Pensions - what's a reasonable income

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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...

Yes it’s drawdown, not an annuity.

What's this about public sector being opted out of state pension? My forecast online says I've got 15 years full contributions which is correct as I didn't pay when in uni, so I assume I am opted in?

@Cocomarine Absolutely, I know that. I just highlight it because when calculating their likely pensions, many people won’t be aware that they won’t get the full state pension. I felt it needed clarifying that, when you said that a couples state pension will be “£18,000” getting them a good chunk to the recommended figure, that isn’t the case for everyone.

@namechanging564

What's this about public sector being opted out of state pension? My forecast online says I've got 15 years full contributions which is correct as I didn't pay when in uni, so I assume I am opted in?

Opted out, just means of a proportion of it. If you have been paying into a public sector pension, you will have a somewhat reduced state pension. At a rough estimate, I will be paid a bit over £3000 a year less than the maximum. It depends how long you have been paying into your public sector pension.

Public sector pensions have not been opted out of state pension since 2016. Before then, some of your NI insurance contributions went towards your occupational public sector pension so you didn’t accrue so much in state pension.

Your statement tells you how many years YOU have got, forecasts the max YOU can get (based on his many years you still can work before state retirement age) and tells you how many further years YOU still need to reach the max available to YOU.

Someone in their early 60s or late 50s might not be able to reach full new state pension of 35 years as a much bigger proportion of their working life was in opted out pension arrangements. Anyone who still has a good few years to go before state retirement has plenty of opportunity to boost the years to 35 or close to it.

So DH and I were 29 in 2016 so very likely to work 35 years from then to retirement age so I'm assuming we are ok to assume full state pension as it stands?

My statement says if I contribute for another 20 years I will get £9000ish which I assume is the maximum?

Really wish I'd started earlier with a pension, I frittered away so much money in my 20's when putting even a small bit away would have made a difference.

I have a DB pension that will be worth approx €8k a year and a lump sum of 51k if I retire at 60 (the goal) and work full time from now until then. State pension here in Ireland is around €13k a year but that won't kick in until at least age 68, that's if it's there at all in 34 years time. Started contributing €200 a month to a PRSA this year but I'm going to need to look at doubling that soon if I'm serious about retiring early. Luckily my husband has a good pension scheme through work and his employer contributes 10%, he's also in a much less physical job than I am so he's less bothered about retiring at 60.

I feel like the uncertainty of the future of state pensions really makes it difficult to plan for the future. Obviously it's difficult to plan regardless but the state pension is a pretty big safety net if you could rely on it.

[quote AnnieSnap]@Cocomarine Absolutely, I know that. I just highlight it because when calculating their likely pensions, many people won’t be aware that they won’t get the full state pension. I felt it needed clarifying that, when you said that a couples state pension will be “£18,000” getting them a good chunk to the recommended figure, that isn’t the case for everyone.[/quote]
Fair point @AnnieSnap I was trying to illustrate a scenario that you can’t look at the figures in the OP and assume you have to save personally to meet those. Most MN users will have some state pension entitlement, either through own contributions or certain benefit receipts. I don’t want to add brackets to every comment “(subject to..)”

There is actually a guy on MSE pensions forum who posts on EVERY reply he makes, “have you checked your state pension?”

Which is no bad thing!

Namechanged
Yes!
Read your statement carefully. It should tell you what the max you can get and how many further years of contributions you need to make to get it. Just over £9k is the current max. It will be uprated every year with inflation.

@cloudtree

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

It's one of the reasons I am sticking with the public sector. The security of knowing that I won't have to depend on DH in retirement. Not that I dislike him generally, but he's pretty crap at taking care of himself

FlowerArranger there was no spare money to put into extra pensions. I'm not worried about him having a better pension as I'm financially better off than he is due to an inheritance I received and which I used to buy extra pension with. Plus, my earning potential is greater than his, in a few years I'll be earning more.

@WombatChocolate thank you, yes it says £80pw currently, 20 years to get to £179ish or whatever it was. Will get DH to check his, he is military, I remember him having to start paying more in NI a few years ago due to changes and pensions, I assume it was 2016!

It's great that you are aware of this. Unfortunately so many women aren't and end up sleep walking into retirement.

@Cocomarine I definitely had mine out tax free
Here's a link from my Pension provider. www.wmpfonline.com/avcretirement

@Oblahdeeoblahdoe your link says the cash AVC withdrawal is only tax free up to the value of 25% of your total fund.

[quote Cocomarine]@Oblahdeeoblahdoe your link says the cash AVC withdrawal is only tax free up to the value of 25% of your total fund.[/quote]
I must have been under the 25% of the overall value of my LGPS benefits. Sorry, if I've misled anyone

That makes sense. Dammit, I wanted to be wrong and you had some loophole I could exploit! 🤣

In order to get a net income of £33,600 you'd need a gross income of £39,000. If you don't buy an annuity and drawdown your defined contribution pension, the rule of thumb is that you shouldn't draw down more than 4% of your pot each year in order to last 25 - 30 years. So, if £39,000 = 4% you'd need a pension pot of £975,000. And that £33,600 net income living outside London. If you live in London, the retirement living standards website calculates you need £36,700 net to live a comfortable retirement

@Cocomarine

That makes sense. Dammit, I wanted to be wrong and you had some loophole I could exploit! 🤣

Have you been in touch with the Prudential? I can remember the rep I met telling me it would be tax free on the way out. It was quite a few years ago so the rules may have changed.

Cocomarine, I'm retired with a public sector pension, and also had AVCs that I took entirely tax free.

Taken from my documentation: the formula for calculating the 25% tax free amount is: 20 x annual pension + lump sum + value of AVC fund at crystallisation date = total/4 = maximum tax free cash.

It is well worth contributing if you can afford it, particularly in the final few years. I did this to boost my lump sum and to reduce my income tax contributions.

My state pension is not the full amount despite 43 years NI contributions, as the defined benefit element was 'contracted out' until 2016 (38 years of my working life were during public sector employment).

I had enquired about boosting my state pension a couple of years before retirement but this was not permitted. I did however defer taking it for a year (for tax purposes) which enhanced it by 5.8% but of course I missed out on drawing it for that period.

Thanks @Oblahdeeoblahdoe and @pandora206 for your replies - I do love a bit of pension chat!

It took a bit of Googling to find out when it changed… 1987! Lucky you to have made some AVCs which could come out tax free! Though it reads like once the legislation was changed, you could only retain that right for contributions made up to 1987. But if your AVCs were

I found that the closer I got to retirement the more geeky about pensions I became! I think my team were fed up with me pointing out the benefits of AVCs towards the end.

@Mia85

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.

I thought that! You need 35 years. I’ve just hit mine and I’m 55

@pandora206

I found that the closer I got to retirement the more geeky about pensions I became! I think my team were fed up with me pointing out the benefits of AVCs towards the end.

Me too! Years ago I used to eye roll at the middle aged ladies in the office talking pensions all day.

I’ve now become Geraldine that I worked with 30 years ago!

@pandora206

I found that the closer I got to retirement the more geeky about pensions I became! I think my team were fed up with me pointing out the benefits of AVCs towards the end.

This, so this.