Am I saving too much?

[Pensionpot123]

Hi all,
I'm always a bit concerned that I don't splash out - I am very frugal....am I too frugal?

Household income ~£100k in West Scotland. Wife and I are mid 30's.
One DC - 6 months.
Value of house - £600k, mortgage £200k with £50k savings. Plan to pay mortgage off in 10 years.

At the moment our pension is looking to be approx £76k/yr combined exc. state pension.
Long term plan would be to downsize on retirement to house maximum half the value of current home (if nothing changes, profit £300k from sale).

Should I be spending more? Am I leaving myself too much for later life?

At the moment we -
Don't eat out
Go on 2 good holidays a year (Florida, cruise, New York etc)
Don't do hotel breaks
Get a takeaway every ~3 months
Change car every 2-3 years to a new-ish budget car (Ibiza, Fabia, Clio etc)
Keep all other outgoings to a real minimum

Any opinions or serious advice about pension is welcome!
Realise there may be people who earn a huge amount more or have a much bigger pension pot.

Yip £49k with 13 weeks off and only work 8.45 to 3.30 with a bit of marking in the evening 🤭

I think your have made some very basic and sound financial decisions which has put you in the good position that you are today.

I would encourage you to start making decisions about your lifestyle from your heart and not to be driven by financial goals (within reason .... but you really don't seem like the kind of people to make reckless decisions!)
If you would like to eat out or get takeaways .... do it occasionally and so on.

I think you change your car a little too often. But you can afford it so it's not a big deal ....

I would also encourage you to understand your pension more instead of relying upon calculators. The likelihood is you will retire on a % of your salary based on the number of years service.

I would also encourage you to pay off your mortgage quicker.

Dave Ramsey does some good books and advice on money and investing that I think would sit well with your principles.

He also says teachers are in the top 10 careers that become millionaires.... he's not wrong here it seems!

I thought your question was a reasonable one. I haven’t read all the replies as they went off on one but sounds like you’re being sensible. These are the sorts of things I have a think about when considering whether to buy the latest Range Rover (I can’t stand range rovers btw):

Maybe have a think of a few different scenarios - will you definitely want to downsize as you may have 20 grandchildren who like coming to stay!
Do you want to help your DC buy houses etc.
Kids seem to get more expensive as they get older, holidays are lots more etc. Mat leaves and LTFT will impact on the pension projections unfortunately - mine will be much less than the calculators tell me.
Do you have income protection/life insurance?
You don’t seem to have any investments? Maybe look at keeping whatever emergency savings you need in cash and start investing the rest - 6% cash interest rates are not likely to hang around forever
Not sure why you change your car so often?

Definitely book the expeditions though!

Thank you!
It actually made financial sense to change the car every year up until recently...I bought a 1 year old car from Motorpoint for £8k, the next year they gave me roughly the same car, 1 year old for only £1k to change it. They don't seem so keen now but it worked for around 7 years and was great - no MOT, no service costs, no real running costs apart from the odd puncture and paid £1k for the pleasure.

I'm keeping my car now, they want approx £3k a year to do the same now.

This was never a formal agreement btw, it just happened that way.

I have no investments - I certainly need to look at it and get that sorted. Trying to find sound financial advice isn't always easy so if you have any companies you'd recommend please do let me know 👌

Agreed - I do need to take time to understand my pension better. In terms of paying my mortgage off quicker I think I'd struggle to do this. We're bursting a gut to get it paid off but think 10 years will be realistic and potentially even a stretch depending on kids etc. the only thing that may make it viable earlier is if we "come into money" of some sort whether it's inheritance or whatever. We certainly won't receive huge inheritances.
What a difference it'll make when it is paid off though!

I don't know if we've missed the boat (pardon the pun) with the expeditions for just now
Potentially need to wait til DC is a little older now. Would love an Asian cruise and a proper artic or Antarctica cruise.

I'm at the other end of this question. Came from a very low income home, but retired (late 50s) having worked very hard in well-paying jobs, had a couple of lucky financial breaks, overpayed mortgages, started saving and pensioning early and saved like a mad thing for decades. Also didn't have kids. I sometimes wondered whether I should be spending more along the way but honestly never felt that I was denying myself anything I genuinely wanted. I drove an old car, bought clothes on the high street and lived in a modest house for the area. But I had as many interesting holidays as I could fit in, financed myself through further education, bought what tech I wanted and enjoyed the occasional bit of expensive eating out.

I don't think I would do much differently now, but that's because when I thought about it I genuinely couldn't think of anything I'd want to spend more on. That's probably the legacy of a frugal upbringing, but also a lack of interest in comparing lifestyles. I just wanted more time to travel. And now I can while I'm still healthy and I'm happy to be able to have a very financially easy retirement.

But I was making decisions only for myself and my partner, not for children. That's a massive difference to your situation. Only you can know what matters to you and your family. And that's where you focus your energy and resources. It's entirely a "you do you" issue.

On a practical note, I found this quite enlightening (recommended on another thread). www.guiide.co.uk/

And on another practical note, I underestimated how much I'd need for the right property in retirement and I wonder if you might have too. I had to find ⅓ more than I'd reckoned on.

I didn't have a rich upbringing...far from it. Interesting point about the house that you'd want - perhaps I need to relook. I'm basing it on property prices at the moment and realise we'd be happy in a £300k house in retirement.... But life does change. As someone says with grandkids or wanting to splash out on doing the house up to our tastes so that all factors in too!

Thank you!

In Scotland we do get a lot of support to go to uni; fees paid, bursaries that you don't need to pay back, grants for certain subjects etc. I was richer when I was a uni student than I was after I graduated

😂 absolutely! I'm almost certain I also got my train pass paid for by the university (can't remember why now).

I'm super confused by your pension prediction. I've been teaching full time for 26 years and when I finish my pension will be absolutely nowhere near that. Also, maybe I should move to Scotland to get paid more - I'm at the top of my game and earn thousands less! Maybe I'm doing something wrong...

It does seem teachers in England maybe get a rough deal? Not sure how your pension stacks up but think my figures have been confirmed by a few people who were very knowledgeable on here

Yes, move to Scotland. Average house price is £190k so that counters argument of higher taxation. Free prescriptions, no tuition fees, unmetered water bills included with council tax payment

@Pensionpot123 What does your wife think with all of these living cost minimisation measures? I am much more tightfisted when it comes to spending money, but my husband balances it a bit for me. When we tried to pay off our mortgage, I still budgeted a maximum £200/month for eating out otherwise life would have been too miserable. Yet, we still managed to pay off our mortgage of £124k in 7 years while paying full time nurseries fees at the same time.

Instead of thinking of working until NPA, perhaps it is worth it to think about retiring early. That's what we plan to do. We aim to retire by 58 and in addition to pay the usual pension contribution (defined benefit), we pay additional contribution for defined contribution pension scheme which can be accessed at NPA-10 (or 58 in our case). So, we don't need to touch the defined benefit pension until NPA. We have also saved regularly for our DD since she was born to help her later in life.

Thank you! That's food for thought.
My wife got the house of her choice, enjoys all the hobbies she has on a very regular basis (few times a week) and more or less, goes away every school holiday. We've always got something to look forward to and think we see the sacrifice as worth it.

@highlo could you please post the link to cash flow modelling tool? It sounds very interesting

😂 shhh don't tell everyone!

I agree this thread is slightly odd.

-OP appears to be very frugal and money savvy, so how can he be unaware that £76k p/a in retirement (excluding state pensions) is a huge amount? Many people can only dream of this and I can see why it is coming across as goady and getting people's backs up.

• I am also in Scotland and supported the recent teachers strikes. HOWEVER, I did not appreciate quite how well paid they are, or just quite how generous the pension was. Obviously I knew it was a DB scheme and therefore very valuable and pretty much the best around.....but seeing the numbers laid out here is eye opening.

I am qualified to post graduate degree level and work a demanding job in the private sector. I work part time, my full time salary would be just under £10k more than the OP's full time teachers salary. HOWEVER: I am older than the OP, and it was a hard slog to get here. I was not earning this in my mid 30s. I also do not have the job security that teaching provides, or the guaranteed pay rises / pay scales etc. Everything is performance related and there is a lot of pressure. But most importantly, I have absolutely nothing like the pension provision he has.

OP and his wife will be getting £38k p/an each, guaranteed and rising with inflation.

At the moment, if I am lucky, my defined contributions will provide a pot that will provide around £10k p/a at retirement. Husband is similar. So we will very much need our state pensions to survive.

This £10k is dependent on investment performance and if we live to 100 it may well run out.

A world away from OP's £38k for life.

Obviously my pot would be bigger if I had been earning more and contributing at a younger age, but again, my career just wasn't like this.

Feeling very much like I've made the wrong career choice.

However, I have to say, at school and uni etc, teaching was never really pushed and never really presented as a lucrative career choice. And in fact a lot of the less academically able students went into teaching (mostly primary). But it feels now that a lot of the people that went into it probably did so because of the generous pension, whereas a lot of us were aware of it, but just didn't realise quite how stingy DC pensions could be, and how stark the difference is, in reality.

Teaching is certainly an ok career. There was thread on here that was asking people their income and I couldn't believe that virtually every post was household income of >£200k - astonishing!

I certainly wasn't goading, someone posted a link to guiide.co.uk which is really helpful BUT I put in my current circumstances, retiring at 65 and wanting a moderate pension income (it gives 3 options, I went for middle) and it says I need £50k pension so although people say £38k would be alot, many of the pension calculators say this isn't true (I'm not saying it's right)

I also done a poll recently in my classes and not one pupil wanted to be a teacher. I couldn't believe it.

This thread is really interesting but what I have found most astonishing is the sometimes unpleasant and adversarial tone of some of the replies. Someone was even claiming that in England you don't accrue annual leave during maternity leave which is not correct.
I have read hundreds of posts on MN where people are declaring hundreds of thousands of pounds in annual income (how many of us have read about a high earning DH earning upwards of £150,000?). Now here's a teacher on around £50,000 and people are seemingly berating them for astute financial planning and challenging every comment that they make and some are saying the pension is too generous?! It seems to me that despite claims of extremely high incomes, these same people may be overstretching themselves and then perhaps feeling a little envious of someone making less but making that money go further.
Teaching is a vital job that is tough and not too many people want to do it.

This thread!

I'm tighter than a gnat's arse according to most people. I hope to retire at 50. It's all good as far as I'm concerned.

@Pensionpot123 Yes, I can believe it.

One of the reasons for that will be due to the strikes and the picketing. They will be under the impression that it's a difficult, thankless job for little pay.

But it's not little pay. It's a generous salary and there's job security unlike most other professions. Yes the job itself may be hard, but a lot of stresses are removed, which people working in the private sector have to deal with.

As I said in my previous post, I did support the strikes. But at the time I didn't quite realise how much they get paid and quite how generous the pension is. I mean your numbers themselves speak volumes. What was it; salary of £45k equating to a pension of £37k? Thats 82% of your salary in retirement. Thats wild. That's just not possible for most people.

It seems to me like it's a bit of an open secret. People are aware that the pension is a benefit to going into teaching.

But I don't think they are aware quite HOW good it is.

Also, it just won't be a factor for many teens / 20 year olds choosing a degree / profession. They don't care about pensions unless someone really talks them through it.

So if a young person has somebody explaining to them the difference in quality of life they could have due to the DB pension, a lot of them will go for it.

For ones like me, who didn't know about teachers pensions (or any pensions) when I was choosing uni courses, it seems like I've missed a trick.

The numbers to aim for on the guiide calculator come from this research on what people spend in retirement https://www.retirementlivingstandards.org.uk. There is quite a lot of detail on there on what each level allows people to buy so you should be able to get a good idea of a ball-park amount to aim for (they are probably going to be updated soon so will go up a bit). Note that they are spending amounts so you will have to account for tax on any pension income.

If I were you I would work out a target amount for what you would want in retirement as a couple and as a single person (it's much more expensive to be single and it's best to plan for reasonable worst case scenarios like divorce). I'd then work out how far you are towards that target based on what you've already accrued. I'd then make sure that I had a plan to get to the target but would keep it flexible. At the moment that's very easy for you as your teacher pension contributions are likely to take you beyond any reasoanble target BUT I wouldn't assume that the £76k will be accurate. Very few people have the charmed life of perfect health, relationships and work environment that assumes. There's also no guarantee that the arrangements will stay as generous as they currently are for the next 30+ years. You can't predict the future but as long as you are keeping an eye on the target you can adjust your plans as life changes.