Ready made portfolios for generating an income in retirement

zagfles

Bostonerimus1 said:

Hoenir said:

Bostonerimus1 said:

MK62 said:

OldScientist said:

NedS said:

OldScientist said:

I think the range of people for whom an annuity is a good option is probably quite limited. For example, the following would probably have little need of an annuity

1) Retirees whose essential expenditure is largely or wholly covered by existing guaranteed income (state pension and/or DB pension) and whose pension pot is around the UK average (roughly £80k). In practice this is probably most people.

Really? I have no idea how many people have access to a DB pension, nor it's average size, but I would guess that most people do not, thus leaving them with only a SP as guaranteed income which certainly does not cover essential expenditure, especially for those with substantial housing costs (considering around 2/3rd of people over 65 do not own their own home, and these are also most likely to be the people without additional DB (or any) pension provision).

I stand by what I wrote since according to the retirement living standards (https://www.retirementlivingstandards.org.uk/ ) the minimum standards excluding housing costs are £14.4k for a single retiree and £22.4k for a couple and these include some items which could be considered discretionary. As such, a full SP of £11.5k covers about 80% of the PLSA minimum standard for a single retiree and just over 100% for a couple. There is also evidence of these boards that people can live well on less than these amounts.
 

....though this very much depends on each individual's interpretation of "living well"!

...and also where the retiree lives. Why exclude housing costs? I assume it's to remove part of the regional variation, but it's still something that has to be paid unless you have been paid enough and planned well enough to have paid off a mortgage.

Many people are heading into retirement years with mortgages to repay or rent to pay. 

My point exactly. For me the main argument for paying off the mortgage is how it reduces the amount of income you need to generate in retirement so that guaranteed income sources can cover a larger fraction of your basic needs. Pension saving and investing should be prioritized, but a paid off mortgage can make retirement far less stressful. For those with rent then a guaranteed income floor becomes all the more important, or a good sized pot and a robust drawdown plan. I was actually encouraged by the statistics given above for the number of retirees who have paid off their mortgage.

If someone renting is just living off the basic state pension with not much savings they'd almost certainly be entitled to housing benefit. This could be better than owning outright as they'd have no maintenance costs to pay. 

Hoenir

zagfles said:

Bostonerimus1 said:

Hoenir said:

Bostonerimus1 said:

MK62 said:

OldScientist said:

NedS said:

OldScientist said:

I think the range of people for whom an annuity is a good option is probably quite limited. For example, the following would probably have little need of an annuity

1) Retirees whose essential expenditure is largely or wholly covered by existing guaranteed income (state pension and/or DB pension) and whose pension pot is around the UK average (roughly £80k). In practice this is probably most people.

Really? I have no idea how many people have access to a DB pension, nor it's average size, but I would guess that most people do not, thus leaving them with only a SP as guaranteed income which certainly does not cover essential expenditure, especially for those with substantial housing costs (considering around 2/3rd of people over 65 do not own their own home, and these are also most likely to be the people without additional DB (or any) pension provision).

I stand by what I wrote since according to the retirement living standards (https://www.retirementlivingstandards.org.uk/ ) the minimum standards excluding housing costs are £14.4k for a single retiree and £22.4k for a couple and these include some items which could be considered discretionary. As such, a full SP of £11.5k covers about 80% of the PLSA minimum standard for a single retiree and just over 100% for a couple. There is also evidence of these boards that people can live well on less than these amounts.
 

....though this very much depends on each individual's interpretation of "living well"!

...and also where the retiree lives. Why exclude housing costs? I assume it's to remove part of the regional variation, but it's still something that has to be paid unless you have been paid enough and planned well enough to have paid off a mortgage.

Many people are heading into retirement years with mortgages to repay or rent to pay. 

My point exactly. For me the main argument for paying off the mortgage is how it reduces the amount of income you need to generate in retirement so that guaranteed income sources can cover a larger fraction of your basic needs. Pension saving and investing should be prioritized, but a paid off mortgage can make retirement far less stressful. For those with rent then a guaranteed income floor becomes all the more important, or a good sized pot and a robust drawdown plan. I was actually encouraged by the statistics given above for the number of retirees who have paid off their mortgage.

If someone renting is just living off the basic state pension with not much savings they'd almost certainly be entitled to housing benefit. This could be better than owning outright as they'd have no maintenance costs to pay. 

Although still in the foothills. Auto enrollment will greatly enhance may people's future. 

Bostonerimus1

zagfles said:

Bostonerimus1 said:

Hoenir said:

Bostonerimus1 said:

MK62 said:

OldScientist said:

NedS said:

OldScientist said:

I think the range of people for whom an annuity is a good option is probably quite limited. For example, the following would probably have little need of an annuity

1) Retirees whose essential expenditure is largely or wholly covered by existing guaranteed income (state pension and/or DB pension) and whose pension pot is around the UK average (roughly £80k). In practice this is probably most people.

Really? I have no idea how many people have access to a DB pension, nor it's average size, but I would guess that most people do not, thus leaving them with only a SP as guaranteed income which certainly does not cover essential expenditure, especially for those with substantial housing costs (considering around 2/3rd of people over 65 do not own their own home, and these are also most likely to be the people without additional DB (or any) pension provision).

I stand by what I wrote since according to the retirement living standards (https://www.retirementlivingstandards.org.uk/ ) the minimum standards excluding housing costs are £14.4k for a single retiree and £22.4k for a couple and these include some items which could be considered discretionary. As such, a full SP of £11.5k covers about 80% of the PLSA minimum standard for a single retiree and just over 100% for a couple. There is also evidence of these boards that people can live well on less than these amounts.
 

....though this very much depends on each individual's interpretation of "living well"!

...and also where the retiree lives. Why exclude housing costs? I assume it's to remove part of the regional variation, but it's still something that has to be paid unless you have been paid enough and planned well enough to have paid off a mortgage.

Many people are heading into retirement years with mortgages to repay or rent to pay. 

My point exactly. For me the main argument for paying off the mortgage is how it reduces the amount of income you need to generate in retirement so that guaranteed income sources can cover a larger fraction of your basic needs. Pension saving and investing should be prioritized, but a paid off mortgage can make retirement far less stressful. For those with rent then a guaranteed income floor becomes all the more important, or a good sized pot and a robust drawdown plan. I was actually encouraged by the statistics given above for the number of retirees who have paid off their mortgage.

If someone renting is just living off the basic state pension with not much savings they'd almost certainly be entitled to housing benefit. This could be better than owning outright as they'd have no maintenance costs to pay. 

There are many solutions and for those with lesser means there needs to be a robust safety net, but I far prefer owning a home to renting because of the greater security and the stored capital. I would not relish a retirement renting on SP and housing benefit.

Bostonerimus1

Hoenir said:

zagfles said:

Bostonerimus1 said:

Hoenir said:

Bostonerimus1 said:

MK62 said:

OldScientist said:

NedS said:

OldScientist said:

I think the range of people for whom an annuity is a good option is probably quite limited. For example, the following would probably have little need of an annuity

1) Retirees whose essential expenditure is largely or wholly covered by existing guaranteed income (state pension and/or DB pension) and whose pension pot is around the UK average (roughly £80k). In practice this is probably most people.

Really? I have no idea how many people have access to a DB pension, nor it's average size, but I would guess that most people do not, thus leaving them with only a SP as guaranteed income which certainly does not cover essential expenditure, especially for those with substantial housing costs (considering around 2/3rd of people over 65 do not own their own home, and these are also most likely to be the people without additional DB (or any) pension provision).

I stand by what I wrote since according to the retirement living standards (https://www.retirementlivingstandards.org.uk/ ) the minimum standards excluding housing costs are £14.4k for a single retiree and £22.4k for a couple and these include some items which could be considered discretionary. As such, a full SP of £11.5k covers about 80% of the PLSA minimum standard for a single retiree and just over 100% for a couple. There is also evidence of these boards that people can live well on less than these amounts.
 

....though this very much depends on each individual's interpretation of "living well"!

...and also where the retiree lives. Why exclude housing costs? I assume it's to remove part of the regional variation, but it's still something that has to be paid unless you have been paid enough and planned well enough to have paid off a mortgage.

Many people are heading into retirement years with mortgages to repay or rent to pay. 

My point exactly. For me the main argument for paying off the mortgage is how it reduces the amount of income you need to generate in retirement so that guaranteed income sources can cover a larger fraction of your basic needs. Pension saving and investing should be prioritized, but a paid off mortgage can make retirement far less stressful. For those with rent then a guaranteed income floor becomes all the more important, or a good sized pot and a robust drawdown plan. I was actually encouraged by the statistics given above for the number of retirees who have paid off their mortgage.

If someone renting is just living off the basic state pension with not much savings they'd almost certainly be entitled to housing benefit. This could be better than owning outright as they'd have no maintenance costs to pay. 

Although still in the foothills. Auto enrollment will greatly enhance may people's future. 

It will do if they invest enough, consistently, for long enough into a sensible portfolio, and don't have fees eating away at their pot. Then they can ask the OP's original question. I'd prefer to see auto-enrollment DB pensions just like we had years ago, but that ship has sailed...or maybe that should be sunk...now.

Hoenir

Bostonerimus1 said:

Hoenir said:

zagfles said:

Bostonerimus1 said:

Hoenir said:

Bostonerimus1 said:

MK62 said:

OldScientist said:

NedS said:

OldScientist said:

I think the range of people for whom an annuity is a good option is probably quite limited. For example, the following would probably have little need of an annuity

1) Retirees whose essential expenditure is largely or wholly covered by existing guaranteed income (state pension and/or DB pension) and whose pension pot is around the UK average (roughly £80k). In practice this is probably most people.

Really? I have no idea how many people have access to a DB pension, nor it's average size, but I would guess that most people do not, thus leaving them with only a SP as guaranteed income which certainly does not cover essential expenditure, especially for those with substantial housing costs (considering around 2/3rd of people over 65 do not own their own home, and these are also most likely to be the people without additional DB (or any) pension provision).

I stand by what I wrote since according to the retirement living standards (https://www.retirementlivingstandards.org.uk/ ) the minimum standards excluding housing costs are £14.4k for a single retiree and £22.4k for a couple and these include some items which could be considered discretionary. As such, a full SP of £11.5k covers about 80% of the PLSA minimum standard for a single retiree and just over 100% for a couple. There is also evidence of these boards that people can live well on less than these amounts.
 

....though this very much depends on each individual's interpretation of "living well"!

...and also where the retiree lives. Why exclude housing costs? I assume it's to remove part of the regional variation, but it's still something that has to be paid unless you have been paid enough and planned well enough to have paid off a mortgage.

Many people are heading into retirement years with mortgages to repay or rent to pay. 

My point exactly. For me the main argument for paying off the mortgage is how it reduces the amount of income you need to generate in retirement so that guaranteed income sources can cover a larger fraction of your basic needs. Pension saving and investing should be prioritized, but a paid off mortgage can make retirement far less stressful. For those with rent then a guaranteed income floor becomes all the more important, or a good sized pot and a robust drawdown plan. I was actually encouraged by the statistics given above for the number of retirees who have paid off their mortgage.

If someone renting is just living off the basic state pension with not much savings they'd almost certainly be entitled to housing benefit. This could be better than owning outright as they'd have no maintenance costs to pay. 

Although still in the foothills. Auto enrollment will greatly enhance may people's future. 

It will do if they invest enough, consistently, for long enough into a sensible portfolio, and don't have fees eating away at their pot. Then they can ask the OP's original question. I'd prefer to see auto-enrollment DB pensions just like we had years ago, but that ship has sailed...or maybe that should be sunk...now.

DB schemes with all the bells and whistles such as Death In Service Benefit, Dependents Pension, Childrens Pension, Lump Sum , Early ill Health Retirement. Has become unaffordable as people live longer. 30 years ago the private DB I belonged to was funded by 10% employee and 22% employer contributions. Then Brown blew a hole with his pension reforms. The scheme soon closed to new members and remained in considerable actuarial deficit for 24 years. Untiil there was a final injection of funds and an insurance company buyout. Which guaranteed the accrued scheme benefits for every member. 

As the cost of housing has risen. For the majority in the private sector saving sufficient money to achieve a quality retirement is just a pipe dream. 

qwertywerty

Dazza1902 said:

It might be helpful for the op to give some details, age, how long he needs to bridge to Sp, what other income he may have, what his spends will be at retirement etc.
It sounds like you are looking for a simple way to draw income. At its simplest there are monthly paying dividend focused funds , rather than having to sell assets for income. It's not popular with those on here.

I have been reading all comments with interest, some of the more technical stuff, investing theory and arguments for and against each strategy is beyond me but this comment I can answer🙂 although my numbers are rounded and timings may change.

I'm currently 50, in good health, married, sole earner, all numbers are joint assets. Hoping to retire before 60. Mortgage already paid off, house is worth 400k, not in a rush to move. Current income is 45k, 600k ISAs invested in 80/20 vanguard type portfolio, 350k DC pension, 100k cash equivalent savings, mainly premium bonds.

About 20k pension income will be from the state pension, and my spouse is currently 60, so will obviously get theirs before I get mine.

Really appreciate the thoughts and comments, thank you