If you had enough, could you not bother with a pension & just live off savings instead? Is there a rule that you have to have a pension?

[Aop]

Totally ignorant here, that's why I'm asking. Like, lottery winners wouldn't need a pension would they?

Are private pension schemes safe? I remember a couple that went pear shaped some years ago? Is it more tightly regulated now?

I personally think pensions are the way to go, we put 10% away every month and Dh's company more or less match it, why wouldn't you take what is in essence free money which currently comes with tax relief.

One benefit of some types of pension is that it is paid until you die. My great grandparents retired at 60 with plentiful savings (they thought). My great grandmother died shortly afterwards, but my great grandfather lived to be 96, went through his savings and ended up in a council flat on just a state pension. It’s really hard to forecast 36 years into the future.

We are approaching retirement and have a mix of pensions and savings which we will draw on at different times to maximise our income.

If £1m was put on deposit earning no interest and paid £40k per annum it would run out in 25 years not 20, but who does that realistically? If you are getting good investment advice you should be hitting double-digit total returns on average per annum. After costs, inflation and tax.

If you are hitting 10% total returns in an equity based fund after management charges and assume underlying taxation is 20% CGT and 8.75% dividend income tax, the fund would not run out even if you were drawing £40k each year and increased that by 4% inflation. In fact after 50 years (if you lived that long) it would be worth £8.3m in future money.

If you had a less risky investment fund generating 5% total returns, everything else the same, it would run out after 26 years and 4 months. You are still getting out £40,000 per annum increasing by 4% compound each year.

If you take that same less risky approach generating 5% etc, and assumed inflation eventually came under control back to 2% your money would run out after 36 years and 10 months.

The key is to invest for growth and make sure management charges are low. These can have a large effect on your money over time.

I have a few friends that don’t work despite children being young adults, so have no private pension and haven’t made all National Insurance payments so won’t even get the full state pension.

You don't have to have a pension, but you get tax back on your contributions. No savings account or investment will instantly give you 20% return.

Also your savings will run out (unless you have invested it and live off the returns), your pension won't.

The only issue is if you die before or soon after retirement, with savings your family will inherit it, pensions are a bit more complicated.

There is no rule to say that your financial planning must involve a pension, and there is a line of reasoning that says that maxing out your ISA contributions is a viable alternative approach. Advantages of a pension include the tax breaks and that your employer may contribute; disadvantages include the lack of flexibility and the fact that pensions legislation can and likely will be amended between now and when you access the money.

I’d not heard of that; are you sure it wasn’t a company scheme?

Private pension funds are supposed to be segregated.

I think @CherryRipe1 means private as I’m not state, rather than private individuals- so, including company schemes.

Yes, some company schemes that were Defined Benefit went under - fraudulently in some cases.

There was a huge raft of new legislation around 2005 including the introduction of the Pension Protection Fund that (high level) guarantees 90% of these company Defined Benefit schemes now.

So make your decisions based on legislation.

There are inheritance tax benefits too, as a pension is held outside of your estate for that purpose.

They also don’t count as savings for benefits - £16K cash savings, no UC. £160,000 pension savings - UC still paid.

This ringfencing can be really helpful. When FIL died and left behind no savings in the bank and a huge load of debt DH and I were extremely worried that we'd be liable for the debts. We weren't and because FIL had money in a pension it could still be paid to DH rather than swallowed up by the credit card companies.

The tax back on Pensions are free money. Why wouldn’t you?

My pension will be diddy so I don’t expect I’ll be paying any tax. Better than nothing!

New because you pay tax on withdraw at certain amount and also it's taxable.

Ive got.
A small sipp, a laughable work pension...and an ISA.
I'm leaning towards the stocks ISA because it's easier! And tax free and you can withdraw What want.

I'll fess up, my pot is 1.5M. I am extremely risk averse. My plan is to take the 500 and live from it for as long as possible and buy a property to let with the 1M. Hopefully that would ensure capital growth & income & when the original 500 sum is gone then draw another 500 and buy another smaller buy-to-let with the other half and run my money down towards end of life.

I want to make it last a good 30yrs

Is your pot in a pension or not?

no

Then you are throwing away a lot of money unnecessarily, money that you could have without any risk at all.

Your money though, so your choice.

It’s just a wrapper for your money that is pretty tax efficient particularly if you’re a higher rate tax payer.

There is an argument though that having some retirement funds in isas rather than pensions would be sensible given access restrictions.

if you’ve got a lump sum or 1.5m you really need some sensible advice. You’d probably want to be putting rental income into a pension each year. It would be very unusual to not have any of your assets invested though. You’d be putting a lot into the property basket z

Oh 😂 I read the question as "If you have your own funds, do you have to take state pension?"

I thought it was an altruistic musing, that if someone didn't need to take money from the state, should it be left so it could be spent on those who need it more. 💁

Survive perhaps, but what about living what's rest of my life to the fullest. I'm not paying into my pension to just survive.

And for only 20 years? Based on my genes I'll be retired for nearly twice that unless something else takes me first.

Don't you think not buying an annuity is more risky??

This is where it gets tricky - if you divorce and he has a very good divorce lawyer, you could end up with next to nothing.

From what I’ve read about the FIRE movement if you’ve got enough saved that you could withdraw 4% each year and live off that then that’s enough to retire. I assume the pot is invested to ensure it grows by more than the 4% you’ve withdrawn.
I think mix of pension and savings is the best option. You can access savings anytime you want and you will get taxed on pension income anyway. It’s only really delaying the tax.