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Is my Pension Pot too Small?
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I tend to “guess” based upon my own experience of my own investing and historical factual figures.
FTSE100 7.8% annualised total return for example (1984-2019).
Anyhow, we don’t have crystal balls so best to have low, mid and high scenarios; guess you’re more pessimistic than I.0 -
ader42 said:I tend to “guess” based upon my own experience of my own investing and historical factual figures.
FTSE100 7.8% annualised total return for example (1984-2019).
Anyhow, we don’t have crystal balls so best to have low, mid and high scenarios; guess you’re more pessimistic than I.0 -
kinger101 said:Albermarle said:kinger101 said:ader42 said:Finger in the air maths…
Current pot is £73k, expecting to pay in circa £7k a year for 15 years, gives a pot of approx. £200k
You can hope the pot doubles in size over that time period (around 7% growth) so becoming approx £400k.
£400k would buy a pension of about £16k a year.
That’s assuming you hope to retire at age 55 of course. If retiring at state pension age then you are in a much better position.
All predictions will be wrong, but they do need to be useful (NB they cannot access pensions at 55 anyway).
I plan growth at 2.5% above inflation, which by my calculations would give OP an inflation adjusted pot of around £420K at 67. At a drawdown rate of 3.5% pa, would mean £14,700 pa. On top of state pension of ca. £9650 per year, then I'd say OP's plans are reasonable to give the a strong plan for a comfortable retirement at state pension age. But it would be useful if they can work out their expenditure too. Of course, I'll be wrong too, but hopefully wrong in a more useful way.0 -
bd10 said:My personal assumptions are: long term inflation rate of 3% and for asset returns 5-6% nominal. For 2023 I am using 6.3% inflation, 4-5% for 2024 and then 3% thereafter. As you will notice, my nominal equity returns are below historical averages and here I make a judgement call to err on the cautious side. The era of QE and cheap money is over, we have an accelerating demographic change to deal with, re-shoring of supply chains keeping the costs higher and thus corporate profits lower and last but not least the huge costs of trying to achieve net zero. So I end up using 2-3% real returns which may sound poor and I may be well below the actual returns which we may see in the future, totally agree. Who knows. But here's the thing: I am more likely to over-save than under-save and if I keep at my own pace of aggressive savings I may be able to retire a few years before 65 instead of being overly optimistic and then realising I am behind target.You can have a look at Vanguard's returns outlook, even Jack Bogle had a chapter partially dedicated to that in his Little Book of Common Sense Investing. Credit Suisse's outlooks are similar to both as well.0
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kinger101 said:ader42 said:Finger in the air maths…
Current pot is £73k, expecting to pay in circa £7k a year for 15 years, gives a pot of approx. £200k
You can hope the pot doubles in size over that time period (around 7% growth) so becoming approx £400k.
£400k would buy a pension of about £16k a year.
That’s assuming you hope to retire at age 55 of course. If retiring at state pension age then you are in a much better position.
All predictions will be wrong, but they do need to be useful (NB they cannot access pensions at 55 anyway).
I plan growth at 2.5% above inflation, which by my calculations would give OP an inflation adjusted pot of around £420K at 67. At a drawdown rate of 3.5% pa, would mean £14,700 pa. On top of state pension of ca. £9650 per year, then I'd say OP's plans are reasonable to give the a strong plan for a comfortable retirement at state pension age. But it would be useful if they can work out their expenditure too. Of course, I'll be wrong too, but hopefully wrong in a more useful way.
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I have been spending some time looking into my pension pot and I have discovered the follow:
1. Weak Return preddiction = £118k, average return = £251k and strong return = £538k. The following caveat is included:
This forecast takes into account possible future inflation, meaning the results can be viewed as if you were spending the money today.
2. AVC + Pre97 SCC + Core ER Contributions + Transfer in contributions + ER Matching Contributions + EE Saver Contributions - Growth Fund (Drawdown L/S). I do not know what any of this means.
3. I wish to transfer some savings across to my pot, I assume this is allowed without any penalties?
4. I just realised I worked for a company in 2013 but I have not accessed their pension pot. I assume there would be one as it was a government requirement at this stage?
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I wish to transfer some savings across to my pot, I assume this is allowed without any penalties?
It is only worth transferring savings into a pension if you will get tax relief on them. So it depends on your earnings as you can only get tax relief up to 100% of your earnings.
So as a simple example.
You earn £30K pa before tax.
Your total contributions to a pension should not exceed £30K including tax relief. It does not matter whether you make the contributions from earnings, or from savings, or a mixture of the two.
If you are a higher earner than that, and there are employer contributions as well, there are other limits.
Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)
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