how much do you think you will need to retire on?

[SingSam]

I am spending the last few days before going back to work looking at how much I think I will need when I retire.

I have read all the advice about how much you are likely to need (a lot say 2/3 of current income which for me is not going to happen), some say work out what your bills are likely to be and go from there...

I am in London so I assume for now I will stay where I am and potentially be mortgage free (v small property). There is the potential to sell up and buy somewhere cheaper but I don't want to consider that option yet (without doing some more research).

I just make a spreadsheet of what my bills are likely to be - excluding food, excluding mortgage - and I was quite surprised by how high they are. This would be assuming I stay in London. I am also sure some bills might go up (like electricity) as I'm in the house all day but then I assume my travel costs would go down (not commuting to work, getting a bus pass eventually!).

has anyone else done this sort of exercise and thought what sort of monthly amount they are likely to need when they retire?

ViveLeBeaver - I think Ifailed is right, probably best to contact the DWP.

As with Ifailed I have also made over 35 years of NI contributions but contracted out for a few years in the 80's so my forecast showed my state pension wouldn't be the full amount. I have been checking my pension forecast on the government website for the last couple of years and it has shown my pension amount increasing each year. Bearing in mind what Ifailed was told by the DWP I am now confused! I think I will be giving them a ring!

this is what I see on the Pension website:

You were contracted out
In the past you’ve been ‘contracted out’ of the additional State Pension.
When you were contracted out:
you and your employers paid lower rate National Insurance contributions, or some of your National Insurance contributions were paid into another pension scheme, such as a personal or stakeholder pension

The amount of additional State Pension you would have been paid if you had not been contracted out is known as the Contracted Out Pension Equivalent (COPE).

Contracted Out Pension Equivalent (COPE)
Your COPE estimate is £62.88 a week.
This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government.

In most cases the private pension scheme you were contracted out to:
will include an amount equal to the COPE amount
may not individually identify the COPE amount

The total amount of pension paid by your workplace or personal pension schemes will depend on the scheme and on any investment choices.

So, instead of getting 159.55 per week, I'll get 96.67 state pension when (if) I get to 67.

An important non financial aspect to consider is how close you are to things.

Being able to walk (or shuffle) to your local shop, doctor etc will able you to remain independent much longer and reduce your outgoings considerably. If you can no longer drive a taxi shopping 2x a month if you are rural could be a crippling expense.

wallyw
even rurally there are supermarket deliveries and many villages are served by buses.
When getting 'elderly' a small market town is ideal especially if it still has a train service- there are usually the essentials of life available (and friendly locals)

I was wondering if anyone could help me?

I’ve got an nhs pension that is currently worth £481 a year revalued into whatever the equivalent sum will be when I retire in 36 years time (sob). Assuming I do 20 more years for the nhs my pension will be worth £9629 a year assuming my salary does not go up. I’ve also got a private pension pot of £10000 which will pay out very little £300 a year. So my nhs pension + private pension + state pension will be around £18320 a year based on today’s figures, which seems better than most. It’s around 2/3 of my income now.

However I’m VERY worried about DPs pension and this is what I need help with.

He is 33 and will be retiring at 68. He’s total pension pot is worth £4000.

To gain a pension pot big enough to pay out around £10000 a year how much does he need to pay in a month? We need to sort his pension urgently as the longer we leave it the costlier it will be.

It’s scary just thinking about this.

I’m 39, I haven’t checked my pension pot properly jet but if there’s more than £50,000 in there I’ll be pleasantly surprised.

Should get the mortgage paid off in 7 years. Would love to start throwing more into our pensions at that age but the kids will probably be really expensive teens at that point. Then they might go to uni.

Life in general costs so much. It’s so hard to save, and I know we save way more than a lot of our friends do.
I honestly think we will be ok in retirement because we are reasonable good at living within our means. But I know some of my friends will be renting for life. I have no idea how they will cope with retirement.

FruitCider look at the Aviva pension calculator and play with some figures.

Pensions you have to fund yourself are expensive. Be prepared to save a good amount of salary.

Ifailed - I have just logged on to my account on the state pension site and I have made 40 years contributions and it says I need to pay NI for a further 3 years to get the full state pension amount. I also have a COPE estimate of 46.66 but it states this will not affect my pension forecast. May be I am misunderstanding this. I assumed it meant in 3 years time (I've after paying in for 43 years) I Would have made up the shortfall? Totally confused now

Icequeen01 I'm no financial expert, but my reading of it is because you've paid lower NI contributions your state pension is reduced by the COPE, however the difference between the lower and normal NI contributions have gone to your private pension pot, & so that should be paying out the COPE amount when you hit retirement. I agree it's confusing!

Oh and I do know you cannot make up the short-fall in NI contributions whilst you had opted out.

I think a phone call is definitely in order! I'm lucky in the fact that my DH has a good pension which he currently draws as he retired 3 years ago (he was only 52 so too young to stop working!) but he now works full time in a completely different field. He was in the forces so he was contracted out for a long time so we always knew he would get a small state pension. I will also have a very small (about £5k pa) work pension. I've been thinking about retirement a lot recently so this thread is really interesting.

From an article in the Telegraph www.telegraph.co.uk/finance/personalfinance/pensions/12143174/Four-million-people-retiring-from-April-could-get-the-wrong-state-pension.html

For the first time the new pension statements show your “contracted out” pension element – which is a chunk of your pension that is paid by your employer (or past employer) instead of the Government.

The statements include a so-called “contracted out pension equivalent figure” (COPE) which is the amount of money you would have built up in your state scheme, but which is now part of your work scheme.

This is crucial because if you “contracted out” part of your state pension entitlement at any point, it will be deducted from your new, flat rate pension, the maximum level of which is £155.65.

Thanks Ifailed. Interesting but depressing reading! Sounds like your understanding is correct and mine was wrong. I'm really pleased I read this thread now! Well I know DH and I are lucky enough to be in a better position than a lot of poor souls so I have no cause to moan. Thanks again Ifailed.

I am really glad that I started to pay into a private pension when I was younger. My employers have also contributed into the pension. I have some other investments, so I consider myself to be fortunate.
I know some people who have not saved into a pension, but have invested into property and they hope to downsize in the future.
I know some people who dont earn enough, so are unable to pay into a private pension.
I dont think that enough emphasis is placed on saving for retirement when people are younger. Talking about pensions and retirement is not "sexy". However, as you get older retirement planning becomes a reality.
People are living longer

I worry about it all the time. My old jobs for last few years didn't have pensions do I only started mine in Nov 2016 with new employer. If I pay in 5%, they pay in 7.5%. So I do as otherwise wouldn't get the 7.5%.

However, I do have a 3 bed maidonette in Tooting which I bought in 2003. It's almost tripled in value and will be paid off by time I'm 50 (I'm 39 now and it's rented out as I live offshore). So can either sell it for capital or (more likely) take the income from it (around 15k per annum post tax in today's money) as part of pension.

If I carry on working until 65 I should have a decent pension pot too if stay in this job. Though I'd like to retire early so saving and OH investing (he has private work pension too which he's been paying into since age 18, he's now 34) so hoping we will be ok.

That said, we might need to fork out for IVF soon and have a wedding to pay for (though we are considering eloping) and you never know what's around the corner, hence I worry!

fruitcider
He basically needs to save about £1000 a month

barking isn't it !

talkin - how could it be that much over 35 years? That would be £420,000 without adding any interest?

£10,000 a year income inflation linked forwards 65 years
payable for around 30 years
assuming investment return rates after charges of around 3%
yup, it will be in that ballpark

Shocking isn’t it? My employer puts in 1% of my salary. I have a lot to make up .

I've also read about the 4% rule although updates say it is probably more like 3 to 3.5%. I save into an ISA mainly and a much smaller amount into a pension. I have no plans to buy annuity but hope that I will have built up enough of a nest to draw it down and live decently. I do not include state or old work pensions in my calculations so that will be a nice surprise.

How do you work out your pension pot. DH should get a 50% salary pension plus a 3 x final salary lump sum. How do we work out his pension pot?

I will never buy an annuity.
A family member bought a £100,000 annuity and died of cancer 37 days later - before even one monthly payment had come in.
Nice profit for the annuity company.

I have my employer (of which I am the shareholder) pay in a chunk to my pension every month.
I am also sorting out ISAs - chunk every month
And I have premium bonds
And I have some cash savings
And the house is mortgage free
And I plan to keep working as long as I can.

And I've told my kids that they have to earn enough to look after me when I go gaga

lulu
If he is on a defined benefit scheme, he does not have a "pension pot"
Be thankful. He has the much better deal.

Thank you. We will also have a paid for house, savings and my teacher pension- which will be very small as I am currently SAHM.

Weirdly the thing that concerns me the most is the huge public sector pension deficit. Where is the money going to come from?