How much to live on

hugheskevi

drummersdale said:

I will have completed 40 years in the civil service this year and am looking to take Partial Retirement next year at 59 - I believe the pension (reduced for collecting it a year early) plus salary means I should find my income is not too bad each month for working only a 3 day week

Just to check you are familiar with the policy of abatement, and have planned your reduced working time and/or the amount of pension you plan to draw based around abatement?

blue.peter

drummersdale said:

Using the CS pensions modeller I reckon by the time we are both retired we should have in the region of £35k a year as a couple plus whatever lump sum we have left after paying off the mortgage etc.  So from what I can gather from this forum that should be ok to live on reasonably well.

That depends very much on factors that you haven't mentioned - things like whether you've paid off your mortgage or will have to continue paying it or rent, and what sort of lifestyle you want to lead. If you do own your home outright and don't live extravagently, £35k/year for two people sounds pretty decent. If you want to test this, there are a couple of things that you could do (and I apologise if you've already thought of these):

1. If you want to maintain your pre-retirement standard of living post-retirement, you could go through your bank statements for the last couple of years or so and see how much you've actually spent. There's no need for a detailed analysis at this stage, just an annual total. You can then compare this with your expected annual income, net of tax.
   
2. You could try actually living on your expected net income for a while (the longer, the better) and see how it goes. (Although I actually retired as a result of redundancy, I was always planning to retire early, and was fortunate in that I'd been doing exactly this for a while before the axe fell. I know that a former colleague - who's a bit younger than me - and her husband were doing the same when I last saw her in late 2019.)

drummersdale said:

 I often think back to when I first joined the CS as an 18 year old when pension was just something you saw deducted from your wages...

You had pension contributions deducted from your pay 40 years ago? I started my working life with a few years in the civil service, and didn't pay any pension contributions then. I've just checked my last few payslips. (Yes, I do still have them!) I left the civil service in September 1981. Even then, I knew the value of a pension. I was already dreaming of retirement. Sadly, I don't have any civil service pension: the preservation period wasn't reduced from five years to two until the mid-80s.

drummersdale

hugheskevi said:

drummersdale said:

I will have completed 40 years in the civil service this year and am looking to take Partial Retirement next year at 59 - I believe the pension (reduced for collecting it a year early) plus salary means I should find my income is not too bad each month for working only a 3 day week

Just to check you are familiar with the policy of abatement, and have planned your reduced working time and/or the amount of pension you plan to draw based around abatement?

Hi hugheskevi - yes I have used the partial retirement calculator on the CS Pension site to assess when abatement might apply

drummersdale

blue.peter said:

drummersdale said:

Using the CS pensions modeller I reckon by the time we are both retired we should have in the region of £35k a year as a couple plus whatever lump sum we have left after paying off the mortgage etc.  So from what I can gather from this forum that should be ok to live on reasonably well.

That depends very much on factors that you haven't mentioned - things like whether you've paid off your mortgage or will have to continue paying it or rent, and what sort of lifestyle you want to lead. If you do own your home outright and don't live extravagently, £35k/year for two people sounds pretty decent. If you want to test this, there are a couple of things that you could do (and I apologise if you've already thought of these):

1. If you want to maintain your pre-retirement standard of living post-retirement, you could go through your bank statements for the last couple of years or so and see how much you've actually spent. There's no need for a detailed analysis at this stage, just an annual total. You can then compare this with your expected annual income, net of tax.
   
2. You could try actually living on your expected net income for a while (the longer, the better) and see how it goes. (Although I actually retired as a result of redundancy, I was always planning to retire early, and was fortunate in that I'd been doing exactly this for a while before the axe fell. I know that a former colleague - who's a bit younger than me - and her husband were doing the same when I last saw her in late 2019.)

drummersdale said:

 I often think back to when I first joined the CS as an 18 year old when pension was just something you saw deducted from your wages...

You had pension contributions deducted from your pay 40 years ago? I started my working life with a few years in the civil service, and didn't pay any pension contributions then. I've just checked my last few payslips. (Yes, I do still have them!) I left the civil service in September 1981. Even then, I knew the value of a pension. I was already dreaming of retirement. Sadly, I don't have any civil service pension: the preservation period wasn't reduced from five years to two until the mid-80s.

Hi Blue Peter - yes the idea would be to use an element of the lump sum to pay off what's left of the mortgage by then.  In terms of living extravagantly, I wouldn't say that we do particularly at the moment and if lockdown has taught me anything it is that some of our previous expenditure was probably a bit unwarranted (clothes, gadgets, etc) and not an actual necessity so like many others have spent less than pre-Covid and actually been able to save more than we did before.  I joined in October 1981 - - alas I don't have my payslips - so perhaps it's the fuzziness of time that I assumed I would have been contributing to my pension back then - either way I will have 40+ years of something coming to me when I retire, wherever it's come from!

Time4T_Accounts

littlemissbossy said:

This thread is so interesting and informative.... and less scary than the pensions board!
I'd like to add my details and any advice, opinions or observations would be great.

He has decided that he wants to take a 25% tax free lump sum, £20,000 of that will go on a new car and the rest into our savings.  We then think that we will take the remainder as a fixed term annuity for 15 years (until he is (70).  From using the Money Advice Service calculator will think that will generate between £600 - £700 per month.  We have contacted his pension companies to ask for quotes and also another quote from other providers.

I'm worried that I've got a hole in my plan that I can't see ?

Thanks for reading and any feedback, especially to point out any errors I've made, which I really think I may have.

I think that inflation might be your enemy with that fixed annuity. If we look at the effect of inflation at 2% per annum (ok, so that’s higher than recent times, but it’s the Bank of England’s target), then £700 per month in 15 years’ time will buy you the same as £530 does today.  You’d need £923 in 15 years’ time to buy what £700 does today.

We all have our own inflation rate, depending on what we spend our money on, but one thing that I think we can count on going up a lot more than 2% each year is our Council Tax bill!  Fuel prices are back on the increase, after a period of stability. People on modest incomes spend a greater proportion of their income on these sorts of bills - and so our personal rates of inflation might in fact be higher than 2%.

Good luck with your plans!

chubsta

Thanks very much for this thread, i have read through the whole thing (whilst at work!!) and it has been a real eye opener - as many have said the main threads on the forum seem to relate to people with huge wages/savings/pension pots which can give the impression you need a huge amount to retire, whereas many here are doing very well on much less.

I am currently hoping to retire at 58, which would give me a pension of about £21000 PA and a lump sum of around £48,000 - i dont have any savings at the moment as am trying to pay my mortgage off early so will have no debts once that is gone. The things that is running through my mind is that if i wait until i am 59 then the pension will be around £24,000/52,000, or if i wait until 60 then about £25000/54000, so a couple more years will make a big difference. However, i have worked shifts since i was 18 and they are literally killing me, nights in particular are so hard to get through and i hate to think of the damage it is doing to my body so would really like to go as early as i can.

My monthly expenditure, minus everything that i wont be paying out when i retire, including food, petrol etc comes to between 900 and 1100 per month at the moment (we have two dogs and they cost around £250 per month to keep in the luxury they expect...), everything else i earn goes on the mortgage. Once the mortgage is paid off at the end of this year i intend to live on what i would get if i retire at 58 and save the rest - this will hopefully show me that an income of around £1600 per month will be easily enough to live on until i get the state pension at 67.

Until reading this thread i was a little worried i wouldnt have enough to go early but now feel that i will actually be pretty well off...

Madrick

Sounds like a good plan
And you're so correct on some of the posts on the pension forum, (those with pots approaching £1,000,000 worried if they will survive) .

Out of interest, how far off 58 are you and is it just your good self (and dogs with rather expensive tastes) living at home?
It's quite a jump in annual pension from ages 58 to 59. That extra £3k pa would cover the dogs, if you could stick it out for another year.
Although I know how you feel and am ready to quit myself as I edge towards 60, but can't decide to stick it out for another year or not. 🤔

Presume this is a DB pension rather than workplace or personal one. So will receive an annual increase to hopefully keep track with inflation. 

I think I will be in a similar position to your good self, around £17-18k after tax from various pensions and cash savings. After the best part of a year on furlough, with only 80% salary, after paying into pension through salary sacrifice, I've been surviving comfortably on £1500 per month, with loads left each month to squirrel away. 
Good luck

203846930

@chubsta do you need the money or do you need to get out of there with you health & soul intact?

Sounds like you have it all planned except when to finish work, the money incentive is a big thing and as big a jump as I get each year and that is without the extra lump sum but for me the time away from the workplace came first in any calculations that I did.
As always it comes down to the want/need struggle.

(don't tell Duncan about how much you spend on your dogs, he drools enough as it is)

helensbiggestfan

Just read your post Chubsta....

Whilst I understand your rationale for working a bit longer to increase your pension I think you really need to think about your health.   Sorry to be blunt but there are no pockets in shrouds.....if your job is affecting your health as badly as you say you maybe need to think long and hard.  

What does your doctor say............

Maybe ask for a check up, a sort of personal MOT and see just where you are at health wise. Getting those vitals checked may help you reach a decision.  

Can you remain working with your employer and maybe do something less harmful, say quit working shifts and switch to more regular hours, or maybe work fewer hours.  

Sorry if I'm overstepping the mark but I genuinely don't think it's worth playing Russian Roulette with your health for the sake of increasing your pension by a couple of grand a year.  

Sadly, having lost my husband before he even got to retire, I speak from personal experience. 😟

littlemissbossy

Steve_PL_too said:

littlemissbossy said:

This thread is so interesting and informative.... and less scary than the pensions board!
I'd like to add my details and any advice, opinions or observations would be great.

He has decided that he wants to take a 25% tax free lump sum, £20,000 of that will go on a new car and the rest into our savings.  We then think that we will take the remainder as a fixed term annuity for 15 years (until he is (70).  From using the Money Advice Service calculator will think that will generate between £600 - £700 per month.  We have contacted his pension companies to ask for quotes and also another quote from other providers.

I'm worried that I've got a hole in my plan that I can't see ?

Thanks for reading and any feedback, especially to point out any errors I've made, which I really think I may have.

I think that inflation might be your enemy with that fixed annuity. If we look at the effect of inflation at 2% per annum (ok, so that’s higher than recent times, but it’s the Bank of England’s target), then £700 per month in 15 years’ time will buy you the same as £530 does today.  You’d need £923 in 15 years’ time to buy what £700 does today.

We all have our own inflation rate, depending on what we spend our money on, but one thing that I think we can count on going up a lot more than 2% each year is our Council Tax bill!  Fuel prices are back on the increase, after a period of stability. People on modest incomes spend a greater proportion of their income on these sorts of bills - and so our personal rates of inflation might in fact be higher than 2%.

Good luck with your plans!

Thanks for taking the time to reply, definitely something to consider.