Pension stuff, how's it all looking ? HAve you prepared ?

[JackyJoll]

A small part of my work pension is Additional Voluntary Contributions. The main part is final salary.

The AVC is treated pretty much like a pension scheme with an actual pot of money. The amount they offer always sounds disappointing.

I took the AVC as an annuity. There were many choices. Linking it to inflation was optional and significantly reduced the monthly income.

Letting my (younger) Mrs have a 50% widow’s pension should I croak, was another option which significantly reduced the income.

My drinking loads of units increased the annuity, as did my asthma. My not smoking decreased the annuity.

[JackyJoll]

there are some things in the small print that I don't like, such as the payments only being guaranteed for a certain length of time, then they might go down.

In my own case I got the income guaranteed until death. That’s another thing that reduced the annuity.

[Potter]

I looked at buying an annuity (much against the advice of my FA) just because I wanted the comfort of a guaranteed income, and it was pretty crap tbh.
IIRC it was L&G that quoted me against a lump sum investment of £500k over a twenty year term and it worked out that if you added up all the monthly payments I would come out with an extra £40k, against just putting it in a bank with no interest and drawing down one twentieth every year.

You easily make more in interest if you kept it in one year fixed bonds and taking the interest every year, then reinvest.

Every time I look at it I can't for the life of me understand why anyone buys an annuity - unless it's using a pension pot that you can't choose to take without penalties and tax. If you have a lump sum sitting in your bank then it's definitely not worth buying one.

[JackyJoll]

Annuities are low because they are going to pay what is agreed, no matter badly interest rates and the market perform and (in cases like mine) no matter how long the beneficiaries live.

I did it out of curiosity as much as anything. It involved about 4% of the theoretical fund.

[JackyJoll]

I don't have much of a pension, probably £60k all in, so my retirement will be funded by savings and investments, which aren't guaranteed to rise with inflation, unless I buy an annuity with some of it, but even those aren't guaranteed after a time.

I can’t remember if you said you pay tax in the UK. One of the reasons resident Brits talk about pensions a lot, is that putting money in a pension can get you out of paying higher rate income tax.

[Count Steer]

Anyway, just out of interest, what do you reckon is enough to retire with?
(if your house is paid for, you have no debt and you have sensible expectations)

This popped up today. https://www.fidelity.co.uk/markets-insi ... SDaNrdenfM

It's a tad long-winded but I thought you might be interested in this bit:

How much will you need for a decent retirement?

New estimates of retirement were published by the Pensions and Lifetime Savings Association (PLSA) earlier this month. Individuals seeking a comfortable retirement should now expect to spend £43,100 a year, up by 15.5%.

At Fidelity, we recently ran some calculations based on retiring at age 65 with the aim of delivering income of £43,500 a year, escalating with inflation. 

The individual would receive the current full State Pension from age 67, £10,600 a year today, reducing the income they need from investments to £32,882.

A woman would need to accumulate £640,000; a man would need less, £600,000, due to their shorter life expectancy. This is based on the income rising with inflation at 2% and assumes investment growth of 5% gross with 1% fees and with no plan to pass on an inheritance.

Life expectancy is assumed to be 20 years for a man and 22 years for a woman. But if the man lived to 92 rather than 85 they would need to save £750,000 - an additional £150,000.

Variables in investment returns can also warp the maths. If annual returns were as poor as 2%, the man would need £810,000. If markets were kind and he notched up 8% gains he would need only £460,000.

Finally, we can’t forget inflation. If the Consumer Prices Index, or CPI, settled over the very long-term at 4%, the sum needed would leap to £803,000.

[Potter]

My FA did the calcs on his fancy sheet and he reckoned to absolutely guarantee £40k a year, every year, (based on historical performance over the last one hundred years) you'd need a pot of just shy of a million, but you can do it with less, the one million figure is a worst case scenario.

The most basic plan when I said I wanted about £40k a year was the traditional mix of property/stocks/cash and when you work it out you'd need north of £800k starting money to make it work with a conservative risk profile. I could list it all out but it's boring.

Most people won't need to worry about such things, the average person is unlikely to have to decide how they will invest their million quid.

[Count Steer]

My FA did the calcs on his fancy sheet and he reckoned to absolutely guarantee £40k a year, every year, (based on historical performance over the last one hundred years) you'd need a pot of just shy of a million, but you can do it with less, the one million figure is a worst case scenario.

The thing with some of these calculators is that the money is still generating the, nominal, £40k pa the year you fall off the perch. If you want to wind down the capital £1M will last 25 years if you spend £40k pa and get no return on investment. (Ignoring inflation).

FAs and Fund Managers don't like the idea that you can just spend it.

[Potter]

My FA did the calcs on his fancy sheet and he reckoned to absolutely guarantee £40k a year, every year, (based on historical performance over the last one hundred years) you'd need a pot of just shy of a million, but you can do it with less, the one million figure is a worst case scenario.

The thing with some of these calculators is that the money is still generating the, nominal, £40k pa the year you fall off the perch. If you want to wind down the capital £1M will last 25 years if you spend £40k pa and get no return on investment. (Ignoring inflation).

FAs and Fund Managers don't like the idea that you can just spend it.

There are loads of scenarios with a million quid to deploy, but yeah the FAs tend to work on solutions that don't deplete all your capital at the end of whatever term you specify.

That's why they don't like cash solutions (i.e. putting it in a bank and living off the interest/draw down to zero) and they're (mostly) all welded to property as a large part of your portfolio as a safe solution to create income and guarantee your capital doesn't disappear.
It's hard to argue against it really, houses are as a safe as...erm...houses.

[JackyJoll]

Individuals seeking a comfortable retirement should now expect to spend £43,100 a year,

About £51,000 gross, according to the podcast. Gosh!

[Horse]

Individuals seeking a comfortable retirement should now expect to spend £43,100 a year,

Hmmm ... I wasn't spending half of that when working ... Need to up my game now retired!

[Bustaspoke]

Hmmm ... I wasn't spending half of that when working ... Need to up my game now retired!

Same here!

[Horse]

Hmmm ... I wasn't spending half of that when working ... Need to up my game now retired!

Same here!

If it was funded adequately, I'd be willing to give it a go

[Count Steer]

Individuals seeking a comfortable retirement should now expect to spend £43,100 a year,

Hmmm ... I wasn't spending half of that when working ... Need to up my game now retired!

My view is that people don't actually keep tabs on what's really going out....particularly when there are 2 of them.

[Horse]

Individuals seeking a comfortable retirement should now expect to spend £43,100 a year,

Hmmm ... I wasn't spending half of that when working ... Need to up my game now retired!

My view is that people don't actually keep tabs on what's really going out....particularly when there are 2 of them.

Well, my own 'into the bank' amount was about half of that, so ... ?

[Count Steer]

Hmmm ... I wasn't spending half of that when working ... Need to up my game now retired!

My view is that people don't actually keep tabs on what's really going out....particularly when there are 2 of them.

Well, my own 'into the bank' amount was about half of that, so ... ?

Dunno Hoss but, tbf, most 'how much do I/we need...?' guides usually work on the appropriate fraction of in work earnings needed to avoid retirement shock rather than a 'comfy' figure. (One mans comfy is another man's crusts and gruel). 2/3rds in the initial years springs to mind.

Obvs if people have been living on 40p a month and Greenshield stamps for 40 years, £43k is going to be quite acceptable.

[Horse]

My view is that people don't actually keep tabs on what's really going out....particularly when there are 2 of them.

Well, my own 'into the bank' amount was about half of that, so ... ?

Dunno Hoss but, tbf, most 'how much do I/we need...?' guides usually work on the appropriate fraction of in work earnings needed to avoid retirement shock rather than a 'comfy' figure. (One mans comfy is another man's crusts and gruel). 2/3rds in the initial years springs to mind.

We'll be ok, but not flush. Filly will get a good pension when she retires, and I will get the state pension, both later this year. After that, if my three 'savings' pension pots recover, I'll stick them into a drawdown option.

We're not totally frugal, but won't fritter either. Foal has been advised that previous largesse and support won't be forthcoming beyond commitments already made. Reductions already made in regular outgoings too.

We've planned to ensure a reasonable lifestyle is not just possible but relatively 'easy'. If it hadn't been, I wouldn't have let Filly put in her notice

[Potter]

In the budget they announced a new £5k ISA allowance, so that's £50k a year between a couple.

Plus some NS&I fixed deposit schemes, it said they will be three year products for now, but they're taking a long term view of things, so if I can tie a million quid up in an NS&I 5% fixed deposit for the next three years I'll do that for my retirement income, it's an easy guaranteed 5%.
If I could I'd sign up for 40yrs and that would be me very happily tucked up with a retirement income.

Hopefully they use it exactly for people like me who want to create a very simple pension from a fixed deposit income stream.

[Greenman]

In the budget they announced a new £5k ISA allowance, so that's £50k a year between a couple.

Plus some NS&I fixed deposit schemes, it said they will be three year products for now, but they're taking a long term view of things, so if I can tie a million quid up in an NS&I 5% fixed deposit for the next three years I'll do that for my retirement income, it's an easy guaranteed 5%.
If I could I'd sign up for 40yrs and that would be me very happily tucked up with a retirement income.

Hopefully they use it exactly for people like me who want to create a very simple pension from a fixed deposit income stream.

So, and please correct me if i'm wrong here, they are once again opening up doors for people who already have a fair chunk of money to be able to make more money for doing fuck all?

Right?

[weeksy]

In the budget they announced a new £5k ISA allowance, so that's £50k a year between a couple.

Plus some NS&I fixed deposit schemes, it said they will be three year products for now, but they're taking a long term view of things, so if I can tie a million quid up in an NS&I 5% fixed deposit for the next three years I'll do that for my retirement income, it's an easy guaranteed 5%.
If I could I'd sign up for 40yrs and that would be me very happily tucked up with a retirement income.

Hopefully they use it exactly for people like me who want to create a very simple pension from a fixed deposit income stream.

So, and please correct me if i'm wrong here, they are once again opening up doors for people who already have a fair chunk of money to be able to make more money for doing fuck all?

Right?

But that's a large chunk of people now... You only have to look on here to see that people without money are the minority these days.