Pension income

[BreakingAndBroke]

Posting for traffic.

I keep seeing articles about how big a pension pot you need to have a minimum/modest/comfortable standard of living in retirement, and the levels vary significantly (pots of £37k, £150k or £500k). Obviously, there are huge variations between £37k and £150k or between £150k and £500k!

If you are a pensioner, what is your monthly income (from all sources, eg. State pension, private pension, widow/er's pension, BTL income, businesses or jobs, interest on savings, stocks, shares etc) and how much in non-pension savings do you have?

And do you consider yourself to have a minimal, modest or comfortable standard of life?

https://www.thetimes.co.uk/money-mentor/pensions-retirement/private-pension/pension-pot-amount-average-uk-how-much

We might start retirement apparently well funded but inflation is the main enemy if you are older. What was initially adequate doesn't cover what it used to. Which is why a decent chunk sensibly invested and pegging along with inflation is SO important for the long term. Nothing is going to be cheaper 20 years from now.

@Oblomov24 , it happens if you save just a little bit every month. Obviously the more you can manage the better, but start young and keep saving is the simplest and best advice any one can offer you. If anything looks too good, it's a scam. Those are my main rules.

I'm aiming to have £25k p.a which seems to be a £500k pot. I own a house outright, I'm 55.

With inflation, I don't know how well I will live on £25k (I'm single). But I'm not living some kind of Scrooge life now to have maybe £30k p.a for retirement. I split what I save and spend. I scrimped a lot in the past to pay off my mortgage, I'm not doing the same now for a retirement that isn't guaranteed, given you don't know what will happen with health.

As a current 77yo retiree /pensioner - how you will live in retirement will obviously depend on your income.
I have the old basic state pension plus SERPs and my state pension is circa £12k. This is the backbone of my income. I also have 2 small personal pensions/annuities which give me an extra £6k pa which is obviously taxed so my total income pa is about £17k

This is more than enough to have a reasonably comfortable life for me. I manage to save for house repairs etc and have shares and ISAs to help out too. On the plus side I have a house worth about £500k and no mortgage.
I get 25% off my council tax (which is still my biggest expense), I run a 20 year old car, manage 2 short holidays in the UK each year and support a 8year old dog.

Having been a single parent all my full-time working life it is harder for me than most couples as they will have twice the personal allowance and twice the pensions but not twice the costs.

Bear in mind that sadly many now happily in a couple will find that they will be single for at least some of the retirement years.

Currently about 100k a year (both retired but I can't access my own pensions for about 10 years) but of course there are the outgoings, including teenagers and uni fees in a few years' time. We don't have a mortgage though so we're definitely comfortable.

@Turmerictolly 's last post reminds me that everyone should remember that income tax will apply. So the quick dirty explanation is that if you have a properly set up pension scheme, your contributions go in tax free, the government then adds the tax that you would have paid on that sum as income to your savings, and if it remains invested in a pension scheme until you are 67-ish, any capital gains and dividend income pile up into a savings account. Obviously, I have massively over-simplified this. But it is a very sensible way to start retirement planning.

Once you start taking an income from your pension pot, you pay tax on the same basis as anyone else, but if you have kept your big saving pot growing out of tax for 20 some years, then it's worth a lot more. I am shit with financial projections and calculations but I used to do this stuff for a living. It really matters.

Completely agree with this . Some people will really struggle in retirement with rental costs but also due to the ridiculous amount they " need" to live on. I admittedly don't have a mortgage ( but only because it was paid off as a priority and we luckily also benefited from low interest rates for a long while) but I also don't feel the need to spend a fortune on the latest gadgets, I don't use a dishwasher or have a tumble dryer, or have take away every week. I genuinely think some people spend too much on non essentials. I rarely buy new clothes ( use birthday money or vouchers if I buy any), however I enjoy a meal out occasionly a trip to the pub weekly or a takeaway ( not weekly). I enjoy a holiday abroad every year too and a combined income of less than £20k a year (I am not yet retired but will certainly be better off if the state pension is still in payment when I am due to retire , in approx 10 years time) .I don't think there is anyway the retirement amounts quoted as "needed" are realistic .

I am working towards retiring at 55 with a monthly income of £2,000 which will be very comfortable really - mortgage paid off and DH contributing to his half of bills / food etc

Why uni fees? Mad to pay those

Really useful thread. I find myself wondering about this often as I can’t decide if I’ll be OK.
57 and public sector DB scheme. I am tired already and parents died in early 60s so I don’t want to retire too late.

Am single (happily!) with 3 young adult DC all at home for the foreseeable. Divorce has wrecked my finances.

Pension will be 19k if I go at 60. Plus enough of a lump sum and savings to pay off the rest of the mortgage on small house worth about 550. Nothing else left though. Am quite frugal but would like to help the DC with deposits so - will probably partially retire at 60 and limp on part time for 2 more years doing 3 days pw giving me another 30k a year which I will try and save to stretch pension out until state pension at 67. Then sell up and give a chunk of the house equity to the kids and live well on 30k (?) in a smaller place somewhere.
If they never leave home they can pay towards it! I don’t wanna work until I die.

If you aren't paying rent or a mortgage, then £2000 might be enough. The retirees I socialise with go on holiday frequently and seem to live comfortably on what must be sizable pensions-think IBM level. It's worth working out bills, car replacements etc too. Work out the vague cost of food etc too and add a percentage for inflation. Think about entertainment. What are you going to do with your time? Living when you have time to do stuff, costs money.

Most people seem to be looking at having pensions greater than any amount I've ever earned in my working life. Maybe I have very simple tastes, but I'm single and most of my hobbies are cheap or free (I like walking, I ride a friend's horses, I read and enjoy cooking, I run with my dog) and I can live very nicely currently on around 1k per month. I'm hoping for a good few years of active retirement during which I will save in case of need carers in future (although my kids have indicated that they would all chip in for this if necessary).
I'm hoping to retire at 65 (in 18 months) and self support until my pension kicks in at 67, while I am still very fit and active.

May I ask you what happens when you retire through ill health? This is likely to be my outcome

I will save in case of need carers in future (although my kids have indicated that they would all chip in for this if necessary).

Don’t bother saving for carers. If you need them the local authority will pay for them. Nobody on such a low income is expected to foot the bill themselves.

Did you read my post where I clearly stated I would struggle to spend £5k a month. Ie your taxed income. Your reading comprehension is also lacking.
And yes I am aware of compound interest which is why dh and I paid into pensions from a very young age. At no point did I say our pension income would be less than yours, rather that we would struggle to spend what you plan to. Instead our children will benefit from our excess income.

I’m from indonesia and went home every year. The cost of airfares for 2 people are £7k. We flight business. Easily i can spent £20k for 4 weeks holiday. Thats not include shopping. Watch, handbags, etc. They can be so expensive. There are watches and bags that cost £100.000 plus. I dont have it personally but i know people who have that kind of wealth. Surely its all depends on your lifestyle.

I think the amounts stated for basic, comfortable or luxury lifestyle after retirement are way too high. They are estimated by investment / pension companies who want you to invest more with them, which obviously skews their projections.

I live in a small house I own outright in an expensive area and my income after tax is approximately £17,000 a year. I have around £150k in savings (paying interest of approx £7500 pa which I re-invest but could supplement my monthly income if I wanted) which I could draw on for holidays / car / household repairs / new appliances / clothes or whatever and I manage very well. In fact I feel quite well off.

My income is made up of full state pension, tiny private pension and a widow's pension. If DH hadn't died we as a couple would have had round £32,500 which we thought plenty, along with savings to draw on for holidays etc.

No, the local authority WON'T automatically pay for carers!

There will be a financial assessment involved, and if you have more than £23,250 in savings, then you WON'T qualify and will have to fund carers yourself.

I've worked out after retirement and prior to 67 we will have about 3200k a month coming in ( but have some lump sum pots also) and on turning 67 we will have about £4500 a month but will plan to divert some of that to our children to help with costs. We've gone off eating out these days as we always feel we cook better food ourselves tbh! Perhaps we will eat out once a month but somewhere much better. Travel - well we have a campervan that will get used well and maybe an annual break in the sun somewhere.

@Toodleoodleooh I think the op means help children with university living costs which is what most parents end up having to do if your income exceeds a certain level. University halls are now £5k a year!

It's all relative. If you manage on a low income before retirement then there's a good chance you'll be able to retire comfortably on a low income. DH and I earn £160k combined now and I've projected we will want around £60k a year in retirement. We won't have a mortgage, kids at home or school fees.

This is the basis of the projections you see from pension providers. They try to show you what you need to sustain your current lifestyle. My season ticket for the train is currently 5k so that’s one saving I will have!

To the PP that made the comment about DB pensions - the best schemes have been phased out and I think uniformed services vary massively depending on the kind of uniform. The best existing DB pension scheme is the civil service which contributes 27%. I find that a LOT and with it coming from tax money, a bit outrageous tbh given that police, fire etc schemes have been reduced and they have to contribute more themselves on comparably low incomes.
I fully support public sector DB pensions but think they need and overhaul and we should pay these people properly instead as we currently have uniformed services, teachers and nurses having to rely on food banks.

I work in the private sector and have a small DB scheme from an employer years ago but the rest is DC company schemes and a sipp and have saved reasonably well since a financial advisor told a 25 year old me to get my head out of my @ss. Thanks to this man I have always paid well into my pensions and kept an ISA on direct debit which has saved my skin numerous times with shock life events like redundancies or needing a new roof. Now I can see retirement in the next ten years I’m grateful for the advice. I am trying to teach my kids about this but their dad is a terrible example and spends a fortune on cars and holidays and relies on inheritance to pay his mortgage off.

This thread is eye opening for me. I was considering taking my pensions at 60 to retire early, perhaps supplementing with part time work until I get my state pension but the amounts being talked about make me wonder if that's feasible. The amounts some people are talking about are staggering. To me anyway, although I've always thought I earned reasonably well. I feel quite depressed now.

Life is about balance. Saving for retirement is incredibly important, but not at the expense of making large sacrifices in your working life. That old adage of spend a bit save a bit applies. The more you can save for retirement the more options that you have e.g. maybe retire early. As to how much you need it really is like saying how long is a piece of string. I am an adviser and I see many many people that have more money than they will ever spend in their lifetime (quite often with no children to pass the wealth on to either) also other people that really struggle on their income and also those on a low income but still have more than enough for their needs. People’s spending habits vary so much. For some £1,200 p.m gives them a lifestyle they are happy with for others £5,000 p.m. what I do.know is that you will almost certainly want more funds in your active early retirement years than in later years (though care requirements clearly erode savings very quickly). My 90 year old mother in law, finds her money from state pension and pension tax credits accumulate in her account as her expenses are limited and she doesn’t do much at 90.
what you can’t predict is your health and how long you’ll live. These factors have a big influence over the funds needed. Just try to save to give yourself options.

@Janjk

I hear you.

We're poorer (by quite some margin) although I feel fortunate in that we are homeowners, and have paid off the mortgage.

Also I don't want to do a lot of flying in my retirement, as I feel air travel contributes significantly to global warming. Taking several flights a year would not sit well with my conscience Handy - as I did a lot of travelling when younger,...