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.

@wellyesisupposeso I work in HE with USS as a pension scheme. It is a combination of defined benefit and defined contribution. The defined benefit is 1/75 of annual salary. So, to earn 1k/annual pension, an annual salary of £75k is needed (so to speak). On the other hand, my husband works for government, LGPS pension. To earn 1k/annual pension, one only needs to earn an annual salary of 49k. So, yes, government related pension is great, even if the salary is much lower than private sector.

@Angelsrose teachers absolutely do not accrue annual leave that they can use to reduce their term time hours in England/wales. Maybe Scotland is this magical place where teachers can do these things, but you absolutely cannot elsewhere.
Would you be happy with your child’s teacher taking a month off before exams to use up her accrued annual leave?

You will find your child gets much more expensive as they get older. Even without £1,000 on a phone.

For example, if your child's does any hobbies like football which is a relatively cheap one, you will be spending much more than £30 on a pair of football boots once your child is out of children's sizes, and £180 registration minimum for the year. Sports and dance are cheaper than music (£40 per hour) but they have all costs if you want your child to participate.

You will need to pay for school trips. Maybe not 3k for 5 days but the year 6 residential will be £300 ish and perhaps 1k for a secondary school trip. It's harder than you think to say no to these opportunities and in addition they are different to a family holiday and offer opportunities for growth for your child away from you.

As they get older you will need a laptop for school and possibly you will want to pay for things like driving lessons. This is in addition to a phone and headphones etc.

It sounds like you have lots of good plans in place, but they won't always be satisfied with the box and a very cheap pair of supermarket trainers.

The max pension predictions will be based on 40 years' service and retirement at SPA. That won't happen for most people and certainly not for teachers now in their 20s and 30s. People change jobs more frequently now. Life events and health aren't predictable and teaching is a high burnout job. I don't know what the rate for leaving after first five years is but think it's pretty high. I'm not a teacher but know a lot of 20s to 40s ex-teachers (some Scottish) who couldn't wait to get out.

You’ll be fine in retirement. The latest research from Which shows a two person household can have a comfortable’ retirement with £28k a year and a ‘luxury’ retirement with £44k a year ( https://www.which.co.uk/money/pensions-and-retirement/planning-your-retirement/how-much-will-you-need-to-retire-aNmlv7V7sVe9). Don’t assume you’ll be ready to downsize though- adult children come and stay with partners and families, so you might not want to let go of the big house until you’re much older.

I’d advise more planning for the 10 years before retirement. I’m in my 50s and the majority of my friends have either stopped working or scaled it back massively. Some of us have health problems, others burnt out after decades of hard work.

Your 20k private pension would be perfect for those years. Paying any spare cash into a SIPP to build up a pension specifically to bridge the gap until retirement age would give you good options when the time comes.

@Amermaidandaman I think what the op was saying is that the accrued annual leave could be added onto the maternity leave so it wouldn't be taken randomly before exams (the mother would already be off work rather than taking it whilst they were back at work). This is the case in England with other jobs but may well be different for you. In any case what the op is saying is correct for their situation, it doesn't have to be the same as your experience.

The max pension predictions will be based on 40 years' service and retirement at SPA. That won't happen for most people and certainly not for teachers now in their 20s and 30s. People change jobs more frequently now. Life events and health aren't predictable and teaching is a high burnout job. I don't know what the rate for leaving after first five years is but think it's pretty high. I'm not a teacher but know a lot of 20s to 40s ex-teachers (some Scottish) who couldn't wait to get out

Exactly. The pension is excellent but you kill yourself for it. Literally in some cases - I know someone who died on his FIRST DAY of retirement. He'd slogged away all his life in full time teaching and as soon as he stopped, his body gave up. This was age 60. I'll be expected to go on yo my late 60s in order to take my full teachers' pension. Will I really be able to sustain this pace in my 60s or even 50s? No way. I'll have to go part time and/or change roles (eg some teachers end up as science department technicians) and then my pension won't be so great. Even more likely, I'll probably want to retire before 68 years old, and if I want to withdraw my pension early, I will take a huge hit - it will be worth much less. So yeh, on paper the TPS is amazing, but the reality of it for many younger teachers today is not.

You know what life costs now, you have a good inkling of what your income in retirement will be.

Give yourself a safety margin of 30%, so that reasonably foreseeable economic hiccups won't put you into penury.

You could do a calculation on the assumption that your pension scheme deteriorates to something equivalent to an ordinary workplace pension, in five years' time.

After that, there isn't much point worrying.

I think you are in the position you are in now through hard work and good planning, but also through good luck. You might want to pass some of that on to your kids.

You have benefitted from the housing market; from no university fees; from free childcare (state and parents); from ultra low rate mortgages. Your own kids are unlikely to get the same.

I suggest there are some things it would be prudent to plan for:

Uni costs - £20k per child (£5k per year to cover accommodation and travel). Double that when fees come back in. That assumes the child also works to cover their spending money.

House deposit - £50k per child. You benefitted from the increase in house prices, at the expense of future generations, as many of us did. Only fair to pay some of that forward.

General teenager expenses - there is a thread running at the moment. Take a look to get some ideas, but expect to pay for regular hobbies, driving lessons, insurance etc. there also might be expenses that come completely out of the blue. e.g. due to reasons too long to go into here we “had to” fork out an additional £90k above and beyond normal teenage costs.

I also think childcare might be more expensive than you think. It’s quite unusual to get a place for term-time only, and also unusual to take a child out of nursery when the mother goes on the next maternity leave. I am sure you have looked into it though. And it was a long time ago now but at our nursery the “free” hours were eclipsed by all the mandatory additional charges the nursery added on to supplement.

Also plan for contingency childcare if your parents/inlaws can’t help out as much as you expect. What if they get sick? What if they just decide it’s too big a commitment?

I would also suggest you get a financial advisor to do some pension modelling with you. What if you semi-retire at 55? What if you leave teaching at 45 and go back to industry? What if the type of pension scheme changes?

FWIW I think you have been getting so much stick on this thread partly because people don’t realise just how frugal you have been (and therefore don’t believe your figures), but also because you have been quite lucky with your set up and don’t seem to recognise that.

*Wow that is a huge amount!
It would be approx £60 a day in Scotland for childcare up til the age of 3 and then it become (more or less) free. As a teacher, we only need term time and so the free nursery hours become more condensed and we may only have to pay a very small amount.

We have some help so DC will only go to childcare 2 days a week and with childcare vouchers (I think that open to everyone?) it'll bring it down to about £400 a month which I still felt was eye watering. I can totally understand why people saying they're cheaper not working though if you're paying £3k a month 😱*

Yeh, the cost is horrendous. We are both teachers but couldn't find anywhere that did that long hours we needed that also offered term time only. You may have found somewhere that suits! Be aware that if you haven't already got your child a place, now is the time to sort that. It may be different in Scotland, but many nurseries locally here require the baby to have their name down before they're even born in order to get a place, at the popular nurseries anyway, as there's such demand. We put my son's name down when he was 2 months old (to start at 10 months old) and were told by the nursery that we were lucky as someone had cancelled a place. There was a 50% during school holidays option for not putting him in.

Just be aware that children can cost more than you expect. We've just discovered that my son is SEN. We are now paying thousands of pounds for assessments and support (the NHS is free but waiting list is literally years). We did not expect this but these costs are now a huge part of our lives. Don't underestimate how expensive your child may end up being. We are two teachers, like you, in a £625k house, on bigger combined salaries than you, but, purely due to children, are currently struggling financially (we felt very well off before having kids!).

I am concerned that you are a teacher. I appreciate you clarified you don’t teach English, but you must have to communicate with pupils, parents and colleagues in writing and should have a better grasp of the basics.

Thank you - it has felt a bit of a witch-hunt and there's always 2 opinions so I was always happy for folk to say I should live a little and I won't need as much as I think...along with some people making up facts too however, such is life! Thank you for all your input, much appreciated!

*I also think childcare might be more expensive than you think. It’s quite unusual to get a place for term-time only, and also unusual to take a child out of nursery when the mother goes on the next maternity leave. I am sure you have looked into it though. And it was a long time ago now but at our nursery the “free” hours were eclipsed by all the mandatory additional charges the nursery added on to supplement.

Also plan for contingency childcare if your parents/inlaws can’t help out as much as you expect. What if they get sick? What if they just decide it’s too big a commitment?*

Yes, this. Only needing 2 days a week if childcare is brilliant and a huge money saver... but you never know what might change.

You are absolutely right - I think we all maybe fall into the trap of comparing our situation to those immediately around us. That means that for me I class myself as in the middle... Most of my friends earn more than me, have larger family networks to help and so I don't class myself as lucky HOWEVER - I do completely realise that outwith my immediate network and village etc there are people who would see me as very very fortunate. I guess similarly there will be areas in south England (and appreciate I'm generalising) here people think they're unfortunate because they only early £100k each.

I certainly want to help my kids without them thinking that life is free and heard a long time ago that Duncan Bannatyne told his kids that if they go into a good profession that helps people then he'd double their salary rather than just handing them a million pounds each. Obviously that's not viable for me but would definitely want to help them 👍

I suggest you take your employer to court as it's pretty clear on any website that you do accrue annual leave 👌

I completely agree (and obviously the cardboard box was said in jest). But then life changes too...sometimes for the better and for the worse. Id hate for my kid to miss out but also want them to appreciate the value and cost of things

I'd rather not respond to your comment thanks. I'm pretty sure most people on this forum don't write their replies how they would write a professional email.
Thanks anyway

Great info thanks! Isn't it interesting that one site says £44k per couple for luxury and another that says £50k pp for a moderate.

Mind boggling!

Employer (council) allows us to take accrued holiday over 2 years and reduce down to 4 days whilst getting paid for 5.

Not sure if this is every council in Scotland but a big help 😊

Surely you can spend "too much" on DC later on in life helping them with cars, mortgages. Read The Psychology of Money for good advise.

Also extra money will allow you to retire early if needed! You're buying freedom by not wasting money on take away etc

100% - buying choice and freedom. The counter argument is you never know what's round The corner but even if that, if the worst happens and I drop dead then I'll be thankful I've left my wife and family in good financial health.

But do you say done rather than did in general conversation with the children? Grammar is so important and teachers should intuitively know the basics.

I appreciate you don’t want called out for your errors - and perhaps you knew it was wrong. But maybe you didn’t. Surely it’s best to know? I am sure that is what you tell your pupils.

I firmly believe teachers should have better grammar than the rest of us! Your grammar should be much better than mine😊

Skipping some of the thread will go back and read.

So have you done no home improvements op? What is your kitchen like?
It really is horses for courses. I couldn't have 50k in the bank and not have a nice kitchen. Old ones make me feel sick. I love looking at my new doors. I would be miserable in an old manky decorated house. I know this isnt a choice for some people and the house is clean just old. ( I lived in one for years).

I can happily drive the 2 miles to work in a 12 year old car too.
I also couldn't do without my phone. I do everything on it.

Also working with teenagers you must see them all in the 'Norfies' ' zavettis' some even have the canada goose jackets. I see this as a teacher in NE England.

Is that why you have to go back and edit posts 😊.