Average pension pot on retirement and whats your aim ?

Steve182

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund).  

Considering current and likely future inflation we will all need to update any targets we made for our pension pots in the last year or two.

NedS

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

lisyloo

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

Do these figures mean you were previously expecting 0% inflation?
it’s bad I agree but surely you were expecting some, so it should be less than the headline figures as you had some factored in anyway?

Steve182

lisyloo said:

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

Do these figures mean you were previously expecting 0% inflation?
it’s bad I agree but surely you were expecting some, so it should be less than the headline figures as you had some factored in anyway?

I had factored in 2% average long term. I'm now factoring in 7% for 2022 then 4% for 2023, hopefully back to 2% in 2024. Just a complete guess.....

Sunnylifeover50plan

Steve182 said:

lisyloo said:

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

Do these figures mean you were previously expecting 0% inflation?
it’s bad I agree but surely you were expecting some, so it should be less than the headline figures as you had some factored in anyway?

I had factored in 2% average long term. I'm now factoring in 7% for 2022 then 4% for 2023, hopefully back to 2% in 2024. Just a complete guess.....

Out of interest what have you factored for growth/ returns? I also had the 2% figure for inflation long term - things have changed quite quickly even if it turns out to be short term.

lisyloo

It’s all very well factoring in a few years, but don’t this need to last up to 40 years?
I would cut my cloth to suit, do equity release, downsize etc. 
im not sure factoring in 2022-2024 cuts the mustard over the next 40 years.

Steve182

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

Yes that's a valid point and is a factor that I'd not previously considered. 

However, given that I plan (hope) to retire within 5 years, growth from my existing pot is going to be much more relevant than the level of new contributions (my wife's comments about increasing my "put-in" while still being relevant were somewhat in jest).  

Obviously if I cannot achieve the level of growth needed VS inflation then a recalculation and more years of work and contribution will be needed before I can afford to retire with the desired pot size.....

1813

SouthCoastBoy said:

Not sure what the average is, everybody has their own spending and requirements profile. Personally if you have no db pension I consider £1million is a reasonable pot for somebody retiring at 60.

This is a great question to ask. I think tbh £1m is not going to be realistic for me in all truth. If that was the case, I’d never retire. 

Currently, I have a pension that pays out around £400 a month and a state pension that pays out around £400 a month. 

Personally I believe you won’t need as much as £1m when you retire, but that depends how investments perform based on your pot. I think tbh the stock market is one option where I plan to put my money but if cost of living continues to get much more difficult, I may never retire. 

I am hoping to have at least a £200k pot with my state and db pensions - hoping based on stock market performance, that may be enough. 

Problem is, I don’t know the best options for my nest egg so still exploring all the time.

Steve182

Sunnylifeover50plan said:

Steve182 said:

lisyloo said:

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

Do these figures mean you were previously expecting 0% inflation?
it’s bad I agree but surely you were expecting some, so it should be less than the headline figures as you had some factored in anyway?

I had factored in 2% average long term. I'm now factoring in 7% for 2022 then 4% for 2023, hopefully back to 2% in 2024. Just a complete guess.....

Out of interest what have you factored for growth/ returns? I also had the 2% figure for inflation long term - things have changed quite quickly even if it turns out to be short term.. 

For pension pot growth, prior to retirement I had, until recently, factored in 6% above inflation. This is because I'm happy to have a  fairly high risk portfolio and don't need to retire at 56 so I can adjust my plans and delay retirement as required. Post retirement I plan around 5% drawdown from age 56 to 67, reducing to 3.5% once my spouse and I both have full SP. I have assumed inflation at 2% average, obviously far below what we expect in 2022/2023

michaels

NedS said:

I actually think the NUMBER is more relevant than the size of the pot. The pot just needs to be able to deliver said amount of income.

Steve182 said:

My aim is now 7% more than it was this time last year, thanks to spiralling inflation, caused for a number of reasons, not least the heinous actions of an evil Russian dictator.  To make some very small light of such an awful situation, my wife told me I'd just have to put-in more (into our retirement fund). 

Unfortunately it's likely worse than that due to freezes on income tax allowances etc. A 7% increase in gross income where the personal tax allowance is frozen and doesn't rise likewise only results in a 5.6% net increase in income, so in reality you will need to target an 8.75% gross increase to achieve 7% net.

My number is x times planned annual expenditure so rising inflation pushes the number up by the same proportion; how my pot has performed relative to my number will thus be driven by real terms investment performance rather than nominal performance.  No view on inflation is needed, just a view on long term real returns.