This is money, how much you need in retirement

Stubod

PennyForThem_2 said:

Which? survey their customers.  Who subscribes to Which but those who are probably better off.  
However for those with DB pensions low inflation is not good news (IMO).  As from experience price increases do not adher to inflation.   
Hence I would advise a hedge against above inflation price increases when you retire......which I am not sure has been taken into consideration.

..very true. OH NHS pension increase for this year 0.5%, but council tax up by 5%, (was 9% past year), electric going up by 28%, (after going up by 10% a few months ago), and Plusnet increase of Cpi (1.5%) +another 4.5%.....so much for index linking!

Malthusian

I see they've still got the video of the poor old duffer who confidently proclaims that he's drawing down 10% of his fund each year yet claims that his fund is still "gaining interest and dividends all the time".

That video was probably shot pre-pandemic (although Which conceals the date of the video so I could be wrong). I wonder how his fund is doing now with those 10%pa withdrawals. *edit* I am probably wrong, it was only this February when I saw that video originally, I thought it was longer ago.

The article also still gets both auto-enrolment and tax relief wrong.

Under the rules of pension auto-enrolment auto-enrolment, a minimum of 8% must be paid into your pension, with 5% coming from you and 3% coming from your employer. 

Someone earning the UK average salary of £28,000 will be saving £186 per month.

This is not correct. Under auto-enrolment rules someone on £28,000 would be getting (£28,000 - £6,240) * 8% = £145 per month, a big difference.

It also says that non-taxpayers get no tax relief which is not true. (It can be if they use a net pay arrangement but not as a general rule.)

SouthCoastBoy

kuratowski said:

bostonerimus said:

So do your own detailed budget and then figure what items will be different in retirement: you might not have a mortgage payment or commuting costs. 

The other data I have observed to test my adjustments is the rate at which my parents have slowed down in their late 70s; and I'm not saying that it will be the same for me, but things like going out in the evenings, travelling more than 100 miles away from home, etc, do not appear to be costs that are likely to persist into very old age.

I think this is the key, retirement spending won't be linear, my 89 year old father in law, goes hardly anywhere and doesn't want to, he gets too tired, however in his 70s he was very active. Generally (not the same for all) I think it is a fair assumption that at 80+ expenditure will decrease. Personally in my plan I have front loaded spending at 3k/mth until 80, then a gradual decrease from there. 

SomeMadeUpName

Malthusian said:

I see they've still got the video of the poor old duffer who confidently proclaims that he's drawing down 10% of his fund each year yet claims that his fund is still "gaining interest and dividends all the time".

That video was probably shot pre-pandemic (although Which conceals the date of the video so I could be wrong). I wonder how his fund is doing now with those 10%pa withdrawals. *edit* I am probably wrong, it was only this February when I saw that video originally, I thought it was longer ago.

The article also still gets both auto-enrolment and tax relief wrong.

Under the rules of pension auto-enrolment auto-enrolment, a minimum of 8% must be paid into your pension, with 5% coming from you and 3% coming from your employer. 

Someone earning the UK average salary of £28,000 will be saving £186 per month.

This is not correct. Under auto-enrolment rules someone on £28,000 would be getting (£28,000 - £6,240) * 8% = £145 per month, a big difference.

It also says that non-taxpayers get no tax relief which is not true. (It can be if they use a net pay arrangement but not as a general rule.)

@Malthusian have you written to the authors? 

I did this for an error (or at least a poorly written explanation) I saw in a web article on BTL CGT and the writer was both grateful and swift in his revision. 

Worth doing for the benefit of others if you spot an error, journalists are only human (by certain definitions anyway). 

Terron

PennyForThem_2 said:

Which? survey their customers.  Who subscribes to Which but those who are probably better off.  
However for those with DB pensions low inflation is not good news (IMO).  As from experience price increases do not adher to inflation.   
Hence I would advise a hedge against above inflation price increases when you retire......which I am not sure has been taken into consideration.

Not all DB pensions are indexed linked. Some give no rises. Some have capped rises. I have one of each. High inflation would be much worse than low.

drumtochty

kuratowski said:

I think Neasy was referring to the way that the thisismoney article quotes the state pension as £8060 per person, which is a bit less than the full new state pension.  Although the which article (on which thisismoney is based) also quotes the average actual state pension for a couple being £16000 (i.e. on average, today's post 2016 retirees do not have sufficient NICs to qualify for the full new state pension), which is close.

Kuratowski, where have you found data to confirm that "on average, today's post 2016 retirees do not have sufficient NICs to qualify for the full new state pension" 

kuratowski

Hello drumtochty, I was quoting the which article, which was linked in an earlier post.  The thisismoney article that kicked off this thread (and to which Neasy referred) was based on the which survey.

Extract copied below

State pension

Once you reach state retirement age, currently 66 for men and women, the government will provide a sizable chunk of your post-retirement money. 

The full level of new state pension (for people qualifying for it on or after 6 April 2016) in 2021-22 is £179.60 per week, but not everyone gets that much. You can find out why in our guide to how much state pension will I get?

In August 2019, the average for a man who qualified after April 2016 was £160.18 a week (£8,329 a year), while the average for a woman was £152.55 (£7,933) a year. Combined, that's around £16,262 a year.

Update: I have now found the original source of these figures: the statistical release from DWP

https://www.gov.uk/government/statistics/dwp-benefits-statistics-february-2020/dwp-benefits-statistical-summary-february-2020

(More recent statistics have subsequently been released by DWP; but that release is the source of the state pension figures being quoted in these articles.)

randompenitent

SomeMadeUpName said:

Malthusian said:

I see they've still got the video of the poor old duffer who confidently proclaims that he's drawing down 10% of his fund each year yet claims that his fund is still "gaining interest and dividends all the time".

@Malthusian have you written to the authors? 

I did this for an error (or at least a poorly written explanation) I saw in a web article on BTL CGT and the writer was both grateful and swift in his revision. 

Worth doing for the benefit of others if you spot an error, journalists are only human (by certain definitions anyway). 

If this is the same video I'm thinking about (and it sounds like it) it's been on the Which? website for quite a while, certainly before this year.
I was so annoyed by it that I wrote to Which? and said I thought it was potentially misleading. I *think* I may have received an acknowledgement (it was a while ago) but no real response and clearly the video is still there.  Disappointing.

marlot

SouthCoastBoy said:

kuratowski said:

bostonerimus said:

So do your own detailed budget and then figure what items will be different in retirement: you might not have a mortgage payment or commuting costs. 

The other data I have observed to test my adjustments is the rate at which my parents have slowed down in their late 70s; and I'm not saying that it will be the same for me, but things like going out in the evenings, travelling more than 100 miles away from home, etc, do not appear to be costs that are likely to persist into very old age.

I think this is the key, retirement spending won't be linear, my 89 year old father in law, goes hardly anywhere and doesn't want to, he gets too tired, however in his 70s he was very active. Generally (not the same for all) I think it is a fair assumption that at 80+ expenditure will decrease. Personally in my plan I have front loaded spending at 3k/mth until 80, then a gradual decrease from there. 

My assumption is more U shaped.  Higher spending in early retirement - travel etc.  Then a wind down, before needing additional funds for care provision.

zagfles

Stubod said:

PennyForThem_2 said:

Which? survey their customers.  Who subscribes to Which but those who are probably better off.  
However for those with DB pensions low inflation is not good news (IMO).  As from experience price increases do not adher to inflation.   
Hence I would advise a hedge against above inflation price increases when you retire......which I am not sure has been taken into consideration.

..very true. OH NHS pension increase for this year 0.5%, but council tax up by 5%, (was 9% past year), electric going up by 28%, (after going up by 10% a few months ago), and Plusnet increase of Cpi (1.5%) +another 4.5%.....so much for index linking!

And my gas price is down 22% from 2 years ago. Some things rise in price, some things fall, some things stay the same. People only whinge about the things that rise in price. Inflation figures reflect the average basket, it may not be the same as everyone's basket but the likelyhood over the long term is that it will even out, your personal inflation rate will likely be above the official figures for some of the time and below for others.