Pensions - how prepared are you for retirement? Do you know how much you're likely to have to live on?

[littleredsquirrel]

Just curious really. I am currently trying to plough my way through all the paperwork to work out what my likely income levels will be when I retire.

I have a pension which I paid into for ten years but nothing being paid in at the moment. Trying to work out whether its worth putting more in or look at other forms of investment.

Currently my pension fund is projecting I'll have 24k pa (or £14k in real terms taking inflation into account.). I have 20 years to go if I want to retire at 60. Looks like we'd definitely be selling the house!

What arrangements have you made for retirement?

That's interesting, notmade, thank you. I have a right old bundle of three or four linked schemes from my first employer, defined contribution, and a new final salary scheme with my current employer. When I looked at using the DC schemes to buy some more years in the DB scheme, it didn't look good value, they would only buy me 2-3 years more service. I was wondering about leaving them to run, and taking my retirement lump sum out of the DC schemes, leaving the DB scheme untouched and so paying out better.

earningsthread well then you've considered cost (which is obviously critical). You said you're motivation for the split was reduction in risk, I was addressing that point. TBH this is why boards like this are of limited use, there are too many other factors that were unsaid to make a single comment very useful.

They may have some limitations Notmadeofrib but they are extremely helpful when you're trying to get to grips with a topic that is full of jargon and technicalities.

Queenbee
do you move your ISA pot? Just that I'm getting 2.5 on my whole cash pot : I move all of it every year
and 3% after tax is around the same

my employment income is the shiny total of £3000 from one company and £7000 from the other ..... 3% of that per year is not going to keep me in much beer when I hit 75 !

beastofburden
the DB scheme you can pretty much not worry about - as they will have managers who worry for you
checking out the DC schemes is probably well worth the effort

which reminds me I really should move my old dormant SERPS DC scheme ....

Thanks Talk. I would say that the no brainer place is to buy extra DB years with my transfer value, as if I get a pay rise all years inflate automatically- would you agree? To add to the complexity, the DC scheme has my protected rights service in it.

Rainy day funds just have to stay in a Cash ISA, no doubt about that.
Talkinpeace you originally suggested savings beyond that (or that's how I read it) and I said that something that protects against inflation is worth due consideration.

Investment risk is fundamentally the risk that you need your money when markets are low. Money you may need to access is therefore totally unsuitable.

FWIW, I do see basic rate tax payers, but admittedly not many.

Annuities, oh God it's horrific at the moment, but I don't think people realise annuities are interest plus return of capital.

I move my ISA pot every year, in the same way it sounds you do.

Thing is if you don't start paying 3% of it in, then it is never going to keep you in the odd smartie, let alone a can of cheap larger!

If you paid in & your employer paid in, then you would at least have something & you may be able to make additional voluntary contributions to top up further if you had a few quid spare everynow & then - I think you can still do that.

Beastofburden
as if I get a pay rise all years inflate automatically
probably, but you may need to move very fast because LGPS 2014 starts on 1st April next year and all contributions and earnings made after that date go into the average salary scheme, and only the pension from before that stays in the final salary part

also, is your DB scheme actually a funded one (ie not NHS, Teachers, MOD, Civil service - which are just parts of general taxation)

because the rules are in constant flux at the moment

Beastofburden, it's not a simple question and there is no simple answer, but if you can access a DB scheme on the same terms (double check that), then it is likely the low risk option. For an experienced investor with other assets the answer could be different. You are in a way paying for peace of mind and an easy option.

Talk, yes my scheme is funded (I say funded, it has a deficit of course) , and I have been a member so long that I do not have to move to career average, all my years are final salary. It's different for people who joined more recently.

Thanks notmade, I think I am too busy with the day job to manage an investment portfolio properly IYSWIM so perhaps ought to pay the premium for someone else to handle things.

I might buy tinned food and keep it all under the bed. Then I'll beat food price inflation and not have to worry so much about the cash I have in my old age

I think its actually a good plan. Old people people like tinned carrots and corned beef.

Fits with your name too!

"Darling we don't need to have that conversation about financial planning anymore. I've decided to invest all our money in minestrone soup."

I am 33 and don't have a pension. I have a rental property which is mortgage free and am in the process of buying another one. We would like another 5 properties by the time I am forty. Our own home has a mortgage but we are overpaying and all being well will be mortgage free within the next 15 years.

A reasonable sum in a SIPP and I manage the shares in the fund. I will work until I die from choice and I have another business which will probably continue to yield income so not putting more into pensions now. I feel the rules change too much and so many people without employer contributions hardly get back what they paid in now despite the tax relief. The life time limit on the pot before HMRC effectively start confiscating it gets lower and lower too and may well go even lower in due course so I'm not sure I'm prepared to take the risk.

For low earners I advise to contract out of automatic enrolment by the way once it hits your workplace. Keep your money.

Interesting, Juliet, I opted out of the automatic enrolment due to other but financial reasons, but why don't you recomend it?

If you do not earn much by the time charges are applied you may not get that much back. Even with private pensions ni many cases the sum you go off to buy an annuity with gives you back not much more than you paid in and you have so much less control over a pension fund than your own savings. There have been some press articles on whether auto enrolment is state sponsored scam.

www.theguardian.com/money/2012/jul/13/pensions-automatic-enrolment-pay

and "Workers on £20,000 a year saving for decades are going to be lucky to see £100 a week during retirement." I think it may be best if you earn very little to keep out of it and keep your money to feed your children. It is not going to make your fortune. Also those without much when they are older will have the £140 a week state pension too if they have 35 years of contributions including childcare years and possibly housing benefit and pension credit.

But I don't think there are any guarantees there will be State Pensions and top ups and housing benefit in 20-30 years time.

I just take the view that if I put money into a pension I lose ALL control over it to faceless people in the City who have never been held accountable for past misdeeds

if I have a variety of savings and income streams I keep my options open

a family member bought a £100,000 annuity and then died 36 days later before a single payment was ever made
nice profit margin for THAT company, but not the family.

I am the same as talkinp (but I can work until I die and I see no reason I'd give up the business). Also my father worked full time to 77,put all his spare money all his life into pensions and then died aged 79 (not a great investment).

( I should add that you can take a lower annuity and buy a guaranteed 10 years etc of the pension and some people take a lower annuity and it continues for their spouse if they have one of course which is some protection for early death but any way view is pension bad deal but do do save something instead).

I do take your point juliet but its not about making your fortune for the vast majority, its about having something, anything (!) to live on given that the state pension is already inadequate and is likely to be much lower or non existent in the future.

Plus its all very well if you have your own business but those planning to go and work in B&Q are going to be fighting the youngsters for those jobs! We are all needing to work for longer but there are likely to be fewer jobs to go around.