Help with knowing how much is 'needed' to retire?

Exodi

phlebas192 said:

Wherever we end up in the future the starting point is "now". If pensions increase by inflation, less than inflation or are even cut in the future, the larger they are at the start of the process the larger they will be after the change. 

I truly understand the point you're trying to make, I'm a mathematician at heart, but it is not as simple as you suggest.

Ponder two different futures:

1. The triple lock is ended by a future government, and SP increases in line with CPI.

2. Successive governments of the day feel they are unable to muster the political capital to end the triple lock. To address the surging pensions bill, they means test the state pension for future recipients, clawing it back from anyone who will be in receipt of income over £50k (or whatever) p/a.

In the first scenario, you would be right, the triple locked increases benefited future retires. In the second, for someone earning £50k, you would not.

That's not to suggest I think that's what will happen - I don't have a crystal ball, I don't know what will happen - but neither do you.

That's why you can not suggest with certainty that maintaining the triple lock will benefit everyone (though it is obviously in current retirees interests).

That's not even considering the non-financial consequences. Would most see it as a win if police numbers reduced even further or NHS appointments were further delayed, to keep the triple lock maintained?

The only people I understand arguing for it are current beneficiaries of the SP, and based on the forum demographic, you'd expect the triple lock to be popular here. Though credit where it's due, many are realistic it can't last forever.

B0bbyEwing said:

My wild uneducated guess is that there'll be something. 

That something may be a heavily reduced state pension where my workplace pension makes up what'd be the difference. 

It may be I'll get the state pension.... When I'm 80.

It may be that if my private/workplace pension is worth £XYZ and I have £abc in savings then I'll only get a state pension of £whatever whereas if I did less in retirement planning I'd get more state pension. 

They're all 'something' possibilities. 

Do I think it'll be the amount that it'd be if I retired today? My wild guess is no. But I'm not planning on relying on it either. As I said - bonus. As soon as you rely on others then you're at their mercy so I try and sort myself. 

I think your last point is eminently sensible. It's good to have the option.

My point was don't be blinkered by what is likely to be the consensus of this forum. Outside of this bubble, pessimism of the future of the SP is widespread (as you are aware). Some forumites may characterise them as pessimistic, they might characterise them back as naïve.

Rather than second guess what the government of the day will do in decades to come, if you are able to, I'd at least consider doing a second financial plan that doesn't include the SP - real worse case scenario, but plan for the worst and hope for the best.

If it turns out all is hunky dory and you get the promised full state pension in a few decades, you could retire early.

Cobbler_tone

Great. Sounds as though some are planning to put less into the economy. Whilst planning for not getting a state pension, don’t forget another million for care home fees.
Fine to aspire to having SP as excess income but if it’s at the expense of working longer to achieve that….I’m out.

I hope not too many people lose sleep over these things that haven’t happened. Reminds me of the amount of spam I see by firms trying to help people who took money out of their pensions recently.

phlebas192

Exodi said:

That's why you can not suggest with certainty that maintaining the triple lock will benefit everyone (though it is obviously in current retirees interests).

Accepted, but you are creating something of a strawman there. I didn't say that absolutely everyone would benefit, just that current increases benefit future pensioners. Perhaps some of the wealthier ones may not get the full benefit, or even any of it, but they're not the ones worrying about whether the SP will even exist. 

B0bbyEwing

Well what I'm planning on doing is sorting myself out. I try not to worry about what I can't control and if I was trying to sort out the world's problems then I'd be here all day & not get anything done.

If down the line I can't sort myself & become too much of a burden to others I'd rather just be put to sleep & be done with it. 

Exodi

phlebas192 said:

Exodi said:

That's why you can not suggest with certainty that maintaining the triple lock will benefit everyone (though it is obviously in current retirees interests).

Accepted, but you are creating something of a strawman there. I didn't say that absolutely everyone would benefit, just that current increases benefit future pensioners. Perhaps some of the wealthier ones may not get the full benefit, or even any of it, but they're not the ones worrying about whether the SP will even exist. 

I don't see the strawman?

You said it again yourself - "current increase benefit future pensioners" - objective. Not 'hopefully' or 'should benefit most future pensioners'. I also think it's a bit presumptuous to suggest wealthier* people are not worried they might not get the state pension.

*wealthy being subjective, many who some people may see as wealthy do not see themselves as wealthy. Wealthy can be colloquially defined as someone richer than us.

Plus if you want an example of a strawman, this entire post is pretty much a textbook example:

Cobbler_tone said:

Great. Sounds as though some are planning to put less into the economy. Whilst planning for not getting a state pension, don’t forget another million for care home fees.
Fine to aspire to having SP as excess income but if it’s at the expense of working longer to achieve that….I’m out.
I hope not too many people lose sleep over these things that haven’t happened. Reminds me of the amount of spam I see by firms trying to help people who took money out of their pensions recently.

kempiejon

B0bbyEwing said:

Thanks. I feel like I started quite late at 28 & even then it was just small amounts (£100pm as we saved for a house also). 

Quite boring maybe but I only really had 2 goals for adult life. 1 was to buy a 1st house I didn't want to move from which I feel I've done. Thr other was retire as early as possible......

Over time I also categorised probably more than most do so that I could get a more accurate picture of where spends were going (for example buying a load of chocolate would go in its own separate junk food category separate from a supermarket spend). 

This year though with costly holidays paid for we've actually started the year using it properly. For example, I've budgeted 1 coffee out for the month.....

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Currently my pot is just over £100k. That's SIPP, L-ISA & workplace. 

Budgeting I found enlightening. Know exactly what was spent and how much of that was essential, optional and indulgent.  Cut out indulgent, reduce optional that frees more money for FI investment
Hmm, if your goal is to retire as early as possible I'd suggest a load of chocolates, junk food (do you mean takeaways or frozen pizza n oven chips at home), costly holidays and coffee out sounds to me like you've tempered that plan. Fair enough there is the living part of life.
Frugality and deferred gratification can get extreme, I have that T shirt.

So you're adding to your SIPP, L-ISA and workplace do you know where that is invested, what you're paying in fees and a history of returns? With those sorts of numbers you can get a handle on where you'll be in 5, 10 and 15 years. My investment choices early on will have improved my position as did leveraging my income tax position.
RE and you'll need money outside of LISA or SIPPs as they cannot be accessed that early.

Cobbler_tone

Exodi said:

phlebas192 said:

Exodi said:

That's why you can not suggest with certainty that maintaining the triple lock will benefit everyone (though it is obviously in current retirees interests).

Accepted, but you are creating something of a strawman there. I didn't say that absolutely everyone would benefit, just that current increases benefit future pensioners. Perhaps some of the wealthier ones may not get the full benefit, or even any of it, but they're not the ones worrying about whether the SP will even exist. 

Plus if you want an example of a strawman, this entire post is pretty much a textbook example:

Cobbler_tone said:

Great. Sounds as though some are planning to put less into the economy. Whilst planning for not getting a state pension, don’t forget another million for care home fees.
Fine to aspire to having SP as excess income but if it’s at the expense of working longer to achieve that….I’m out.
I hope not too many people lose sleep over these things that haven’t happened. Reminds me of the amount of spam I see by firms trying to help people who took money out of their pensions recently.

You can stick to the role of Mr Condescending, I'll take Strawman.
Maybe I have little time for people who waste energy on negative thinking and needless worry and speculation. Especially in a world where it can quickly drag others down and is subsequently passed off as fact.
The people suggesting the triple lock will be scrapped, or even the state pension itself, is wild speculation.   
It is no different to any other aspect of life and constant change. You plan on what you know and adjust accordingly. Second guessing will usually lead to poor decision making.

Besides, everyone keeps telling me that the tax free lump sum level is being reduced/scrapped and that the stock market is about to implode.

A stopped clock..... 

Exodi

Cobbler_tone said:

Maybe I have little time for people who waste energy on negative thinking and needless worry and speculation. 

Negative thinking and needless worry and speculation?

You mean planning around more than just a single eventuality - my suggestion is to plan for the worse and hope for the best. If the best happens, fantastic, you can retire early. If the worst happens, you had already planned for it. Your suggestion is effectively the opposite, if the best happens well that was as you planned, if the worse happens, well you're pretty stuffed. I'm not sure why you suggest the former is the one that would keep people up at night worrying?

Of course I could plan the triple lock lasts a long time, I get the full state pension, my investments return double digits every year (sorry now I'm doing the strawman), but I think it's naïve to only plan around the best outcome - especially over decades (obviously different if OP is retiring sooner).

Cobbler_tone said:
Especially in a world where it can quickly drag others down and is subsequently passed off as fact.

The people suggesting the triple lock will be scrapped, or even the state pension itself, is wild speculation.   

I agree with the first half, I'd imagine that's why you've taken issue with what I said, because you're likening it in your mind to the wild budget speculation causing people to cash in their TFLS. FWIW, I also think that was daft.

Cobbler_tone said:
The people suggesting the triple lock will be scrapped, or even the state pension itself, is wild speculation.   

I think your suggestion 'the triple lock will be scrapped (...) is wild speculation' is even wilder. It doesn't take a mathematician to realise that an instrument that ratchets up spending by more than inflation and earnings is not sustainable over the long term. I do not believe you do not know this.

Yes the government of today hasn't confirmed they will scrap it. But that doesn't confirm that it will never be scrapped - it has to be. The question is when. Believing it will last forever is naivety. 

Cobbler_tone said:

It is no different to any other aspect of life and constant change. You plan on what you know and adjust accordingly. Second guessing will usually lead to poor decision making.

I agree - which may sound like a contradiction, but we know the triple lock is not sustainable. It's not too different from having an emergency fund because you know the boiler will eventually need replacing, but you don't know when. Politicians also acknowledge this. It isn't in effect because politicians feel it is necessary any more, it is in effect because no party has had the political capital to end it - Ian Dale references the situation where many politicians dance around the matter on the radio, then when the LIVE light switches off tell him they know the triple lock is a serious issue. As I said earlier, nearly 40% of the population also acknowledges this and expect it to end within the next decade.

Knowing this and the political situation leads me to conclude (like the OP) that the SP will change, but I don't know how - perhaps ending the triple lock in a timely manner will be all that happens however what's fairest or most reasonable isn't usually what happens (look and the standstill in France over protests against any measures to address the ballooning pension spend, which has stoked division which can be distilled by the 'C'est Nicolas qui paie' slogan). The best way to address that in my planning so I'm not making guesses or speculating on the details of future policy, as I said at the start, was to plan for the worse.

FWIW I don't think for one minute the state pension will be abolished in the next few decades (it would cause uproar) and obviously I hope it's not for selfish reasons.

Cobbler_tone said:
Besides, everyone keeps telling me that the tax free lump sum level is being reduced/scrapped and that the stock market is about to implode.

Again, please stop with this strawman, it's deeply unhelpful. I haven't made those suggestions so I don't appreciate you keep likening the two things (as above, I agree with your despair on that and was regularly posting during the speculation warning people against cashing in their pensions).

B0bbyEwing

Well this has been a lesson I didn't expect. 

Straw men & 3 locks. 

Google has been put to some use today 😂

michaels

Exodi said:

phlebas192 said:

Wherever we end up in the future the starting point is "now". If pensions increase by inflation, less than inflation or are even cut in the future, the larger they are at the start of the process the larger they will be after the change. 

I truly understand the point you're trying to make, I'm a mathematician at heart, but it is not as simple as you suggest.

Ponder two different futures:

1. The triple lock is ended by a future government, and SP increases in line with CPI.

2. Successive governments of the day feel they are unable to muster the political capital to end the triple lock. To address the surging pensions bill, they means test the state pension for future recipients, clawing it back from anyone who will be in receipt of income over £50k (or whatever) p/a.

In the first scenario, you would be right, the triple locked increases benefited future retires. In the second, for someone earning £50k, you would not.

That's not to suggest I think that's what will happen - I don't have a crystal ball, I don't know what will happen - but neither do you.

That's why you can not suggest with certainty that maintaining the triple lock will benefit everyone (though it is obviously in current retirees interests).

That's not even considering the non-financial consequences. Would most see it as a win if police numbers reduced even further or NHS appointments were further delayed, to keep the triple lock maintained?

The only people I understand arguing for it are current beneficiaries of the SP, and based on the forum demographic, you'd expect the triple lock to be popular here. Though credit where it's due, many are realistic it can't last forever.

B0bbyEwing said:

My wild uneducated guess is that there'll be something. 

That something may be a heavily reduced state pension where my workplace pension makes up what'd be the difference. 

It may be I'll get the state pension.... When I'm 80.

It may be that if my private/workplace pension is worth £XYZ and I have £abc in savings then I'll only get a state pension of £whatever whereas if I did less in retirement planning I'd get more state pension. 

They're all 'something' possibilities. 

Do I think it'll be the amount that it'd be if I retired today? My wild guess is no. But I'm not planning on relying on it either. As I said - bonus. As soon as you rely on others then you're at their mercy so I try and sort myself. 

I think your last point is eminently sensible. It's good to have the option.

My point was don't be blinkered by what is likely to be the consensus of this forum. Outside of this bubble, pessimism of the future of the SP is widespread (as you are aware). Some forumites may characterise them as pessimistic, they might characterise them back as naïve.

Rather than second guess what the government of the day will do in decades to come, if you are able to, I'd at least consider doing a second financial plan that doesn't include the SP - real worse case scenario, but plan for the worst and hope for the best.

If it turns out all is hunky dory and you get the promised full state pension in a few decades, you could retire early.

I think you are being pessimistic on the maths.  The govt can maintain the triple lock and simply keep the average number of years of receipt constant via the retirement age.

The freezing of the personal allowance means that the net cost of the triple lock will probably decline over time.