What annual pension would a £1m pension give you

kinger101

I personally don't see the point of modelling £1m at 95.

All models are wrong, so you just need one that is useful.  If it is going to go wrong, it's likely in the first decade due to sequence of returns risk.

30+ years out is finger in the air territory. If your spreadsheet says one million, the reality will be somewhere between being penniless 15 years earlier of having an eight figure sum.

So accept the risk or mitigate with annuities.

ex-pat_scot

Ciprico said:

ex-pat_scot said:

Well I checked my pot this morning and the markets seem to be heading up again for me (invested in global ETF trackers).
My spreadsheet shows £998,750 - tantalisingly close to the 7 figure threshold.
It's only a number, but is a big milestone for me.
I'm not at the @SouthCoastBoy level of caution, but am rather tailoring my thoughts towards refining the "how much", "when" and the future forecasting.
Simplistically I see the £1m would provide £250,000 tax free cash, to be immediately withdrawn to pay off mortgage, and about £60,000 wrapped into ISAs. The remaining £750,000 would then be front-loaded with 6% withdrawal rate from 55 to 67, then lower at SPA (when I get to SPA I will look at whether it would be better to defer the SP as an increasingly-valuable guarantee floor), or to reduce the withdrawal rate and take the full SP at that point. I'd have to be flexible in my approach - a 6% withdrawal rate is punchy and it would have to flex if conditions worsen. (I could always go back to consulting part time in extremis).

I'm not quite at the age when I can access the pension though - next Easter will bring that joy and opportunity and time for thorough planning.

Whilst £1m is a great achievement, and a convenient goal, my target is really the £1.073m level to be able to maximise the tax free cash allowance. Anything beyond that becomes a bit of a "one more year" exercise, in that it would give greater confidence in withdrawing up to the HR tax threshold.

I am in similar position but not quite as much cash and a little older.....

...have you not been tempted to switch to fixed income (gilts) and cruise to the £1.7M at no risk?

I've been tempted and am switching all dividends and new contributions to Gilts/MM, but currently left the bulk in HMWO and City of London it...

Like you I plan to "relax" saving at the old limit.

Unlike you I can and plan to retire in the next 6 months.

Don't be envious...I'd rather be 7 years younger!

Cruising to £1.071m - I'm not so sure that FI / Gilts is risk free at the moment!
Given the pot will have to last for another 35-40 years, I'm happy to take the volatility for now.
I'm pretty much 100% global diversified low cost ETFs.
If markets dive, then I can delay / go part time / consulting.

As I age, and / or start to lose my faculties, I can start to annuitise to buy a floor level of income. 

Just checked the end of day position - just nudged into the 7 figure mark with £1,000,537. I'm off to celebrate with a nice cup of tea.

ex-pat_scot

Ciprico said:

ex-pat_scot said:

Well I checked my pot this morning and the markets seem to be heading up again for me (invested in global ETF trackers).
My spreadsheet shows £998,750 - tantalisingly close to the 7 figure threshold.
It's only a number, but is a big milestone for me.
I'm not at the @SouthCoastBoy level of caution, but am rather tailoring my thoughts towards refining the "how much", "when" and the future forecasting.
Simplistically I see the £1m would provide £250,000 tax free cash, to be immediately withdrawn to pay off mortgage, and about £60,000 wrapped into ISAs. The remaining £750,000 would then be front-loaded with 6% withdrawal rate from 55 to 67, then lower at SPA (when I get to SPA I will look at whether it would be better to defer the SP as an increasingly-valuable guarantee floor), or to reduce the withdrawal rate and take the full SP at that point. I'd have to be flexible in my approach - a 6% withdrawal rate is punchy and it would have to flex if conditions worsen. (I could always go back to consulting part time in extremis).

I'm not quite at the age when I can access the pension though - next Easter will bring that joy and opportunity and time for thorough planning.

Whilst £1m is a great achievement, and a convenient goal, my target is really the £1.073m level to be able to maximise the tax free cash allowance. Anything beyond that becomes a bit of a "one more year" exercise, in that it would give greater confidence in withdrawing up to the HR tax threshold.

I am in similar position but not quite as much cash and a little older.....

...have you not been tempted to switch to fixed income (gilts) and cruise to the £1.7M at no risk?

I've been tempted and am switching all dividends and new contributions to Gilts/MM, but currently left the bulk in HMWO and City of London it...

Like you I plan to "relax" saving at the old limit.

Unlike you I can and plan to retire in the next 6 months.

Don't be envious...I'd rather be 7 years younger!

Cruising to £1.071m - I'm not so sure that FI / Gilts is risk free at the moment!
Given the pot will have to last for another 35-40 years, I'm happy to take the volatility for now.
I'm pretty much 100% global diversified low cost ETFs.
If markets dive, then I can delay / go part time / consulting.

As I age, and / or start to lose my faculties, I can start to annuitise to buy a floor level of income. 

Just checked the end of day position - just nudged into the 7 figure mark with £1,000,537. I'm off to celebrate with a nice cup of tea.

Linton

kinger101 said:

I personally don't see the point of modelling £1m at 95.

All models are wrong, so you just need one that is useful.  If it is going to go wrong, it's likely in the first decade due to sequence of returns risk.

30+ years out is finger in the air territory. If your spreadsheet says one million, the reality will be somewhere between being penniless 15 years earlier of having an eight figure sum.

So accept the risk or mitigate with annuities.

Barring end of the world scenarios I dont think reality is as uncertain as you suggest.  For example you always have the option of spending most of your available wealth on an inflation linked annuity.  That provides a pretty certain worst case position - you wiont be penniless 15 years before death.

The benefit about modelling to 95 and showing that you will have £1M still available is that it gives you a measure of the leeway should the plan go wrong.  It represents the period of time you have available to do something about a deteriorating position. It is also is a useful for checking whether a particular large expenditure is affordable or not. So for example if you are  deciding whether to take a £20K holiday or buy a £30K car, with say £500K as your wealth at death you can confidently go for it without worrying any further about significant extra risk.  If wealth at death was less than £100K you may reasonably have doubts.

To basically it is a useful way to understand and cope with risk.

Pat38493

ex-pat_scot said:

Ciprico said:

ex-pat_scot said:

Well I checked my pot this morning and the markets seem to be heading up again for me (invested in global ETF trackers).
My spreadsheet shows £998,750 - tantalisingly close to the 7 figure threshold.
It's only a number, but is a big milestone for me.
I'm not at the @SouthCoastBoy level of caution, but am rather tailoring my thoughts towards refining the "how much", "when" and the future forecasting.
Simplistically I see the £1m would provide £250,000 tax free cash, to be immediately withdrawn to pay off mortgage, and about £60,000 wrapped into ISAs. The remaining £750,000 would then be front-loaded with 6% withdrawal rate from 55 to 67, then lower at SPA (when I get to SPA I will look at whether it would be better to defer the SP as an increasingly-valuable guarantee floor), or to reduce the withdrawal rate and take the full SP at that point. I'd have to be flexible in my approach - a 6% withdrawal rate is punchy and it would have to flex if conditions worsen. (I could always go back to consulting part time in extremis).

I'm not quite at the age when I can access the pension though - next Easter will bring that joy and opportunity and time for thorough planning.

Whilst £1m is a great achievement, and a convenient goal, my target is really the £1.073m level to be able to maximise the tax free cash allowance. Anything beyond that becomes a bit of a "one more year" exercise, in that it would give greater confidence in withdrawing up to the HR tax threshold.

I am in similar position but not quite as much cash and a little older.....

...have you not been tempted to switch to fixed income (gilts) and cruise to the £1.7M at no risk?

I've been tempted and am switching all dividends and new contributions to Gilts/MM, but currently left the bulk in HMWO and City of London it...

Like you I plan to "relax" saving at the old limit.

Unlike you I can and plan to retire in the next 6 months.

Don't be envious...I'd rather be 7 years younger!

Cruising to £1.071m - I'm not so sure that FI / Gilts is risk free at the moment!
Given the pot will have to last for another 35-40 years, I'm happy to take the volatility for now.
I'm pretty much 100% global diversified low cost ETFs.
If markets dive, then I can delay / go part time / consulting.

As I age, and / or start to lose my faculties, I can start to annuitise to buy a floor level of income. 

Just checked the end of day position - just nudged into the 7 figure mark with £1,000,537. I'm off to celebrate with a nice cup of tea.

I could be wrong but I think that if you invest directly in the gilts and retain them to the end, then it’s almost risk free.  However most people investing in gilts are actually investing in a fund that trades in gilts which is not risk free.  Investing directly in gilts is actually not so easy as you can’t generally just buy them on the main online providers.

I might have this a bit wrong but this is what I understood from a few previous threads.

sheslookinhot

SouthCoastBoy said:

Superdude0499 said:

What on Earth will you do with 1M at 95? Very comfortable beneficiaries I think.

I hope to have c1M I combined SIPP/ISA at age 60. I don’t intend to live extravagantly, requiring around 36k in today’s money. 2xSP + Wife’s modest DB (c12K) will account for over 85% of our needs.

i’ve modelled all kinds of apocalyptic scenarios but come out with 99% success each time. There are many tools to use but I’ve found the timelineapp very good for fleshing out my plans. Made for FA’s but simple enough for plebs like me to use (and free if the only client you have is yourself). Still more Han likely to leave large legacy for my two children.

So, 60 for me with 1M more than adequate. I think!

My modelling needs to give me 1m at 95 to feel comfortable I can retire, it doesn't mean I expect or need 1m at 95.

Interestingly your spending needs appear to be similar to mine, with my wife's db also similar to your wife

Maybe there are pockets in shrouds 🤔

QrizB

Pat38493 said:

I could be wrong but I think that if you invest directly in the gilts and retain them to the end, then it’s almost risk free.  However most people investing in gilts are actually investing in a fund that trades in gilts which is not risk free.  Investing directly in gilts is actually not so easy as you can’t generally just buy them on the main online providers.

I might have this a bit wrong but this is what I understood from a few previous threads.

I hold gilts* (not a gilt fund) in my ii SSISA, and I've seen other threads where people have been looking to buy them with HL.

See this thread for other examples:
https://forums.moneysavingexpert.com/discussion/6448839/gilts-are-cheap-again

* £500-worth, maturing in September this year. I'm not expecting it to make me rich.

michaels

ex-pat_scot said:

Well I checked my pot this morning and the markets seem to be heading up again for me (invested in global ETF trackers).
My spreadsheet shows £998,750 - tantalisingly close to the 7 figure threshold.
It's only a number, but is a big milestone for me.
I'm not at the @SouthCoastBoy level of caution, but am rather tailoring my thoughts towards refining the "how much", "when" and the future forecasting.
Simplistically I see the £1m would provide £250,000 tax free cash, to be immediately withdrawn to pay off mortgage, and about £60,000 wrapped into ISAs. The remaining £750,000 would then be front-loaded with 6% withdrawal rate from 55 to 67, then lower at SPA (when I get to SPA I will look at whether it would be better to defer the SP as an increasingly-valuable guarantee floor), or to reduce the withdrawal rate and take the full SP at that point. I'd have to be flexible in my approach - a 6% withdrawal rate is punchy and it would have to flex if conditions worsen. (I could always go back to consulting part time in extremis).

I'm not quite at the age when I can access the pension though - next Easter will bring that joy and opportunity and time for thorough planning.

Whilst £1m is a great achievement, and a convenient goal, my target is really the £1.073m level to be able to maximise the tax free cash allowance. Anything beyond that becomes a bit of a "one more year" exercise, in that it would give greater confidence in withdrawing up to the HR tax threshold.

Can I ask what the pluses (and minuses?) are of holding your global tracker as an ETF rather than a fund - I have the latter, total charges including platform are about 14 basis points - are the ETFs cheaper?

kinger101

Linton said:

kinger101 said:

I personally don't see the point of modelling £1m at 95.

All models are wrong, so you just need one that is useful.  If it is going to go wrong, it's likely in the first decade due to sequence of returns risk.

30+ years out is finger in the air territory. If your spreadsheet says one million, the reality will be somewhere between being penniless 15 years earlier of having an eight figure sum.

So accept the risk or mitigate with annuities.

Barring end of the world scenarios I dont think reality is as uncertain as you suggest.  For example you always have the option of spending most of your available wealth on an inflation linked annuity.  That provides a pretty certain worst case position - you wiont be penniless 15 years before death.

The benefit about modelling to 95 and showing that you will have £1M still available is that it gives you a measure of the leeway should the plan go wrong.  It represents the period of time you have available to do something about a deteriorating position. It is also is a useful for checking whether a particular large expenditure is affordable or not. So for example if you are  deciding whether to take a £20K holiday or buy a £30K car, with say £500K as your wealth at death you can confidently go for it without worrying any further about significant extra risk.  If wealth at death was less than £100K you may reasonably have doubts.

To basically it is a useful way to understand and cope with risk.

But all if that could be achieved without modelling £1m at 95.  It's a very specific goal a very long way into the future.

Target could for example be enough to purchase annuity to cover basic living standard, then use a flexible drawdown plan that has sufficient resilience to cut one's cloth accordingly.

kinger101

michaels said:

ex-pat_scot said:

Well I checked my pot this morning and the markets seem to be heading up again for me (invested in global ETF trackers).
My spreadsheet shows £998,750 - tantalisingly close to the 7 figure threshold.
It's only a number, but is a big milestone for me.
I'm not at the @SouthCoastBoy level of caution, but am rather tailoring my thoughts towards refining the "how much", "when" and the future forecasting.
Simplistically I see the £1m would provide £250,000 tax free cash, to be immediately withdrawn to pay off mortgage, and about £60,000 wrapped into ISAs. The remaining £750,000 would then be front-loaded with 6% withdrawal rate from 55 to 67, then lower at SPA (when I get to SPA I will look at whether it would be better to defer the SP as an increasingly-valuable guarantee floor), or to reduce the withdrawal rate and take the full SP at that point. I'd have to be flexible in my approach - a 6% withdrawal rate is punchy and it would have to flex if conditions worsen. (I could always go back to consulting part time in extremis).

I'm not quite at the age when I can access the pension though - next Easter will bring that joy and opportunity and time for thorough planning.

Whilst £1m is a great achievement, and a convenient goal, my target is really the £1.073m level to be able to maximise the tax free cash allowance. Anything beyond that becomes a bit of a "one more year" exercise, in that it would give greater confidence in withdrawing up to the HR tax threshold.

Can I ask what the pluses (and minuses?) are of holding your global tracker as an ETF rather than a fund - I have the latter, total charges including platform are about 14 basis points - are the ETFs cheaper?

ETFs tend to be cheaper because platform fees are often capped at a much lower level.