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

[Count Steer]

What is the average pension pot for a fifty year old person?

Google throws up a few different answers, I wondered what people think?

It's a bit of a 'how long is a piece of string' question really. The average pot is probably a lot less than is ideal. The Google figures are all over the shop and focus on what you 'should' have by then. £50k pops up a lot. (And should double over 10 years). What the ideal is depends on when you plan to retire and what sort of retirement you want. Usual thing, if you want to retire on, eg, 50% or 66% of current income you just have to work backwards to figure out what you need to save/when you can retire. That's before taking into account what inflation/interest rates and random Chancellors will do to the value of the pot/income from it.

According to recent reports the state pension alone is a 'below the poverty line' existence.

[Mr. Dazzle]

Google says all sorts of tosh, like the average savings (not pension, just savings) of a 45yr old is about three times their yearly salary or just over £100k - which I think is utter cobblers, what average 45yr old has a hundred grand stashed away.

Obviously I know people with that amount and more, but they’re exceptions, most normal working class people I know don’t have six figures in their savings account.

I've got more than that and I'm 39

Deffo a string question though

[Count Steer]

Google says all sorts of tosh, like the average savings (not pension, just savings) of a 45yr old is about three times their yearly salary or just over £100k - which I think is utter cobblers, what average 45yr old has a hundred grand stashed away.

Obviously I know people with that amount and more, but they’re exceptions, most normal working class people I know don’t have six figures in their savings account.

To be fair, it's not Google saying it but yes, if that average is cashable savings, I'd say it's bolleaux. Most folk at 45 are up to their neck in mortgage rather than salting it away.

[Count Steer]

Ideally our plan would be to take the lot out at fifty five, it’s worthless as an actual pension/annuity, we might as well take it and do something better but I’ll need decent advice or HMRC are going to have my pants down.

You could put it into a SIPP based on investments of your choice. Take out the initial tax free slab and stick it in ISAs and then pull/draw down the rest over time in a tax effective fashion and use it as part of your annual ISA allowance...or something along those lines.

Difficult to pull it all without the tax man sharpening his carving knife.

[Count Steer]

Ideally our plan would be to take the lot out at fifty five, it’s worthless as an actual pension/annuity, we might as well take it and do something better but I’ll need decent advice or HMRC are going to have my pants down.

You could put it into a SIPP based on investments of your choice. Take out the initial tax free slab and stick it in ISAs and then pull/draw down the rest over time in a tax effective fashion and use it as part of your annual ISA allowance...or something along those lines.

Difficult to pull it all without the tax man sharpening his carving knife.

We’re maxed out on allowances now.

The allowance rules are a joke, as I understand it you can earn up to £18k each tax free from interest as long as you don’t have any income from anywhere else. It’s your usual allowance, plus a grand, plus an extra five grand special allowance if you don’t have any other income, but if you do have any income then you lose the extra five grand allowance. So bizarrely it seems that if you take a job and earn even just a pound then you lose the whole five grand allowance.

There's no max total on ISAs just the £20k pa each, so you could drip feed it out of the SIPP using draw-down in 5+ years time making sure you didn't eg take enough to put you in another tax band in a year.

Yeah the allowances can be arcane. My bro retired and his employers wanted him to go back on a casual basis from time to time. He did for a little while then decided the only people (apart from the employer) that were benefiting were HMRC. After tax it made his daily rate rather .

[Dodgy69]

If you work for a decent company who put a good % of your salary in your pot and you match it, it'll build up quite nicely, particularly if you're young, so at 57 ?? retirement could be doable.

Trouble is, these poxy politicians keep increasing the age that you can get your hands on it. I think the state pension will slowly become unreachable for some, based on this myth that we're all living longer.

Drawing a pension is definitely all about tax avoidance and identifying the loop holes.

[JackyJoll]

Yeah the allowances can be arcane. My bro retired and his employers wanted him to go back on a casual basis from time to time. He did for a little while then decided the only people (apart from the employer) that were benefiting were HMRC. After tax it made his daily rate rather .

I’ve heard of guys getting by on a pension, then taking on a small job to pass the time, then finding most of the wage from the small job is taxed at “Higher Rate,” especially in Scotland.

[Mr. Dazzle]

based on this myth that we're all living longer.

It's a double (maybe even triple!) whammy.

Life expectancy is going up, birth rates are coming down. So not only are people living longer (I.e. there are more retired people) there are a fewer young people to replace them as tax payers. Triple whammy cause the aging population needs more and more expensive medical care.

There are two obvious solutions: Raise retirement age. Or, my personal favourite as I've said many times, mandatory televised death matches for the over 60s

With any luck ChatGPT will save us.

Figure 1_ Total Fertility Rate (TFR) increased slightly in 2021.png (24.58 KiB) Viewed 310 times

HPfE2018_Ch1_Fig4.jpg (49.68 KiB) Viewed 310 times

[Dodgy69]

I tend to believe that there's just more old people than there has been in the passed. Have a walk around a cemetery and look at the headstones, I have.

Delaying folk getting there own workplace pensions is just scandalous. I do think taxpayer's money could be spent a lot smarter and undoing the call for us all to work longer.

[Mr. Dazzle]

Why?

They're trying to stop people spaffing it all by the time they're 62 and being a drain on the tax payers (which there wont be ebough of) for another 25 years.

You're free to save money in places whcih don't give tax breaks if you prefer

[Count Steer]

Why?

They're trying to stop people spaffing it all by the time they're 62 and being a drain on the tax payers (which there wont be ebough of) for another 25 years.

You're free to save money in places whcih don't give tax breaks if you prefer

It's not that long since you couldn't get your hands on your pension at 55 never mind pulling a tax free chunk out of it. Not really thought through given increasing life expectancies and declining birth rates eh?

[Horse]

The only thing that gives me the hump is the £5k special allowance that disappears entirely once you earn a pound in income that comes from paid employment, so you can quite literally be worse off because you work.

Do you have a link for info on that?

All I can see on .gov is:
Your tax-free Personal Allowance
The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on.

Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. It’s smaller if your income is over £100,000.

I'm drawing a final salary type pension, and will get the state pension later this year.

But I also work part-time - and won't get anywhere near enough to cover £5k, whether as additional tax-free or anything else.

[Yorick]

We get by on under £3k a month. Obviously we have no heating bills but it costs us about £3,000 in private health costs.
We live very nicely, but not spending for the sake of it.

[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)

My mate did it a couple of years ago with half a million in the bank, him and his wife work a couple of days a week in department stores and that pays all of his bills and most of his food money, so he only dips into his half a million for the odd holiday or something. My other mate did it on £750k that he has invested in bonds returning about 5% and he doesn't work at all, he has about £3k a month coming in and that's enough.

I really don't know what a lump sum figure would be tbh - and people's needs/expectations vary. I think if I worked out the lump sum equivalent of our company pensions I'd be a bit (Although we both left the jobs with final salary pensions some years before we actually retired so didn't have the full 40/60ths of final salary or whatever the max was in them. I know some people that stuck with average jobs in companies like that and their buy out figure for their pension - if they'd been daft enough to accept - was over £1M).

If I waved a wet finger in the air I'd say, for a couple, used to a reasonably comfortable existence, £3k a month is a minimum, £5k a month is 'comfy' and an emergency stash is a nice to have. As I say, needs/expectations vary and £3k/month would keep some folk quite happy.

[weeksy]

Hold on a sec. Without a mortgage you think £3000 a month is a minimum and £5000 a month comfortable?

They seem very high to me.

[Yorick]

Hold on a sec. Without a mortgage you think £3000 a month is a minimum and £5000 a month comfortable?

They seem very high to me.

We came over here with a pot of cash.
When we bought this villa, we worked out that we had about £30k a year to live on till our pensions kicked in 12 years away

And we've kept to that quite easily.

The income from the apartment also meant that the pot is still healthy.

[Dodgy69]

Reckon we could manage on £1500 a month.

[Buckaroo]

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)

My mate did it a couple of years ago with half a million in the bank, him and his wife work a couple of days a week in department stores and that pays all of his bills and most of his food money, so he only dips into his half a million for the odd holiday or something. My other mate did it on £750k that he has invested in bonds returning about 5% and he doesn't work at all, he has about £3k a month coming in and that's enough.

I really don't know what a lump sum figure would be tbh - and people's needs/expectations vary. I think if I worked out the lump sum equivalent of our company pensions I'd be a bit (Although we both left the jobs with final salary pensions some years before we actually retired so didn't have the full 40/60ths of final salary or whatever the max was in them. I know some people that stuck with average jobs in companies like that and their buy out figure for their pension - if they'd been daft enough to accept - was over £1M).

If I waved a wet finger in the air I'd say, for a couple, used to a reasonably comfortable existence, £3k a month is a minimum, £5k a month is 'comfy' and an emergency stash is a nice to have. As I say, needs/expectations vary and £3k/month would keep some folk quite happy.

Yep, just about spot on. I've shared my info previously, so won't state it again, but I think your damp digit is pretty accurate.

[Treadeager]

I reckon those two figures are in the right " ball park "

[Horse]

Hold on a sec. Without a mortgage you think £3000 a month is a minimum and £5000 a month comfortable?

They seem very high to me.

It's fairly easy to get a (as CS says) finger in the air estimate.

Add up all your regular monthly bills
Add in irregular amount for dentist, opticians, with respective treatments, car services & tyres, etc., etc.
Add in annual one-offs such as insurance renewals, AA membership, etc.
Add in extras: birthdays, Christmas, holidays
Add in house repairs (new boiler, new roof?), furniture, redecorating, clothes, etc.
Then spend time thinking of everything you might do and might spend.

Your life will change. Try to imagine how and the costs involved will change too.

Then contingency. Think about how fuel bills have changed.