Active discussions

Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Talk
Money matters

Find financial and money-saving discussions including debt and pension chat on our Money forum. If you're looking for ways to make your money to go further, sign up to our Moneysaver emails here.

Original poster

Pensions - what's a reasonable income

126 replies

DisplayPurposesOnly · 12/10/2021 16:27

From the BBC website today the Pensions and Lifetime Savings Association have suggested these amounts to live on in retirement:

Minimum standard of living
Single £10,900
Couple £16,700

Moderate standard of living
Single £20,800
Couple £30,600

Comfortable standard of living
Single £33,600
Couple £49,700

BBC News - Pensions: Experts say £10,900 a year needed to retire
www.bbc.co.uk/news/business-58883053

Im off to tot up my pension pots...

OP posts:
FinallyFluid · 12/10/2021 19:16

@HandlebarLadyTash

I totally agree. My mother is on a basic state pension in Ireland and lives comfortably, the odd lunch out, trips to the theatre a few times a year, not excessively so, but enough not to feel that you are only existing. IYKWIM

Baxdream · 12/10/2021 19:24

I'm already at max state pension according to the forecast of £780 a month (I'm 41).
My work pension is around £19k a year at the moment. I'm still paying in and I've just been promoted

But I pay a huge chunk over every month (public service) and have always worked full time

Cocomarine · 12/10/2021 19:27

@cloudtree

You need a massive pension pot to have an in one of £30k per annum. It’s realistically outside of the reach of most people unless they have a public sector final salary pension. I’m pretty sure it’s about a million quid needed in your pot to give you a pension of £30k per annum.
But if you’ve that £30K as being the income for a couple and moderate lifestyle, then state pension delivers £18K of it - so between two people, £12K isn’t quite since an eye watering sum to find - certainly not your £1m pot!
cloudtree · 12/10/2021 19:38

No but the op says a comfortable standard of living for a single person requires £33k

And who knows what the state pension will be in the future. Plus most people would like to stop work before their state pension kicks in at 67.

RoyalMush · 12/10/2021 19:42

This is terrifying and the kind of kick up the arse I need.

Oblahdeeoblahdoe · 12/10/2021 20:30

I agree. When my DD and her DH decided she would have a career break he paid into a pension for her. It's tax efficient too

Cocomarine · 12/10/2021 20:41

@Oblahdeeoblahdoe

If you are going to make additional payments into a pension ask your employer to match or at least contribute more as well. If you receive a bonus and don't necessarily need it ask for it to be paid into your pension pot before tax too. If anyone works in the public sector then make AVCs 8f you can as they are tax free when you take them out, no brainer.
@Oblahdeeoblahdoe I have never seen that public sector AVCs are tax free on the way out. Can to link to it? The taxation legislation for pensions is set outwith the pension fund detail itself.

Do you mean the situation with many AVCs where you can draw from those as your 25% tax free sum thus potentially having none of that AVC pot taxed - in order not to have any reduction on the DB part of pension?

Mia85 · 12/10/2021 20:59

I'm already at max state pension according to the forecast of £780 a month (I'm 41)

Are you sure about that @Baxdream ? I'm not sure that's possible if you are 41! When you get your forecast the number at the top tells you what you are on track to get if you keep contributing. Then in smaller text it tells you what you have already built up and then how many years you need to do to get the forecast amount.

MintJulia · 13/10/2021 04:04

@baxdream If you are in the UK, I think you need 35 years of NI contributions to be entitled to the full state pension.

So it would be hard to qualify until you are 50 at the very earliest.

cloudtree · 13/10/2021 06:38

It’s important to note that those figures are net of tax.

Why are people saying pension income isn’t taxed? That isn’t true at all (other than if you take the lump sum part). Pension income is taxed in the normal way. The only tax saving is that since your overall income is probably lower you might be in a lower tax band so you might feel like you’re paying less tax because you’re not paying any at higher rate.

Now that high earners lose the tax free benefit when they pay in to their pension too, it’s double whammy. Tax in and tax out!

Anyone who was thinking this is tax free like a savings pot is in for a shock

Baxdream · 13/10/2021 06:57

Of course I'm still contributing. That is my forecast and I will still be working. Apologies I just worked it badly!

Pensions - what's a reasonable income
Cocomarine · 13/10/2021 07:08

@cloudtree

It’s important to note that those figures are net of tax.

Why are people saying pension income isn’t taxed? That isn’t true at all (other than if you take the lump sum part). Pension income is taxed in the normal way. The only tax saving is that since your overall income is probably lower you might be in a lower tax band so you might feel like you’re paying less tax because you’re not paying any at higher rate.

Now that high earners lose the tax free benefit when they pay in to their pension too, it’s double whammy. Tax in and tax out!

Anyone who was thinking this is tax free like a savings pot is in for a shock

You are totally misquoting me! @cloudtree !

That is precisely why I used the phrase “net of tax” and didn’t say anything about the amount being taxed free.

If you read the article, it will tell you that the amounts quoted are after tax - “take home pay” if you like. That’s not quoted in the OP. So I actually highlighted your very point! I said net of tax, then in the same post referred to being under the tax limit in one paragraph and in the next paragraph gave an estimate figure of what you need to plan for to have the net result shown.

cloudtree · 13/10/2021 07:24

I misunderstood your point.

In order to have a pension income of £30k AFTER tax you would then need a pension pot of well over £1.5 million. Good luck with that everyone. Unless you’re public sector then it’s not possible for most.

Smidge001 · 13/10/2021 07:42

That article is so misleading. Not only are those figures net of tax, so you actually need way more to achieve it, the link to the table showing what size pot you'd need uses an annuity based at 5%!!! How ridiculous. You havent been able to get a 5% annuity for decades! I think the rates are about 1.1%. So their suggested pension pot of £590k needs to be multiplied by 5. Yee gods.

namechanging564 · 13/10/2021 07:48

My civil service pension is what keeps my husband loyal Grin I jest, but it's hugely empowering knowing I'm not reliant on anyone else for that time in my life, I do really worry for the situations some women are getting themselves into. It's too easy to ignore the long term impact of career breaks when looking only at childcare bills.

FinallyFluid · 13/10/2021 08:36

Can I ask those of us who have or have spouses with a FS/DB what is your survivors % pension ?

With DH's it is a very decent IMO 25% for me for life.

If he dies in the first year of retirement, I qualify for the full pension for five years.

WombatChocolate · 13/10/2021 09:05

50% with final salary, or I think 37.5% with career average are normal payouts from public sector pensions for spouses after death of pension holder.

cloudtree · 13/10/2021 09:07

I have in all seriousness contemplated switching to a public sector job simply for the pension.

MiddlesexGirl · 13/10/2021 09:07

I'm annoyed that I didn't realise earlier that even while not working I could have been contributing up to £9k-ish each year to a pension. Every little helps.

But yes ... it's not really possible to get a very comfortable standard of living in retirement from pensions alone. But I guess that's only fair as pensions = tax breaks.

AnnieSnap · 13/10/2021 09:36

@Cocomarine worth bearing in mind that anyone who ‘opted out’, which virtually everyone with a public sector pension did/does, does not received the full state pension.

Cocomarine · 13/10/2021 09:43

@Smidge001

That article is so misleading. Not only are those figures net of tax, so you actually need way more to achieve it, the link to the table showing what size pot you'd need uses an annuity based at 5%!!! How ridiculous. You havent been able to get a 5% annuity for decades! I think the rates are about 1.1%. So their suggested pension pot of £590k needs to be multiplied by 5. Yee gods.
To be fair, the article does say net of tax.

I’m with you an the annuity rates though!

Cocomarine · 13/10/2021 09:47

[quote AnnieSnap]@Cocomarine worth bearing in mind that anyone who ‘opted out’, which virtually everyone with a public sector pension did/does, does not received the full state pension.[/quote]
They will however make up the “missing” state pension from their occupational pension that was boosted by opting out.

Sadly, I think a lot of people won’t take the time to understand that and will just think they were “fiddled”!

It’s in the pension statement if you check your entitlement, but so many people don’t know you can do that.

I see frequently on here people who have no idea how their own pension works, or the state pension. And I’m not being mean about them - fair play to them for asking the question! But it makes me think about just how many people aren’t even asking.

Cruiser11 · 13/10/2021 10:26

My DH and I have just retired and are taking 50k a year out of out our pensions pots to live on. We haven’t factored in state pensions at all so could probably take more than 50k. We’ve put some of the 25% tax free allowance away and are going to use it as a big holiday pot as we love to travel. Our pots are 1.4 million in total and we used 50k of the tax free amount to buy an electric car so shouldn’t have really car related costs for years.

WombatChocolate · 13/10/2021 10:35

Re opting out and state pension, people were opted out until 2016. Years after that in work can mean it is possible to still accrue the full 35 years of contributions. This is more likely if someone has longer ahead to work.

It is not true that no-one who has been in opted out public sector pensions can get the full state pension.

If you look at your statement, it will say what the max you will be able to get is….this factors in how many years before retirement you still have. It will also then say how many more years of contributions are required to reach the full amount. This is the important info, bot the COPE figure about contributiins which went to the occupational pension instead which are. It included.

Every extra year you pay NI currently adds about £5 per week to state pension. It is also possible to pay in to cover the last 6 years if you didn’t contribute, but no further back than that. If you will accrue the full 35 years even with the missed years, there’s no need to pay in for the missed years. If you know you won’t, it can be worth looking into that. If you plan to stop work early, often making extra payments after stopping work, once you know exactly how many years you have got and how many you need, can be a good idea.

WombatChocolate · 13/10/2021 10:40

Cruiser..I assume that’s via draw down and not an annuity. To get an annuity of £50k per year, Infeel like your pot would need to be bigger than £1.4m.

In my mind I have a figure of £30k roughly buys an annuity if roughly £1k. So I guess you’d need £1.5 m…so actually your £1.4 m isn’t far from that….but if you used some for holidays and cars, it isn’t all funding pensions.

These figures show you both how expensive retirement is in terms of the pension pot required, if you have a DC private sector pension, and also that fortunately it isn’t necessary to have a £1.5m pension pot for a moderate retirement. £30k per year is good for a couple and gives a decent retirement. It does still need a large pension pot for an annuity to get that though, or to go for careful draw down to ensure the money doesn’t run out.