This is not going to be enough to live on is it?

[meddlesomemarch]

Just done a pension estimate and it looks like in 8 years time, aged 67, the total sum of my pensions is only going to amount to £21k per annum. Whilst the house is paid off, this seems depressingly low. Am I being overly pessimistic here?

Financial advisor has said at the age I am now (59), it won't be worth paying into pension but if I have any spare monthly cash to put into AVCs instead.

£21,000 a year for life with no rent/mortgage to pay, and your time will be your own. That's quite a nice situation to look forward to. As others have said, if you want to be able to afford some luxuries and your health permits it you can supplement your pension by working as much as you choose to.

Well that's what we will have too.
I'm just bunging as much as we can each month into pensions (you get tax relief added so no better investment really) so we have some cash savings to sit alongside it to cover a bit of fun money etc.

More than I earn working full time. Manage ok. Runs home and a car and can save. Now round the world trip money - but can stretch to a day or two out. You’ll be fine.

YABU. I'm living off £6k a year just about. Can we swap???

My advise is to.continue paying as much as you can for the next 8 years.

Teachers Pensions are inflation proofed. So each year the ou.t due rises with inflation. Can't remember which index they use. In 8 years time your State Pension will have risen each year in line with inflation. Eg. Looks like next year state pension looks set to rise £1000.

Try to make sure you do all house maintenance, white goods replacement and car that will last into future before you retire.

You should be ok then.

I’d suggest you do a plan of your outgoings when retired. Obviously you can stop saving but also want to allow a certain amount for house / white good repairs, that sort of thing, include holidays, gifts, occasional car upgrades, absolutely everything.

Then compare total outgoings to your expected total income & you can see if you have any excess or shortfall. Then you can make the decision to either reduce your (non fixed) outgoings or increase income & how much increase you are aiming for. Say you were just £1k-£2k py short, you might be able to make that up marking and invigilating for example.

There are some threads on Gransnet about pension income. They are full of happy posters who say they are living on far less than this and having a great time. I'm not entirely sure about this (I'm retiring in August and a bit worried) but it does cheer you up reading them. My feeing is that provided you have some savings to cover emergencies you should be able to live quite comfortably on this. When ;the time comes I'll be experimenting with batch cooking, growing veg and seeing what fun I can have with my bus pass. I'm thinking that if I need a bit more money I could get a "little job" 2 days a week, maybe have a lodger or see if dealing in curios (my brother does quite well out of that) would work. Dog and house sitting are other possibilities.

Is that after tax or before? I think it should be plenty for a decent if not super luxury life for one person. I live on £18k before tax salary with 2 kids (no rent/mortgage).

I had £19,000 when I retired. Enough left over to save. Lost £7,200 when ex-husband died, but still doing OK, tho' digging into inherited capital for big items like dental treatment now. Lucky to live in London with Freedom Pass. You'll be fine.

I’m comfortable on that amount but I pay less than your figures for water, electric/gas and internet. I don’t run a car, but I haven’t reached free bus pass age and spend out 9n public transport.

The Pensions and Lifetime Saving Association reckons that £20,800 a year will give you a 'moderate' standard of living after retirement (assuming no rent/mortgage), including replacing a 3-year old car every 10 years and two holidays a year, plus eating out once a month and one or two takeaways a month...

www.retirementlivingstandards.org.uk/

You won't have to buy 'work type' clothes.
You can spend more time cooking from scratch, batch cooking and filling the freezer .
There are lots of ways of meeting up with friends that are free.
If you want to eat out , and can't stretch to dinner, lunch is much cheaper.
You will have time to do basic maintenance and gardening yourself. Painting and gardening are very satisfying. Wilko paint is brilliant and seeds are cheap.
Matinee performances are often cheaper. Or just turn up and see if they have £10.00 tickets.

Whole families living off that (which they won’t be, they’ll be receiving benefits on top of an income that size) won’t be putting fairly significant proportions of their income into a private pension each month in anticipation of a decent return upon retirement. I don’t think it’s unreasonable for somebody to recall having done that for most of their working life and feel a bit disappointed that the return isn’t going to be as great as they hoped.

Mines the state pension and nothing more. I've given up caring I'll just be homeless.

WTF? Are you for real? Is this some kind of stealth boast? £21k is a large pension amount that most people can't dream of. It's perfectly adequate for a very nice lifestyle, once the mortgage is paid.

Presumably you're still working? In which case, yes, pay as much as you can into AVCs.

Did the financial advisor also recommend stocks and shares ISAs too? Although with your timeframe that might be more risk than you want as the bear market might last 10 years.

And if you are still employed, are you planning on staying in employment until 67?

I've been able to pay my missing national insurance contributions at a vastly reduced rate (£158/yr) because I went self employed after finishing in employment. If I wanted to do that while employed it would have been more than £800/year. If that was an option open to you (tutoring maybe?), HMRC could advise over the phone how to do that.

Ime financial advisors are mainly interested in the commission they make, they don't necessarily look at everything open to you.

And the amount you need absolutely depends on the lifestyle you want - start tracking and budgeting all your spending now - I'm a huge fan of YNAB for that (pm me if you want a referral code).
Good luck!

It depends what lifestyle you want really. Happy pottering around the house, doing free/cheap activities, you’ll be fine. However if you want lots of holidays, & meals out then you’ll struggle. I’d be happy with 30k a year pension, so am aiming for that by paying extra into my work pension.

Whole families living off that (which they won’t be, they’ll be receiving benefits on top of an income that size)

My entire income for a family of 3 is less than that.

Exactly. And not everyone also gets benefits.

ifs.org.uk/publications/16055

On average, retirees’ total household spending per person remains relatively constant in real terms through retirement, increasing slightly at ages up to around age 80 and remaining flat or falling thereafter. For example, for those born in 1939–43, spending at age 67 was on average £245 per person per week, rising to £263 per person per week at age 75, a real (in CPI-adjusted terms) increase of 7%, or just under 1% per year. For those born in 1924–28, spending fell from £197 per person per week at age 82 to £185 at age 88, a fall of 6%, or around 1% per year.

if the spending patterns of current retirees are a good guide to how people in the future will want to spend, current savers might be best advised not to plan their retirement saving on the basis that their overall spending will fall sharply during retirement. Furthermore, we find that later-born generations spend more at the start of retirement on categories such as leisure services and holidays (which make up 7% of total spending at age 65 for the 1924–28 birth cohort compared with 11% for the 1944–48 birth cohort), which tend to increase with age, and less on categories such as food inside the home, which tend to decrease with age. This might mean that the spending of younger, and future, generations of retirees could grow more strongly with age than is the case for current retirees.

21k is way more than enough for me and DH put together. We’ve led a fairly frugal life though on just one salary so we are used to living on a tight budget. With our mortgage gone we could have a nice life on that kind of income.
I do think though it’s all about the lifestyle you are used to. I can imagine that if you are used to holidays etc and earning a high 40k plus salary, managing on 21k could be quite a shock.

Chaoatte 'As you have employment gaps did the financial advisor mean voluntary NI contributions so that you get the full state pension, rather than AVCs which are into the pension? That is usually worth doing*',
*
Apparently I'll get the full state pension. I claimed child benefit bringing up kids so perhaps that meant I've enough NI. Definitely said AVCs. I meant she advised this rather than but extra pension in-house

What kind of lifestyle do you need to maintain? If you have no housing costs it seems like an ok amount to cover basic household outgoings plus extras.

Cardiffborn 'Did the financial advisor also recommend stocks and shares ISAs too? Although with your timeframe that might be more risk than you want as the bear market might last 10 years.

And if you are still employed, are you planning on staying in employment until 67?

I've been able to pay my missing national insurance contributions at a vastly reduced rate (£158/yr) because I went self employed after finishing in employment'

Yes, she did - at medium risk until I'm 67. I checked my state pension forecast and it definitely stated I'd receive maximum pension (I claimed child benefit so can only think that's why).

I would love to retire earlier but don't think I can.

What do you mean? It’s quite low, but not impossible to live on.