How much pension do you need ?

Ana27 · 21/11/2021 22:42

I think it really depends on your usual pattern of spending and so you're best placed to answer that for you (especially if you are already quite close to retirement) but there's some really useful research on what people actually spend.

www.retirementlivingstandards.org.uk says £10900 for a single person (including state pension) a year for a basic standard of living and £20800 for what they call moderate.

www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p which say £13k for essentials for a single person (including state pension) and £19K for comfortable.

That's a good starting point but you have to vary it for your own commitments and life.

Cocomarine · 21/11/2021 23:49

@GoodnightGrandma

If I’m getting full OAP pension, how much private pension would you expect to need to live pretty basically ? As in paying bills/food/haircuts/clothes/run a car etc

Well you’ve started to answer your own question!

You need to add up the bills / food / haircuts / clothes / car that you mention… and everything else that’s necessary or desirable to you personally.

Then take away the amount of your state pension, and perhaps add a little for safety and there’s your private pension requirement.

A good test is to work out your budget and then spend a year living to it. You can flush out things you’ve forgotten or not realised your miss so much you’d like to keep them in the budget. It can be a little tricky because many expenses are different when working - but it’s still a useful exercise!

shivawn · 22/11/2021 01:52

Think about what your living/lifestyle expenses are currently. I'm of the opinion that these won't drastically drop in retirement. Obviously you won't have to make pension contributions once you've retired, hopefully will have a mortgage paid off and savings might be less of a priority but otherwise you'll probably want a similar quality of life to pre-retirement.

Sprostongreen21 · 22/11/2021 04:40

You need to look at your own expenditures now. What would they be like then? Is it a long time away?
Some people already love frugal lives so will manage fine on little, others need more money so pay into their oensoon accordingly.

BarbaraofSeville · 22/11/2021 06:03

@shivawn

Think about what your living/lifestyle expenses are currently. I'm of the opinion that these won't drastically drop in retirement. Obviously you won't have to make pension contributions once you've retired, hopefully will have a mortgage paid off and savings might be less of a priority but otherwise you'll probably want a similar quality of life to pre-retirement.

To add to that, you don't pay NI once you're above state pension age, so that will increase your income compared with working.

You won't have the costs of going to work, such as commuting, work clothes and bought lunches if applicable, but you will have more time, so that could translate into doing things more that costs money like travel and hobbies.

Interesting question OP, one I've been thinking about. I will get a small pension at 60 and would quite like to be able to retire then, but it won't be enough for more than a basic lifestyle so am saving to be able to top it up to something more comfortable.

ChessieFL · 22/11/2021 06:37

These things are all very dependent on lifestyle. Some people pay £150 for a haircut every 8 weeks, some people pay a fiver for a trim once or twice a year. You need to work out how much you need for the lifestyle you want.

Original poster

GoodnightGrandma · 22/11/2021 07:24

Thanks everyone.
I think I’m the frugal type !

OP posts:

DaisyNGO · 22/11/2021 16:18

@GoodnightGrandma

Thanks everyone. I think I’m the frugal type !

me too I'm pleased to see the links in here as the figures I see for retirement are usually based on things like three holidays a year, extravagant gifts for friends' DC weddings etc etc.

Dashel · 22/11/2021 17:13

You also need to have enough for the big ticket items such as a new (to you) car, new kitchen/bathroom/carpets/oven/boiler etc as its possible that if you have a long retirement then you may want to redecorate some of the house or may need to have a new boiler or have the roof repaired etc, so whilst it’s great to be frugal, sometimes you need to get things done.

Original poster

GoodnightGrandma · 22/11/2021 17:35

@Dashel

You also need to have enough for the big ticket items such as a new (to you) car, new kitchen/bathroom/carpets/oven/boiler etc as its possible that if you have a long retirement then you may want to redecorate some of the house or may need to have a new boiler or have the roof repaired etc, so whilst it’s great to be frugal, sometimes you need to get things done.

I agree, you need a maintenance fund.

OP posts:

YogaRebel · 22/11/2021 17:42

Hi all - How much of your salary % do you pay into your pension a month ? I'm currently paying 10% salary sacrifice into a company pension scheme...I'm thinking I ll need to up that some more - as I was pt for so many years while kids were at primary....

Original poster

GoodnightGrandma · 22/11/2021 18:50

I believe I pay 5% and the company match it.

OP posts:

DaisyNGO · 22/11/2021 19:20

@Dashel

You also need to have enough for the big ticket items such as a new (to you) car, new kitchen/bathroom/carpets/oven/boiler etc as its possible that if you have a long retirement then you may want to redecorate some of the house or may need to have a new boiler or have the roof repaired etc, so whilst it’s great to be frugal, sometimes you need to get things done.

I count boiler etc in frugal as they are essential

That said, my parents kitchen is about 40 years old. There's nothing wrong with it. It's not something they plan to replace and neither would I.

Dashel · 22/11/2021 19:25

I meant more it’s great to be frugal in normal times and be able to live on a tight budget, but sometimes you need to have the funds for a boiler replacement or want to have the funds to Decorate.

So when planning retirement income, if possible, you need to have a sinking fund as you can’t guarantee that you won’t have a large unexpected expense

DaisyNGO · 22/11/2021 19:34

@Dashel

I meant more it’s great to be frugal in normal times and be able to live on a tight budget, but sometimes you need to have the funds for a boiler replacement or want to have the funds to Decorate.

So when planning retirement income, if possible, you need to have a sinking fund as you can’t guarantee that you won’t have a large unexpected expense

I agree

Are we talking at cross purposes?

I was saying I see a lot of articles basing figures on frivolities that I don't do even now. Of course stuff like repairs and boiler money are essential.

Ana27 · 22/11/2021 20:46

If I were retiring around now I think I would be concerned about the possible impact of inflation. If you have a defined benefit pension with good inflation increases then you at least have some protection. If you have a defined contribution scheme then I'd probably put in a generous contingency for the possibility of high inflation + stock market crash, which will be miserable for everyone but especially if you are a pensioner.

Tillymintsmama · 22/11/2021 21:09

I'm just thinking I will do the equity release thing with my house so working on paying my mortgage off.

Hollyhead · 22/11/2021 21:18

Retirement isn’t linear in terms of spend either - most people spend more in early retirement and then as they get older less - not that many over 80s travel overseas for instance.

DaisyNGO · 22/11/2021 21:44

@Hollyhead

Retirement isn’t linear in terms of spend either - most people spend more in early retirement and then as they get older less - not that many over 80s travel overseas for instance.

I don't travel anyway but I do think private health will be a factor if I get old.

DaisyNGO · 22/11/2021 21:45

@Ana27

If I were retiring around now I think I would be concerned about the possible impact of inflation. If you have a defined benefit pension with good inflation increases then you at least have some protection. If you have a defined contribution scheme then I'd probably put in a generous contingency for the possibility of high inflation + stock market crash, which will be miserable for everyone but especially if you are a pensioner.

My dad is really worried about inflation, he thinks it's going to be a big problem very soon.

Cocomarine · 22/11/2021 22:24

@Hollyhead

Retirement isn’t linear in terms of spend either - most people spend more in early retirement and then as they get older less - not that many over 80s travel overseas for instance.

That’s a tricky one though, because I actually think it’s potentially a U curve with care costs coming in hard in your 80s. And I don’t mean care homes - as actually most people actually don’t go into them. But more things like having carers in, to stay in your own home. But like a PP, my plan is to assume lower costs in my 80s and if I do need care, to spank the equity release - regardless of it being an expensive way to borrow. I think it’s a good back up plan.

YogaRebel · 29/11/2021 23:52

My friend has decided ( jokingly ) that when she's a pensioner/ run out of money she ll commit a crime of some sort. That way in prison she ll be guaranteed 3 meals a day a bed and health care ..... 😱😆 Never though of flipping the system that way before lol . Personally I ll keep saving!

Superstar22 · 05/12/2021 07:34

Save as much as you can, more than you think you’ll need. The average woman who is 60 today can expect to live to 94. Hopefully most of that is in good health for you.