Is £25k (Which) reasonable or unrealistic for a couple?

Malthusian

Nebulous2 said:

Some issues with the funding premise, it might be an older video, but the guy who said he could draw 10% of his fund each year would be way off, given the figures I see people talking about here.

The Which article is full of nonsense on that front.

I honestly have no idea what he's trying to say, especially as he rambles about his fund "gaining interest and dividends all the time" (not if you're drawing 10% each year it's not). Later on the same guy says "to be resolute in how much you can draw down" and "don't go mad"!

Later on the Which article says you need a fund of £169,175 to generate a total income of £25,000 - by which they mean £11,000 from the drawdown pension, assuming two State Pensions totalling £14,000pa. (Why £14,000pa, when two New State Pensions are £18,000? No idea.) That's 6.5% a year - which is not impossible but very optimistic. The Which article bases this on an assumed growth rate of 3% per year above inflation and costs (it doesn't mention either, but this has to be in real terms or it makes even less sense).  This is a very optimistic assumption, as per the FCA's statutory illustration rates which say that 2% above inflation is a "medium" rate of growth to assume, before costs. (And bear in mind someone drawing down from their pension will experience lower growth than someone in accumulation.)

The information on auto-enrolment contributions is also wrong - it forgets that under auto-enrolment minimums the employer doesn't have to pay contributions on the first £6,240 of earnings. (Many will anyway but the paragraph is about auto-enrolment rules.)

The tax relief section is also wrong. It says that non-taxpayers don't get pension tax relief, which is a serious omission that could lead a non-taxpayer into a bad decision.

Not bad going for a short article.

Quite frightening the amount of nonsense you are allowed to print under the guise of financial journalism. The poor duffer draining his pension fund by 10% every year probably thinks he is a savvy informed investor because he reads Which cover to cover. By the time he wakes up to the fact that it wasn't just a "bad couple of years" and "the rona thingy" causing his fund value to consistently head south, it will be too late.

Nebulous2

whatsthenews said:

Nebulous2 said:

Some odd things in there. Some figures, such as the grocery bill and clothes don’t increase as you move through the bands - where in practice I think they would. People on an essential lifestyle aren’t allowed any alcohol. 

Looking at the video, these people look more like my father’s generation than mine. A reminder perhaps that going part-time now at 58 may still be an exception, rather than common place. 

Some issues with the funding premise, it might be an older video, but the guy who said he could draw 10% of his fund each year would be way off, given the figures I see people talking about here. 

However despite my nit-picking it was reassuring overall. Having just been paid for January, and knowing I only have two months of full-time pay left, I could have an inclination to hit the panic button, but was left feeling it’s all going to be fine. 

when you say "some odd things in here", to what are you referring, because I'd like to look at it!
We would be over the moon with £25k income a year and could live what we would class as a luxury lifestyle as we're surviving on less than half of that ATM. 
£25k per year for a couple might be what Which recommend, but it's simply not possible for many, including some professionals.
In this day and age might also be wise to allow for older kids being at home for longer. 

I'm referring to the comments I made, immediately after the section you quoted. They assume that people on all three income bands spend exactly the same on food and clothing, whereas I think as people have more disposable income they will tend to increase their expenditure on those things. They also assume that people on the lower incomes, the 'essential' one wont spend anything on alcohol, which is very broad-brush. 

I'm in what I would class as a semi-professional role. I've just handed in my notice and I'm looking at low £20,000s gross as an early pension, and having some slight doubts about whether it is enough. I'm planning to take a part-time role, probably two days a week on £15-18k. The two of them will definitely be enough.

I'd be interested in knowing which professional role means people have less than half of the £25k middle rate that Which found....

Nebulous2

Malthusian said:

Nebulous2 said:

Some issues with the funding premise, it might be an older video, but the guy who said he could draw 10% of his fund each year would be way off, given the figures I see people talking about here.

The Which article is full of nonsense on that front.

I honestly have no idea what he's trying to say, especially as he rambles about his fund "gaining interest and dividends all the time" (not if you're drawing 10% each year it's not). Later on the same guy says "to be resolute in how much you can draw down" and "don't go mad"!

Later on the Which article says you need a fund of £169,175 to generate a total income of £25,000 - by which they mean £11,000 from the drawdown pension, assuming two State Pensions totalling £14,000pa. (Why £14,000pa, when two New State Pensions are £18,000? No idea.) That's 6.5% a year - which is not impossible but very optimistic. The Which article bases this on an assumed growth rate of 3% per year above inflation and costs (it doesn't mention either, but this has to be in real terms or it makes even less sense).  This is a very optimistic assumption, as per the FCA's statutory illustration rates which say that 2% above inflation is a "medium" rate of growth to assume, before costs. (And bear in mind someone drawing down from their pension will experience lower growth than someone in accumulation.)

The information on auto-enrolment contributions is also wrong - it forgets that under auto-enrolment minimums the employer doesn't have to pay contributions on the first £6,240 of earnings. (Many will anyway but the paragraph is about auto-enrolment rules.)

The tax relief section is also wrong. It says that non-taxpayers don't get pension tax relief, which is a serious omission that could lead a non-taxpayer into a bad decision.

Not bad going for a short article.

Quite frightening the amount of nonsense you are allowed to print under the guise of financial journalism. The poor duffer draining his pension fund by 10% every year probably thinks he is a savvy informed investor because he reads Which cover to cover. By the time he wakes up to the fact that it wasn't just a "bad couple of years" and "the rona thingy" causing his fund value to consistently head south, it will be too late.

Given most of mine will be an LGPS DB pension, I only have an academic interest in drawdown rates, but I knew 10% was way-off beam. 
Did you share my view that they looked old? 

In addition to that, I was sitting at my desk when I watched it. There was a futon next to me. One small dog was lying on it, on top of an old throw. The other, bigger dog, was at my feet. The whole thing, with their well-groomed houses, felt miles away from where I am. That may just be me being judgemental however. 

Malthusian

Nebulous2 said:

Did you share my view that they looked old? 

Can't see it. The last time inflation was high enough that it was realistic to expect to draw 10% per year, income drawdown didn't exist.

I think it's a toxic combination of a DIYer who has no idea what he is doing and journalists who also have no idea what he is doing, and neither the ability nor inclination to query or challenge what he said. The journo creating the video about "how real retirees have been managing their money" has approached it in the same way that they would a video report on "what's the nation's favourite kind of biscuit".

Sea_Shell

Just seen I've been mentioned in dispatches, up thread!   Thanks.

I'm glad my thread has been of interest.