Average pension pot on retirement and whats your aim ?

hugheskevi

My target DC pot for my wife and myself is:

£179.60 x (365.25 / 7) x 11 x 2 x (0.8 / 0.85) = £194,040

Which is the amount of DC pension needed to replace State Pension between age 57 and 68 for two basic rate taxpayers, taking into account tax free lump sum, assuming rate of return after charges equal to growth in State Pension. Any surplus can be converted into secure income through State Pension deferral.

The rest is DB income augmented by voluntary contributions, taken early at a protected pension age of 55 and then later State Pension income (using Class 3 NICs to ensure a full record if necessary).

That smoothes pension income whilst being tax-efficient and mitigating Lifetime Allowance issues by taking DB pension early and ensuring that income is not subject to uncertain investment risk over the longer term. Everything would be a lot harder without the DB pension providing a solid foundation to build upon.

lisyloo

I’m aiming for £750k maybe at 57 although I really like my job so might carry on working
i am detailing my spending this year so I can re-asses what I need.
i did it in 2019 but that was pre-pandemic and some of my spending was higher so I’m doing it again.
i May work longer to get more but I’m lucky that I love my job.

Kim1965

How would people equate db pensions to dc? 20 x annual db pension or what an annuity would cost to buy the equivalent? . I have a dbs of 8 k at 60, (2.5k uncapped the rest capped at 5% rpi).
 So would most want the 8 k db, or 225k dc pot??
 I have a mixture of db and dc pensions, seems hard to equate them to a purely dc pot. 

Prism

Kim1965 said:

How would people equate db pensions to dc? 20 x annual db pension or what an annuity would cost to buy the equivalent? . I have a dbs of 8 k at 60, (2.5k uncapped the rest capped at 5% rpi).
 So would most want the 8 k db, or 225k dc pot??
 I have a mixture of db and dc pensions, seems hard to equate them to a purely dc pot. 

I would run it through an annuity calculator - its what the ONS do. The 20x has little meaning beyond a few generic calculations

Kim1965

20 x comes from how db s are viewed by lta. This seems to me vastly underestimated. 

Albermarle

Kim1965 said:

How would people equate db pensions to dc? 20 x annual db pension or what an annuity would cost to buy the equivalent? . I have a dbs of 8 k at 60, (2.5k uncapped the rest capped at 5% rpi).
 So would most want the 8 k db, or 225k dc pot??
 I have a mixture of db and dc pensions, seems hard to equate them to a purely dc pot. 

From previous threads , somewhere inbetween the two seems sensible , which is also where many CETVs are .
The 20X underestimates , whilst very poor annuity rates are not typical long term.
So 30 to 35X depending on how good the attached conditions are .

arnoldy

Kim1965 said:

20 x comes from how db s are viewed by lta. This seems to me vastly underestimated. 

Agreed. Also 100% safe uncapped fully index linked public sector pensions are 20X for LTA purposes, the same as private DBs which are almost always capped and more risky! Utterly wrong. There are three types of pension: DC, Private Sector DB, Public Sector DB - they should be treated as bronze, silver and gold in that order.

Albermarle

There are three types of pension: DC, Private Sector DB, Public Sector DB - they should be treated as bronze, silver and gold in that order.

Unless you had a 'non contributory ' Private sector DB pension . Yes they did exist once upon a time .

Also there is nothing intrinsically wrong with a DC pension, if enough money goes into it .

If an employer was prepared to fund a DC pension at the same level as they have to fund DB pensions , then it would be a bit more 50:50 which was best . Some would say the DC would be better due to the ability to leave it as an inheritance.

bostonerimus

Albermarle said:

There are three types of pension: DC, Private Sector DB, Public Sector DB - they should be treated as bronze, silver and gold in that order.

Unless you had a 'non contributory ' Private sector DB pension . Yes they did exist once upon a time .

Also there is nothing intrinsically wrong with a DC pension, if enough money goes into it .

If an employer was prepared to fund a DC pension at the same level as they have to fund DB pensions , then it would be a bit more 50:50 which was best . Some would say the DC would be better due to the ability to leave it as an inheritance.

My Dad had a non-contributory pension and then took a lump-sum and full pension to take early redundancy at 60. My Mum and Dad had paid off the mortgage by then and lived off that pension plus SP for the rest of their lives. They also had some savings and actually saved some of the pension each month. It was a lot simpler back then. I'm sure their experiences have greatly influenced my approach to retirement income generation as it has fundamentally been to make the size of my DC pension pot irrelevant.

bostonerimus

Kim1965 said:

How would people equate db pensions to dc? 20 x annual db pension or what an annuity would cost to buy the equivalent? . I have a dbs of 8 k at 60, (2.5k uncapped the rest capped at 5% rpi).
 So would most want the 8 k db, or 225k dc pot??
 I have a mixture of db and dc pensions, seems hard to equate them to a purely dc pot. 

I wouldn't bother trying to equate a DB pension to a DC pot because so much depends on life expectancy and interest rates and inflation. Just take the DB pension off the income you need and see what size pot you need to generate any shortfall.