How much do you think you’ll need to save up to retire on?

Money_Advice_Service wrote: »

The calculator uses a broad range of assumptions (displayed on step 5). One of which is an assumed rate of inflation of 2.5% which is adjusted back. This aims to show the value of someones pension pot and their income at the start of their retirement in today's money if it were payable today.

(MAS - Andrew DipPFS) #talkmoney

The following is quoted from page 4 of 5 of the calculator straight after where it says what income I could receive pa having taken the 25% tfls

This income would stay the same throughout retirement but would buy less over time if prices rise.

I assume state pension is assumed to rise by cpi? How about DC pension, is it assumed to remain the same in real terms if inflation is 2.5% but less if inflation exceeds 2.5%?

Next question, is there a 'household' version of the tool so I can include my DWs pensions?

michaels wrote: »

How about DC pension, is it assumed to remain the same in real terms if inflation is 2.5% but less if inflation exceeds 2.5%?

The 4% rule assumes that you start drawing 4% of your pot and increase it by inflation each year, so it stays the same in real terms.


Analysis of historical returns and inflation rates (including two world wars and the great depression) showrf that in only a small proportion of cases (5% IIRC) would growth have been too low to maintain this.
The inital work was done for the US. The safe rate for the UK is a bit lower. There are also more sophiscated systems.

Alexland wrote: »

Yes and maybe some means tested benefits but that is still not a desirable outcome. Our fallback would be to start releasing money from our home reducing our estate.

One of the advantages of the proposed dutch collective DC pension schemes is that the longevity risk is pooled avoiding the need to oversave just incase you outlive your planning assumptions. You still can't control the growth rate but the trustees would be able to flex the income such that it is sustainable.

Alex

If I only had DC pensions I think I would look to start at 4% when I am 60 (next year), then reduce the drawdown at SPA (66).


I am not certain I would want other people controlling varying my income.


Fortunately I have a mixture of pension types and property.

Money_Advice_Service wrote: »

The Money Advice Service has a great retirement calculator where in a few easy steps, it can give you an estimate of the income you'll get when you retire. This will include income from defined benefit and defined contribution schemes, plus either the basic State Pension or the new State Pension, depending on when you were born. You'll also find out if your likely retirement income is less than you need to fund your desired lifestyle in retirement.
https://www.moneyadviceservice.org.uk/en/tools/pension-calculator

Come back and let me know what you think?

(MAS - Andrew - DipPFS) #talkmoney

Can't sleep so had a quick look at this 'tool'

1. It won't let me set a pot of money which I draw from and deplete between my chosen retirement age and the age at which my pensions kick in - many people, including myself, intend to use an ISA or SIPP for just this purpose

2. It seems to assume, unless I'm missing something, any pension pot is used to purchase an annuity - which is an outdated, and for many bad, model given current annuity rates

3. I've just noticed in the assumptions it makes a 2.5% pa increase to payments based on assumed payrises - which is fine if the pension is a works pension and therefore linked to salary, not if the pension is a private pension or other pension provision outside of a scheme, LISA/ISA/SIPP. Those who do are more likely to set a 'rounded number' - 50/100/200 pm - and leave it at that amount long term without regular review

4. It would be helpful if, rather than having me estimate what my DB pension will be worth the calculator allowed me to give the accrual rate and it model the income based on how many years I would have left until NPA - calculators should be doing the calculating

5. The results don't give any information about potential tax due - surely you can at least provide an indication of basic/higher rate tax with the caveat that the rates and thresholds are subject to change?

6. The results page only permits me to vary my contributions as a percentage of a yearly amount - not helpful when earlier in the tool I had the ability to enter monetary amounts on a monthly or yearly basis

7. As 'the UK Government' has removed mandatory retirement and indicated they expect a more flexible workforce until later in life, it would be helpful if the tool made some acknowledgement to the large number of people who will reduce their hours while drawing on a pension - your calculator is a fixed line where most in the future might find they are faced with a phased retirement

All in all a very basic tool that does not give a realistic representation of how much someone might have to save to retire at anything other than SPA/scheme age but at least makes an effort to acknowledge there are a number of different products available.

6/10

Maybe 7.5/10 if I wasn't grumpy due to lack of sleep...