Miniscule pension, mid 40s, should I increase it?

[Deleted User]

My total pension pot is miniscule. It currently stands at about 50k as at last statement nearly a year ago.

So it's fair to say I'm on course for a very frugal retirement.

In other news, I've just had a small pay rise at work. I'm thinking of asking HR to direct that pay increase straight to my pension.

On one hand, I want to get used to a lower income, so its less of a shock if I make retirement age.

On the other hand, with my pension being so I miniscule anyway, part of me thinks I should just live for today.

Thoughts please? 

2nd_time_buyer

50k is probably above average for mid 40s. 

Bear in mind that the state pension can be just enough to survive on (£9100 per year), any additional will directly improve your quality of life.

Which suggests that a drawdown pot of £169,175 is sufficient for a 'comfortable' £25k year pension (including state pension). So you are well on the way.

ErinGoBrath

2nd_time_buyer said:

50k is probably above average for mid 40s. 

Bear in mind that the state pension can be just enough to survive on (£9100 per year), any additional will directly improve your quality of life.

Which suggests that a drawdown pot of £169,175 is sufficient for a 'comfortable' £25k year pension (including state pension). So you are well on the way.

For an extra £16,000 pa on top of the state pension you need a fund nearer £400,000 assuming the much touted 4% 'safe' withdrawal rate. A fund of £169,175 would only get you about £7,000 pa. Fine if you can live on just £16,000 a year including the state pension.

2nd_time_buyer

Sorry, yes you are right. The Which figure for the pot assumes a couple both claiming state pension. 

The "comfortable" pension for an individual is £19k per year. 

ErinGoBrath

2nd_time_buyer said:

Sorry, yes you are right. The Which figure assume a couple both claiming state pension. 

The "comfortable" pension for an individual is £19k pretty year. 

Wouldnt call that comfortable myself to be honest. Basic, maybe.

Billy_B_North

Beardybaldy said:

My total pension pot is miniscule. It currently stands at about 50k as at last statement nearly a year ago.

So it's fair to say I'm on course for a very frugal retirement.

In other news, I've just had a small pay rise at work. I'm thinking of asking HR to direct that pay increase straight to my pension.

On one hand, I want to get used to a lower income, so its less of a shock if I make retirement age.

On the other hand, with my pension being so I miniscule anyway, part of me thinks I should just live for today.

Thoughts please? 

It sounds like it’d be worth you exploring whether you can find a job which pays more.

You mention on another thread that you are just about to buy a property to rent out, which is strange if you are struggling to fund your pension appropriately. Would it not be better to take advantage of the tax breaks and put say £100k of that money into a private pension, taking advantage of this year and previous years’ allowances?

Billy_B_North

2nd_time_buyer said:

50k is probably above average for mid 40s. 

Bear in mind that the state pension can be just enough to survive on (£9100 per year), any additional will directly improve your quality of life.

Which suggests that a drawdown pot of £169,175 is sufficient for a 'comfortable' £25k year pension (including state pension). So you are well on the way.

How are you calculating that you can comfortably draw down £16,000 per year from a £170,000 pot?

A more realistic figure is £5,000 per year.

2nd_time_buyer

ErinGoBrath said:

2nd_time_buyer said:

Sorry, yes you are right. The Which figure assume a couple both claiming state pension. 

The "comfortable" pension for an individual is £19k pretty year. 

Wouldnt call that comfortable myself to be honest. Basic, maybe.

The average UK income for pensioners is £15,080 net per year. From: 

https://www.unbiased.co.uk/life/pensions-retirement/what-is-the-average-uk-retirement-income

It then goes on to say...

"Average UK earnings – before tax or housing costs – are £30,420. After income tax, National Insurance and 5 per cent pension contributions (the recommended minimum), this is reduced to £23,111. On the face of it, this is about 50 per cent more than average retirement income.

However, this does not factor in housing costs. The average UK mortgage payment is £669 per month or £8,028 per year. If this is deducted from the average net income, the result is £15,083."

Which coincidentally is exactly the same as the average pensioner income. To me at least, £30k seems sufficient for a comfortable working income.

Albermarle

Regarding Which , as mentioned above there is some misunderstandings .

What they actually say is that a couple can drawdown £11K pa from a £170K pot ( not £16K) 
However as said above this is far too optimistic and not sure how they arrived at that .

Billy_B_North

2nd_time_buyer said:

ErinGoBrath said:

2nd_time_buyer said:

Sorry, yes you are right. The Which figure assume a couple both claiming state pension. 

The "comfortable" pension for an individual is £19k pretty year. 

Wouldnt call that comfortable myself to be honest. Basic, maybe.

The average UK income for pensioners is £15,080 net per year. From: 

https://www.unbiased.co.uk/life/pensions-retirement/what-is-the-average-uk-retirement-income

It then goes on to say...

"Average UK earnings – before tax or housing costs – are £30,420. After income tax, National Insurance and 5 per cent pension contributions (the recommended minimum), this is reduced to £23,111. On the face of it, this is about 50 per cent more than average retirement income.

However, this does not factor in housing costs. The average UK mortgage payment is £669 per month or £8,028 per year. If this is deducted from the average net income, the result is £15,083."

Which coincidentally is exactly the same as the average pensioner income. To me at least, £30k seems sufficient for a comfortable working income.

It seems woefully inadequate to me. No nice sports cars, no posh hotels, only economy class flights etc.

ErinGoBrath

Billy_B_North said:

2nd_time_buyer said:

ErinGoBrath said:

2nd_time_buyer said:

Sorry, yes you are right. The Which figure assume a couple both claiming state pension. 

The "comfortable" pension for an individual is £19k pretty year. 

Wouldnt call that comfortable myself to be honest. Basic, maybe.

The average UK income for pensioners is £15,080 net per year. From: 

https://www.unbiased.co.uk/life/pensions-retirement/what-is-the-average-uk-retirement-income

It then goes on to say...

"Average UK earnings – before tax or housing costs – are £30,420. After income tax, National Insurance and 5 per cent pension contributions (the recommended minimum), this is reduced to £23,111. On the face of it, this is about 50 per cent more than average retirement income.

However, this does not factor in housing costs. The average UK mortgage payment is £669 per month or £8,028 per year. If this is deducted from the average net income, the result is £15,083."

Which coincidentally is exactly the same as the average pensioner income. To me at least, £30k seems sufficient for a comfortable working income.

It seems woefully inadequate to me. No nice sports cars, no posh hotels, only economy class flights etc.

Quite. More like Vauxhall Corsas and tents and no flights. No thanks.