checked my x-ray results online again and they are still not back at my GP yet!

Wednesday2000

Albermarle said:

Whether to take a lump sum and a reduced pension, is a personal decision that depends on a number of factors.
As already said many have need of the lump sum. Another important factor is the ratio between the lump sum and the lost pension. Less than 15:1 is seen as poor, 25:1 is very good, Typically a private sector DB will be 20 to 22.
You should take into account that the lump sum is tax free as well
It is also affected by how good the pension is in terms of inflationary increases, spousal benefit etc.

In reality most take the lump sum, simply because they see the Pound Notes in their eyes, even if it is not such a good idea.
A smaller number ( like you and me) prefer to have the full pension/guaranteed income.

I will check the ratio, thanks. He is with TFL and I know they are generally seen as good.

blue.peter

Wednesday2000 said:

Thanks, I just checked and his pension reduces in 2037 when he is 67 years old so that is okay.:)

Good, but do keep an eye on it. There's still a risk that his SPA will increase further before he gets there. I wouldn't expect this to happen to him after 2027 (current SPA - 10 years), but anything's possible.

2Scratters

[Deleted User] said:

2Scratters. The 770 and 197 figures you mentioned earlier, are they monthly or annually? Are they DB pensions? If they are DB they are a very useful provision to have and not exactly ‘really small’. If they are DC are you running the pots down or is that a sustainable rate?

Sorry for not being very clear, yes they are monthly figures and are both DB pensions. Only running down DH's pension pot. I think my terminology of really small is that it is doable for the next 2 years and that things will have to be watched in spending terms was probably where I was heading. Perhaps quite small would be more appropriate?

2 Scratters xx

Albermarle

2Scratters said:

[Deleted User] said:

2Scratters. The 770 and 197 figures you mentioned earlier, are they monthly or annually? Are they DB pensions? If they are DB they are a very useful provision to have and not exactly ‘really small’. If they are DC are you running the pots down or is that a sustainable rate?

Sorry for not being very clear, yes they are monthly figures and are both DB pensions. Only running down DH's pension pot. I think my terminology of really small is that it is doable for the next 2 years and that things will have to be watched in spending terms was probably where I was heading. Perhaps quite small would be more appropriate?

2 Scratters xx

£11.6K pa is clearly not a lot on its own , but if you add two state pensions to it, then things should be not too bad, especially as all the income will be guaranteed ( no sweating about investments etc ) and partly/fully increasing with. inflation.
You might think it small, but if I said how much it would cost to buy an annuity that would pay that annual income linked to inflation, you would probably be quite surprised.

It would be about a Quarter of a Million Pounds .....

It seems a lot, but the inflation linking really pushes up the cost, over a period of potentially 20 to 30 years.