Actual Spending in Retirement against expectations

OldScientist

Albermarle said:

 Given the mean UK pension pot is about £70k (and that must be a well skewed distribution) most people are going to be a long way off this.

As an 'old scientist ' you will know that statistics can produce any figure you want .

I have seen many figures quoted for average pension pots from £25K to > £100K 

Do you include a notional figure for DB pensions ( including all those civil service/teachers/NHS/local government ones )?

Do you include all pensions including auto enrolment ones that have only been going a few months , or a snapshot at 55? or 65 ?

Etc Etc

True... I would have been severely 'told off' by my first boss for neglecting sources and details...

The figure of 70k came from a (now removed) study mentioned on https://www.actuarialpost.co.uk/article/highest-average-pension-pot-is-less-than-90-000-9269.htm that included data from the 15k customers of an IFA. A more comprehensive study is reported by https://www.fca.org.uk/data/retirement-income-market-data - yes this only includes DC plans that have been accessed.

UK government statistics on retirement income can be found at https://www.gov.uk/government/statistics/pensioners-incomes-series-financial-year-2019-to-2020/pensioners-incomes-series-financial-year-2019-to-2020  There are distributions of income from various sources on that page (Section 5), and overall retirement incomes are compared to household incomes towards the end of the page in Section 7.

Relating the minimal, moderate, and comfortable tags to the percentiles of current pensioners at those income levels might help manage expectations.

DT2001

Sea_Shell said:

jamesd said:

Sea_Shell said:

So then how do you judge "fair"?   Split each side of the family 50/50 and then divvy up between them (so 2 get £1500 each and the others get £1000 each), or give £1200 to each of them as individuals?

They are individuals.

Each Pound given at age 10 is enough to provide 40p of drawdown pension at 57, so £3,600 leads to £1,426. Retirement is a long way away but it's credible for some to give the gift of early retirement.

You could also facilitate earlier things using pension contributions in your own name with expression of wishes saying divide evenly between them or divide to achieve even value at a set age assuming 5% returns between your death and some specified age, to take ages and different investment times into account. They would then inherit from you a beneficiary pension that can be withdrawn from at any age.

Assumptions: 5% plus inflation growth for 47 years in equities, actual return differences between them ignored, but it favours spreading the money over many years not using a lump.

We won't be doing anything that elaborate!!     

Sea Shell - If you have surplus funds now and are not using your £3,600 pension contributions allowance you could open a separate pot and build up funds for your N and N’s. 

Using a expression of wishes as Jamesd suggests potentially giving access to the funds before normal pension age but also allows you to use returns if the needs arise.

My MIL is using excess natural income from her portfolio to help sons pension and our children’s Uni costs. She wanted control of capital/income so if she needs care she’ll not burden anyone else.

So plenty of options to help and try to minimise IHT whilst not compromising ones own situation.

DT2001

zagfles said:

I had a go at itemising my spending at a high level in tax year 2019/20, the last "normal" year. It was my year of "trialling" retirement - I went part time and bought loads of extra leave so had loads of time off, so we went on a ridiculous number of holidays. My wife was still working but in a school part time & term time only so she had loads of time off as well.

Spent about £34k total (ex mortgage, which will be paid off when fully retired). This was for a couple with kids at uni - so they were with us about half the year.

£9800 holidays (that was 6 foreign holidays, some inc the kids, one on my own)

£6500 supermarket (food, booze, toiletries etc, some clothes)

£5200 bills (council tax, utilities, phones etc)

£4000 house (new decking, new washing machine, house insurance)

£2500 car (petrol, servicing, road tax, insurance, breakdown cover)

£6000 on everything else (nights/meals out, presents, clothes, charity, health, hair, public transport, minor household goods & services etc)

Did the knowledge of your spending affect your planning for retirement?

I’ve tried to estimate my expected expenditure at a comfortable level. How the investments do dictates my level of luxuries. It allows me the knowledge that whenever OH wants to give up we’ll have more than enough.

We each have our own expected requirements and mine have reduced since the pandemic as I realised we could cope on less although having all 4 children home during since 1st lockdown fudged the food costs. I reckon about £18-20k.

zagfles

DT2001 said:

zagfles said:

I had a go at itemising my spending at a high level in tax year 2019/20, the last "normal" year. It was my year of "trialling" retirement - I went part time and bought loads of extra leave so had loads of time off, so we went on a ridiculous number of holidays. My wife was still working but in a school part time & term time only so she had loads of time off as well.

Spent about £34k total (ex mortgage, which will be paid off when fully retired). This was for a couple with kids at uni - so they were with us about half the year.

£9800 holidays (that was 6 foreign holidays, some inc the kids, one on my own)

£6500 supermarket (food, booze, toiletries etc, some clothes)

£5200 bills (council tax, utilities, phones etc)

£4000 house (new decking, new washing machine, house insurance)

£2500 car (petrol, servicing, road tax, insurance, breakdown cover)

£6000 on everything else (nights/meals out, presents, clothes, charity, health, hair, public transport, minor household goods & services etc)

Did the knowledge of your spending affect your planning for retirement?

I’ve tried to estimate my expected expenditure at a comfortable level. How the investments do dictates my level of luxuries. It allows me the knowledge that whenever OH wants to give up we’ll have more than enough.

We each have our own expected requirements and mine have reduced since the pandemic as I realised we could cope on less although having all 4 children home during since 1st lockdown fudged the food costs. I reckon about £18-20k.

Yes, I was really trying to answer the question of whether more time off = more spending. The answer was yes but not much.

Although I think the pandemic (& possibly Brexit) could have changed things - will travel become more expensive, will inflation generally take off etc.

Sea_Shell

DT2001 said:

Sea_Shell said:

jamesd said:

Sea_Shell said:

So then how do you judge "fair"?   Split each side of the family 50/50 and then divvy up between them (so 2 get £1500 each and the others get £1000 each), or give £1200 to each of them as individuals?

They are individuals.

Each Pound given at age 10 is enough to provide 40p of drawdown pension at 57, so £3,600 leads to £1,426. Retirement is a long way away but it's credible for some to give the gift of early retirement.

You could also facilitate earlier things using pension contributions in your own name with expression of wishes saying divide evenly between them or divide to achieve even value at a set age assuming 5% returns between your death and some specified age, to take ages and different investment times into account. They would then inherit from you a beneficiary pension that can be withdrawn from at any age.

Assumptions: 5% plus inflation growth for 47 years in equities, actual return differences between them ignored, but it favours spreading the money over many years not using a lump.

We won't be doing anything that elaborate!!     

Sea Shell - If you have surplus funds now and are not using your £3,600 pension contributions allowance you could open a separate pot and build up funds for your N and N’s. 

Using a expression of wishes as Jamesd suggests potentially giving access to the funds before normal pension age but also allows you to use returns if the needs arise.

My MIL is using excess natural income from her portfolio to help sons pension and our children’s Uni costs. She wanted control of capital/income so if she needs care she’ll not burden anyone else.

So plenty of options to help and try to minimise IHT whilst not compromising ones own situation.

I'm already using my allowance to pay into my main pension pot.

Should it be my responsibility as an Aunt to provide a financial future for my N&Ns?

Where does it stop?   Driving lessons, university, cars, weddings, houses, their children, now their pensions too!!

It's a bottomless bucket that may never be filled, certainly not by their parents!!

pensionpawn

zagfles said:

DT2001 said:

zagfles said:

I had a go at itemising my spending at a high level in tax year 2019/20, the last "normal" year. It was my year of "trialling" retirement - I went part time and bought loads of extra leave so had loads of time off, so we went on a ridiculous number of holidays. My wife was still working but in a school part time & term time only so she had loads of time off as well.

Spent about £34k total (ex mortgage, which will be paid off when fully retired). This was for a couple with kids at uni - so they were with us about half the year.

£9800 holidays (that was 6 foreign holidays, some inc the kids, one on my own)

£6500 supermarket (food, booze, toiletries etc, some clothes)

£5200 bills (council tax, utilities, phones etc)

£4000 house (new decking, new washing machine, house insurance)

£2500 car (petrol, servicing, road tax, insurance, breakdown cover)

£6000 on everything else (nights/meals out, presents, clothes, charity, health, hair, public transport, minor household goods & services etc)

Did the knowledge of your spending affect your planning for retirement?

I’ve tried to estimate my expected expenditure at a comfortable level. How the investments do dictates my level of luxuries. It allows me the knowledge that whenever OH wants to give up we’ll have more than enough.

We each have our own expected requirements and mine have reduced since the pandemic as I realised we could cope on less although having all 4 children home during since 1st lockdown fudged the food costs. I reckon about £18-20k.

Yes, I was really trying to answer the question of whether more time off = more spending. The answer was yes but not much.

Although I think the pandemic (& possibly Brexit) could have changed things - will travel become more expensive, will inflation generally take off etc.

In order to verify whether my planned level of retirement income will be sufficient I've decided to reduce my hours next April to a level where my net income will approximate to my planned withdrawal. This will be around 60% hours and with leave thrown it this will mean I have almost half the year to myself, which again is testing whether the extra quality time with my wife will result in more expenditure. We also plan to go on a few nice holidays that the kids would find boring however that sort of expenditure will be front loaded from 57 - 70 and will whittle down considerably thereafter unless some bionic implants are invented to make me feel like I'm 21 again lol!