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...

I think my total pension is worth 10k so I can live for a year oh joy. I can't pay in more at the moment, we are struggling. Don't think I'll be retiring.

@pandora206

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 for the better explanation. I thought I was going mad.

We spend approx. £30k a year/£2500 monthly , pre retirement, that includes £350 mortgage and £300 car finance and we spend £5-6k on holidays.
We’ll have approx £26-28k at SPA, we will be very comfortable.
Our basic bills and food ex mortgage are £1000 monthly plus £240 into my Sipp.
I will however, have less than DH if anything happens to either of us, I’ll only get half his DB pension.

I’d have approx £18k, he’d have at least £3.5k more.
This all assumes that the world economy doesn’t crash in the next 7 years or so as we are aiming for £250k in DC pensions, we are 60% of that currently.

I dont even spend 24k a year now. Not sure why I'd need tha much when I retire.

I think people dont understand the lifestyle you'll have when you're retired.

Hopefully there wont be any rent or mortgage payments. Commuting costs gone.
Childcare cost gone. Teenagers gone- now self sufficient.

The amount of money you've got will go a lot further.

@Porfre you haven't seen my holiday wish list 😂

If you look at the website these figures came from, Londoners need £13k minimum, which is a lot more than many single pensioners have.
A great many single female pensioners have quite a low income.
Many women retired, or nearer retirement, did not have the opportunity to join a pension scheme when young, then had years out with childcare, then maybe part time work and caring for elderly parents.
You also have to have a high salary in order to pay in large contributions to a pension. Millions of people earn very low sums with little spare after paying bills. It's no use saying look to the future and save if you do not have the income to do so.

@Porfre due to the increasing numbers of people who divorce in their late 40s, 50s these days, many more retired people have mortgages than was the case in the past. I divorced at 49 and bought my husband out of the marital home. The housing market was as flat as a pancake so trying to down size wasn’t an option. I will have a mortgage until I’m 78! I’m 62 now. I don’t have a car loan. My car is 7 years old, but I may have to find the money for another car in the future. As you say though, outgoings are lower, no dependent kids, no commute, no NI, no pension contributions. Like @userchange987 though, travelling is a big expense. As I get older, I become increasingly aware that my time is limited, experiences are much more important than belongs, but experiences are expensive if it means seeing the world. I am very aware that many retired people can’t do this.

If those figures are net they look on the high side to me for anyone who has paid off a mortgage. I would say that once I remove savings and investment commitments they are higher than what I currently get after tax and from that I’m making mortgage payment including overpayment and I would count myself ‘comfortable’.

I get that people may want to do more hobbies and travel, but spending on those things that is higher than during working years is going to be confined to early retirement years for the vast majority of us.

I am a bit confused here....
I have avc's.. a very small amount.. but they are taxed at source along with all the rest of my incomes..2 small council pensions I received from 60... and my salary.

Two different financial advisers have told me in the past week to forget about annuities and up my private pension contributions.. I calculate it would take 44 years to get my money back through an annuity!! So flexi-drawdown seems the way to go.

£16500 if your house is paid off, well insulated so low bills, and you live somewhere you can run one small car (which you own) is doable, if you are paying rent, have a drafty house 2 miles from the nearest shop up a hill not so much.

But they are good for a starting point. Apparently our state pensions come to this amount so the private provision will top it up to around the middle eventually but because we are different ages the intention is the draw down the private pension to allow me to retire earlier knowing once I reach 67 another £9200 a year is in the pot ... in theory.

What’s confusing you @Bonbon21 ?

I don't have a pension as couldn't get a job so ended up temping for years. When I did get a job they didn't offer pensions. A SAHM currently at 40 and still no pension 😢

@Raindancer411

I don't have a pension as couldn't get a job so ended up temping for years. When I did get a job they didn't offer pensions. A SAHM currently at 40 and still no pension 😢

Are you at least registered for child benefit so that you get the NI credits? Have you checked your state pension forecast?

You can pay up to £2880 (I think) into a pension even if you are not earning and this gets tax relief so it goes up to £3600 max. It's not a huge amound but it would be a good start and it's something any family with a SAHP should try to do if possible.

AnnieSnap - you really should be paying into a pension still, if you can afford it, when retired/not earning you are allowed to pay in £2880 net and it gets made up to £3600 with tax relief. £720 free cash every year until you are 75.
Even if you are a tax payer in retirement, it’s still worth £180 a year to contribute , just keep the funds in cash.

@Mia85 Yes I am getting child benefit so at least my NI stamp is getting kept up to date. I didn't know you could pay in. Would I still get the tax relief if my hubby is a high earner?

@Raindancer411 not that you should rely on this, but you'll have a stake in your DH's pension if you split. It might be worth getting him to pay into a private pension for you (well, I don't mean him, the family pot should)

Hi @Raindancer411 yes you can get tax relief as a non-taxpayer and your DH's earnings are irrelevant. It is only up to the max of £3600 gross so not a huge amount but you might as well get the £720 tax relief and it means you start to build up something in your own name. If your DH is a high earner presumably that would be affordable.

If you don't already do so you might also want to think about building up a S&S ISA or other investments in your name so you build financial security in other ways too.

Assuming I get the full state pension I should have about £20k a year, but I hope to retire before 67 so then I am looking at more like £11k a year! That looks far less doable.

At 40, paying £300 gross, so £240 net of tax relief into a Sipp, at 5% growth you would have approx £120k after 20 years.
A simple fund like Vanguard lifestrategy 80 has low charges, or you could go for a Vanguard target 2042 retirement fund that de risks the closer you get to that date. All that means is that it goes from say 80% equities/20% bonds to 20% equities/80% bonds over the 20 years, well in the last 5 years of the fund in effect.

@GenderApostatemk2

AnnieSnap - you really should be paying into a pension still, if you can afford it, when retired/not earning you are allowed to pay in £2880 net and it gets made up to £3600 with tax relief. £720 free cash every year until you are 75. Even if you are a tax payer in retirement, it’s still worth £180 a year to contribute , just keep the funds in cash.

I didn’t know I could do that after retiring! Would that go into my not yet receiving state pension then? Could you tell me how to go about it?

It has nothing to do with State pensions.
Open a SIPP, I use Hargreaves lansdown, DH uses Charles stanley direct but there are others, possibly with lower charges, like Nutmeg.
Set up a direct debit for £240 monthly, they claim £60 tax relief for you and it gets added fairly quickly.
If you plan to withdraw the money in full every year then keep it in cash. There is usually a minimum amount you need to keep in to avoid account closure.

@GenderApostatemk2 Thanks for the heads up 👍

Hargreaves don’t charge for cash held in Sipp accounts, I just checked.
You could put in the full £2880 between now and March, then come 5 April, take out 25% of the £3600 as a tax free lump sum followed by the remainder, it all depends on how much of your personal allowance you are using as to how much of the £2700 is taxable.

@GenderApostatemk2 definitely food for thought. I’ll look into it.

I worked for one of the large retail banks starting in the late 80’s after graduation. Having checked my state pension forecast it appears I will never get the maximum state pension, even after 35 years of contributions as I was contracted out of SERPS. I had no idea about this or the impact on my state pension. I do of course have the pension from the Bank for the 11 years I worked there which is a good DB pension but obviously not quite as good as sold given the effect on my state pension. I think I will get about £20 less per week State pension than my husband will get for 35 years plus contributions.