Pension plan - divide pension pot by 20?

kimwp

I recently started using the figures from James shacks video on YouTube using the last 100 years of data - he includes state pension and a 25% reduction at 75 so it's probably close to what you are looking for.

roadweary

dunstonh said:

roadweary said:

dunstonh said:

Having saved quite heavily into my pension, yet the various calculators being so complex, I was thinking about just taking my project pension pot at 60 and dividing that by 20.

So, on that basis you would probably run out of money somewhere between age 70 and 95.

What do people think?

Only time will tell.   All we do know is that you would get away with it in some periods but not in others.   

It also depends on how much money you are allocating to capital expenditure items.  e.g. cars, refurbishments, boilers etc.   People often forget the unexpected costs/capital costs.

Apologies if I'm missing something very basic....but how would 900k run out in 10 years?

I was factoring in inflation and tax as any modelling should on an uncrystallised fund needing £45k p.a. net spending need.   I was taking a guess earlier at what it would likely come out at but I just ran it now on a 60% equities spread and got:

• The worst-case scenario occurred between January 1969  and January 2008 , during which you would have run out of money by the age of 75
  
• The median scenario predicts that you would have run out of money by the age of 90  based on our calculations
• The best-case scenario occurred between January 1975 and January 2014, which would have left you with £9.9m at the end of your life after adjusting for inflation. 

I have included the current state pension maximum in the modelling.  You may have more or less than that.
I did not factor in any capital expenditure. (which over 30 odd years is unlikely)

If changed to 100% cash it is worse (runs out at 88 in best case scenario).

Obviously, we have very limited info and there may be a second state pension and another pension and savings/investments etc but that information is missing on the first post.

I'm in awe!  My work pension is Standard Life Managed Pension Fund Managed Pn PDF Factsheet

That's yet another thing that I need to get advice on at some stage as they start to automatically move percentages of your investments to less risky ones as you approach retirement age.  I haven't shared with them currently that I want to retire early else that would have already started....

BikingBud

dunstonh said:

roadweary said:

dunstonh said:

Having saved quite heavily into my pension, yet the various calculators being so complex, I was thinking about just taking my project pension pot at 60 and dividing that by 20.

So, on that basis you would probably run out of money somewhere between age 70 and 95.

What do people think?

Only time will tell.   All we do know is that you would get away with it in some periods but not in others.   

It also depends on how much money you are allocating to capital expenditure items.  e.g. cars, refurbishments, boilers etc.   People often forget the unexpected costs/capital costs.

Apologies if I'm missing something very basic....but how would 900k run out in 10 years?

I was factoring in inflation and tax as any modelling should on an uncrystallised fund needing £45k p.a. net spending need.   I was taking a guess earlier at what it would likely come out at but I just ran it now on a 60% equities spread and got:

• The worst-case scenario occurred between January 1969  and January 2008 , during which you would have run out of money by the age of 75
  
• The median scenario predicts that you would have run out of money by the age of 90  based on our calculations
• The best-case scenario occurred between January 1975 and January 2014, which would have left you with £9.9m at the end of your life after adjusting for inflation. 

I have included the current state pension maximum in the modelling.  You may have more or less than that.
I did not factor in any capital expenditure. (which over 30 odd years is unlikely)

If changed to 100% cash it is worse (runs out at 88 in best case scenario).

Obviously, we have very limited info and there may be a second state pension and another pension and savings/investments etc but that information is missing on the first post.

BB's fag packet , sorry don't have access to these models, says:

 60>67 = 7 yrs@£55k =£385k - Pre SP cost to achieve £45k - Tax @20% only considered, lazy I know but...
SP £11.5k > 55k-11.5k=£43.5k - Cost per year after SP
(900-385)/43.5=11.8 yrs - Longevity of pot post SP

11.8+7= 19 yrs > 79 yrs - Age when pot runs out but with SP still paid at inflated rate. 

Your 3-4k per month also indicates there is quite some variation on your expectations. If you could settle for the lower figure your tax would drop off by c£3.5k. You don't really want to be depleting your fund to pay the tax man unnecessarily eg:

60>67 = 7 yrs@£42k =£294k - Pre SP cost to achieve £36k - Tax @20%
SP £11.5k > 42k-11.5k=£30.5k - Cost per year after SP
(900-294)/30.5=19.7 yrs - Longevity of pot post SP

19.7+7= 26.7 yrs > ~87 yrs - Age when pot runs out but with SP still paid at inflated rate.

Other things being equal, pension growth, variability of expenditure and broader inflation, SP triple lock? 

I would suggest that you get a very clear perspective of your expenditure now and consider going forward what is and is not discretionary and see how much headroom you actually have in £36k. Then you can make a better decision on what you may wish to enjoy now with the risk that cash flow later is impacted negatively.

Mr Slack's less than you think?

Seems a fair crack if you ask me. And if things appear to be deviating drastically consider options but don't let it run away and deplete too soon.

Albermarle

SouthCoastBoy said:

Albermarle said:

roadweary said:

dunstonh said:

Having saved quite heavily into my pension, yet the various calculators being so complex, I was thinking about just taking my project pension pot at 60 and dividing that by 20.

So, on that basis you would probably run out of money somewhere between age 70 and 95.

What do people think?

Only time will tell.   All we do know is that you would get away with it in some periods but not in others.   

It also depends on how much money you are allocating to capital expenditure items.  e.g. cars, refurbishments, boilers etc.   People often forget the unexpected costs/capital costs.

Apologies if I'm missing something very basic....but how would 900k run out in 10 years?

It is a worst case scenario.
£900K / 20 = £45K pa. Each year it will have to be increased by inflation to maintain the same spending power, so after 10 years it could easily be over £60K pa .
Then lets say the day after you start taking the pension, markets crash by 30% and hardly recover for years. 
In this case there would not be much left after 10 years.

And that is why I need to carry on working, the perils of a dc pension 

Something tells me that you would not be planning to take a 5% drawdown like the OP.
Probably something closer to 3% , so this worst case scenario pretty much disappears.
More likely you will pop off with Millions and with HMRC rubbing their hands !