What annual pension would a £1m pension give you

Mick70

discussion with a colleague, he is similar age to myself and hopes to retire in 2 years, age 55, with a £1m DC pot , as he has full state pension from age 67 and plans to reduce his pension accordingly when receives SP .  The question so many ask, what pension could he drawdown from this pot,  i thought 35-40k pa would be reasonable ?

Mick

Mick70

ah but that wouldnt rise with inflation each year?  i think 

Albermarle

Mick70 said:

discussion with a colleague, he is similar age to myself and hopes to retire in 2 years, age 55, with a £1m DC pot , as he has full state pension from age 67 and plans to reduce his pension accordingly when receives SP .  The question so many ask, what pension could he drawdown from this pot,  i thought 35-40k pa would be reasonable ?

Mick

You are probably in the right ball park, but due to his age, probably better to err towards the lower figure. Although as you know it is all theory and some flexibility over the years will probably be needed.

dunstonh

At 55, 1m would allow around £30,000 a year as a reasonable sustainable rate of draw.    Taking higher until state pension and then lower after that would need to be modelled but its a very common thing to do.

Stubod

Last quote I got for an annuity with Index linking and spouse death benefit was around £3.7/k per £100k, so £1,000k = £37k / yr pension before tax??

SouthCoastBoy

dunstonh said:

At 55, 1m would allow around £30,000 a year as a reasonable sustainable rate of draw.    Taking higher until state pension and then lower after that would need to be modelled but its a very common thing to do.

When you say 30k a year, 30k a Yr plus cpi inflation for that year?

Pat38493

SouthCoastBoy said:

dunstonh said:

At 55, 1m would allow around £30,000 a year as a reasonable sustainable rate of draw.    Taking higher until state pension and then lower after that would need to be modelled but its a very common thing to do.

When you say 30k a year, 30k a Yr plus cpi inflation for that year?

I think that's what he meant yes - 30K / year without increases would leave you with a whopping amount of gold for your tomb.

dunstonh

Last quote I got for an annuity with Index linking and spouse death benefit was around £3.7/k per £100k, so £1,000k = £37k / yr pension before tax??

At age 55?  and what level of indexation?  what level of death benefits?

When you say 30k a year, 30k a Yr plus cpi inflation for that year?

30k indexed.   However, there could be play on that figure depending on the state pension and spending need (and any other wrappers/holdings)

SouthCoastBoy

dunstonh said:

Last quote I got for an annuity with Index linking and spouse death benefit was around £3.7/k per £100k, so £1,000k = £37k / yr pension before tax??

At age 55?  and what level of indexation?  what level of death benefits?

When you say 30k a year, 30k a Yr plus cpi inflation for that year?

30k indexed.   However, there could be play on that figure depending on the state pension and spending need (and any other wrappers/holdings)

Thks, that's encouraging as I'm planning to budget for 2.5k a mth plus indexation. I will be paying minimal tax as over 50% of my wealth is non taxable, so 30k a year should about do it.

ader42

If it was me at age 55 I would be remaining invested and take £50k a year (reducing to £50k including state pension at 67) - putting what I didn’t need into stocks & shares ISAs, and making sure I always had 2 years of income set aside for negative growth periods.  

Peterrr

ader42 said:

If it was me at age 55 I would be remaining invested and take £50k a year (reducing to £50k including state pension at 67)  

I'd agree, though flexibility is key: being willing to tighten the belt in the event of a poor sequence of returns. Our intention in such circumstances would include downsizing the home and releasing equity. Also this riskier drawdown rate is with the intention to "die with zero" as opposed to leaving much of an estate.