Retirement

[DaveH]

Not saying they are correct figures but the comfortable one probably includes a new car every 2-3 years, several holidays and £1000 a year on clothes

That is the sort of thing I have seen in a lot of the estimator reports.

£1000 a year on clothes? I doubt if I have spent that in the last 5 years. Generally I buy good quality hiking boots (to last for 10-20 years) and reasonable quality football boots (which I'm not going to be wearing that much as I approach 70). The rest is pretty much cheap jeans and t-shirts. I'm trying to think of the last year. I didn't need any new footware. I can only think of 2 t-shirts and a pair of shorts, that I bought. I didn't need anything else.

 

[Town End Farmer Giles]

That is the sort of thing I have seen in a lot of the estimator reports.

£1000 a year on clothes? I doubt if I have spent that in the last 5 years. Generally I buy good quality hiking boots (to last for 10-20 years) and reasonable quality football boots (which I'm not going to be wearing that much as I approach 70). The rest is pretty much cheap jeans and t-shirts. I'm trying to think of the last year. I didn't need any new footware. I can only think of 2 t-shirts and a pair of shorts, that I bought. I didn't need anything else.

We're all different that's why these things just dont work for everyone in real life. I'd say clothes is the one area i may look to scale back as probably spend far more than that a year.

I've mentioned my budget before, £1000-1200 a month for bills and shopping, that's my pension, and covers essentials for both of us. Grand a month, ish, for clothes, holidays, nights out, thats for me. Some months will be less, some more. It'll probably average less but I'm budgeting on roughly that in determining how long my lump sum lasts.

The missus will chip in a bit towards holidays but has no pension, just savings.

 

[The Great Soprendo]

Question for the investment experts...does anyone think there's some logic in keeping some cash in a pension pot during the investment phase of it (obviously I understand it has its place when nearing retirement if about to buy an annuity for instance, or for some stability). I'm not thinking of it as a long term choice, more as a way of being able to react in a timely fashion to investment opportunities, eg if there's a crash or even just a large-ish correction in a market.

This could either be done by choosing a proportion of your regular investment to build up as cash, or by actually cashing in on a fund that you feel as peaked, for instance, then keeping it ready for an investment opportunity.

Obviously no crystal balls available, and it doesn't compare favourably in terms of interest to a good savings account or cash ISA, so definitely only as a 'yet to be invested' amount, but I do wonder if building up a small proportion of your pension pot in cash might make sense for those who like to be more opportunistic with their pension investments.

Clearly goes against conventional wisdom about 'time in the market' etc but I think that advice only serves to a point and especially for those who aren't interested in managing their pension pot more actively (which is fine). I'm definitely a bit of a tinkerer though, at least with part of my pot, and think it has probably served me ok over the years.

Just thought it was an interesting idea to chew over.

 

[42]

Question for the investment experts...does anyone think there's some logic in keeping some cash in a pension pot during the investment phase of it (obviously I understand it has its place when nearing retirement if about to buy an annuity for instance, or for some stability). I'm not thinking of it as a long term choice, more as a way of being able to react in a timely fashion to investment opportunities, eg if there's a crash or even just a large-ish correction in a market.

This could either be done by choosing a proportion of your regular investment to build up as cash, or by actually cashing in on a fund that you feel as peaked, for instance, then keeping it ready for an investment opportunity.

Obviously no crystal balls available, and it doesn't compare favourably in terms of interest to a good savings account or cash ISA, so definitely only as a 'yet to be invested' amount, but I do wonder if building up a small proportion of your pension pot in cash might make sense for those who like to be more opportunistic with their pension investments.

Clearly goes against conventional wisdom about 'time in the market' etc but I think that advice only serves to a point and especially for those who aren't interested in managing their pension pot more actively (which is fine). I'm definitely a bit of a tinkerer though, at least with part of my pot, and think it has probably served me ok over the years.

Just thought it was an interesting idea to chew over.

Trying to time the market is largely futile. You might get lucky & buy in the dip. But if going to do that, then why not just keep it in cash in a savings account which gives you greater flexibility, and use that if market crashes?

 

[The Great Soprendo]

Trying to time the market is largely futile. You might get lucky & buy in the dip. But if going to do that, then why not just keep it in cash in a savings account which gives you greater flexibility, and use that if market crashes?

Maybe, but there are also limits tax wise on how much you'd want to keep in a savings account, and tax advantages to it being in a pension (especially if via an employer scheme). And obvious limits on ISAs.

I agree there's a good chance of getting it wrong with trying to time the markets, but equally if it were so simple as just 'time in the market' then stock brokers wouldn't have more money than me!

 

[Ned Land]

Question for the investment experts...does anyone think there's some logic in keeping some cash in a pension pot during the investment phase of it (obviously I understand it has its place when nearing retirement if about to buy an annuity for instance, or for some stability). I'm not thinking of it as a long term choice, more as a way of being able to react in a timely fashion to investment opportunities, eg if there's a crash or even just a large-ish correction in a market.

This could either be done by choosing a proportion of your regular investment to build up as cash, or by actually cashing in on a fund that you feel as peaked, for instance, then keeping it ready for an investment opportunity.

Obviously no crystal balls available, and it doesn't compare favourably in terms of interest to a good savings account or cash ISA, so definitely only as a 'yet to be invested' amount, but I do wonder if building up a small proportion of your pension pot in cash might make sense for those who like to be more opportunistic with their pension investments.

Clearly goes against conventional wisdom about 'time in the market' etc but I think that advice only serves to a point and especially for those who aren't interested in managing their pension pot more actively (which is fine). I'm definitely a bit of a tinkerer though, at least with part of my pot, and think it has probably served me ok over the years.

Just thought it was an interesting idea to chew over.

I’m in a similar position. I aim to retire in 7 years time. I have been paying into an AVC scheme and the plan was to take a cash free lump sump.

Presently my investments are 100% equities which has been great recently. But I want to preserve the capital for when I retire.

There is a Prudential’lifestyle’ option but it’s very low risk and I still want growth over 7 years.

My current thinking is to move 10% of the ‘pot’ into the AVC money market fund each year over the next 7 years. If the stock market tanks then I could gamble a portion of this, or try to preserve the value of the ‘pot’ closer to retirement.

For my SIPP, Vanguard have target retirement funds so I might replicate their holdings.

It’s made me realise how much of this is luck.

 

[OldNewtown]

I agree there's a good chance of getting it wrong with trying to time the markets, but equally if it were so simple as just 'time in the market' then stock brokers wouldn't have more money than me!

The time that you would have to spend monitoring the market before finally taking a punt?
Along with pressure that you put on yourself?
Would it be worth it?

In relation to your comment about stockbrokers, they can play with other people's money. If the market tanks they won't lose much, perhaps a smaller bonus. However you could lose a significant portion of your pension pot and have to change your retirement plans.

The best advice I was given was only gamble what you are prepared to lose. Investing in the stock market is a long term thing.
If you want to play the market have a separate pot of money that you wouldn't miss.if it disappears.

All in my personal opinion of course,

 

[The Great Soprendo]

I’m in a similar position. I aim to retire in 7 years time. I have been paying into an AVC scheme and the plan was to take a cash free lump sump.

Presently my investments are 100% equities which has been great recently. But I want to preserve the capital for when I retire.

There is a Prudential’lifestyle’ option but it’s very low risk and I still want growth over 7 years.

My current thinking is to move 10% of the ‘pot’ into the AVC money market fund each year over the next 7 years. If the stock market tanks then I could gamble a portion of this, or try to preserve the value of the ‘pot’ closer to retirement.

For my SIPP, Vanguard have target retirement funds so I might replicate their holdings.

It’s made me realise how much of this is luck.

Yeah, a lot to think about. However, my underlying principle (which I may go back on) is that I'll likely keep my pension in drawdown rather than buy an annuity on retirement, which probably means money will be staying invested over the long term even after retirement. Therefore the idea of lifestyling the funds makes less sense as you're going to be able to work through the peaks and troughs of the market, hopefully. It's whether you can stomach that risk of course (even more so when you're a worry-monger pensioner).

 

[Ned Land]

Yeah, a lot to think about. However, my underlying principle (which I may go back on) is that I'll likely keep my pension in drawdown rather than buy an annuity on retirement, which probably means money will be staying invested over the long term even after retirement. Therefore the idea of lifestyling the funds makes less sense as you're going to be able to work through the peaks and troughs of the market, hopefully. It's whether you can stomach that risk of course (even more so when you're a worry-monger pensioner).

My plan is to keep the SIPP 80% equities and use from 60-67.

AVC fund - I’d prefer a lump sum but it could be transferred to a SIPP.

ISA - 100% equities, withdraw after 67.

I have a DB pension so I regard all of the above as a semi-educated gamble.

 

[Darlo1973]

I've just seen a report in today’s I paper.
Apparently Hargreaves Lansdown are saying that single people need over £26,000 a year and couples over £38,000 to have a comfortable retirement.

I remember seeing this a few months ago and thinking how unrealistic it seemed:

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Who compiles these figures ?
Elon Musk ?
Jeff Bezos ?
Jacob Rees-Mogg ?

I doubt any of those could survive a week on £26k.

However, it all depends on what you define as "comfortable". Your typical Hargreaves Lansdown investor is going to have an expectation of a higher standard of living than someone who is mostly reliant on the state pension.

£26k is £500 a week (minus some tax) which, assuming you have no rent/mortgage to pay, should be enough but it's hardly going to be a lavish lifestyle once bills and basic living costs are accounted for.

 

[DaveH]

The best advice I was given was only gamble what you are prepared to lose. Investing in the stock market is a long term thing.
If you want to play the market have a separate pot of money that you wouldn't miss.if it disappears.

And make sure you fully understand what you have invested into.

My dad put all his lump sum into some sort of share scheme. I don't know the full details but I think he was supposed to keep an eye on things and make sure it was always aligned to companies or industries towards the top end of the FTSE100. But he didn't and left it as was, so when a couple of the companies he had invested in started to fail, his investment started to fall. Then there was some event which rocked the stock markets (could have been the 2008 crash). Rather than leave everything in to rebuild, he pulled it put and put it into the bank. He lost half his lump sum.

What little I know, I don't think it was bad advice or a bad product, he just didn't understand it. He was a very bright bloke who usually read into the finest details of anything that caught his attention, but his pension investment he allowed to be someone else's problem, except it wasn't.

I doubt any of those could survive a week on £26k.

However, it all depends on what you define as "comfortable". Your typical Hargreaves Lansdown investor is going to have an expectation of a higher standard of living than someone who is mostly reliant on the state pension.

£26k is £500 a week (minus some tax) which, assuming you have no rent/mortgage to pay, should be enough but it's hardly going to be a lavish lifestyle once bills and basic living costs are accounted for.

I've not really looked at breaking it down on a weekly basis. The £40k a year often talked about is £770 per week. There will be bills to pay from that, but that sounds like a fair bit to me.

Taking my current monthly take home, subtracting the mortgage payment and dividing by 5, gives less than that, and I have not accounted for not paying anything into savings. By the time I'm 58, my youngest will be 24 and the other one 28.

I have not accounted for my wife's earnings in what we currently spend.

Some of the reports suggest that £40k is the lower end of comfortable living with a few luxuries as a treat. But looking at that it is feeling like more than enough compared to what we spend now.

 

[Town End Farmer Giles]

I doubt any of those could survive a week on £26k.

However, it all depends on what you define as "comfortable". Your typical Hargreaves Lansdown investor is going to have an expectation of a higher standard of living than someone who is mostly reliant on the state pension.

£26k is £500 a week (minus some tax) which, assuming you have no rent/mortgage to pay, should be enough but it's hardly going to be a lavish lifestyle once bills and basic living costs are accounted for.

£2k a month is fine, see my post earlier, grand for bills, grand for clothes, nights out, holidays. It's roughly what I spend now, averaged out.

 

[LiverBird]

Can anyone with knowledge of the NHS pension explain if its any good?

I feel people just say its good because they've been told it is so, or maybe the older NHS pension was good. Have no idea how it works in its current form

 

[The Great Soprendo]

My plan is to keep the SIPP 80% equities and use from 60-67.

AVC fund - I’d prefer a lump sum but it could be transferred to a SIPP.

ISA - 100% equities, withdraw after 67.

I have a DB pension so I regard all of the above as a semi-educated gamble.

Having a DB pension changes everything (I don't, though the missus will have a very small teaching one which might pay for a holiday each year). My retirement date will depend entirely on how well my pension investments (from work schemes I've been paying into for nearly 30 years) perform. I'm definitely working at the highish risk end in terms of where that money is invested but it's a strategy that has paid off so far largely and which I will probably stick with. There have been a few years where the pot value has gone down (even with contributions going in) and that is scary but it has otherwise been good. However I know that a major stock market crash could ruin everything. Hence wondering if a bit of cash contingency in the pension might give a little peace of mind or provide an opportunity for at least some upside if that happened, without significantly altering the general approach.

 

[42]

Can anyone with knowledge of the NHS pension explain if its any good?

I feel people just say its good because they've been told it is so, or maybe the older NHS pension was good. Have no idea how it works in its current form

Put it this way, in order to fund the benefits, the employee contributions are about 20% (give or take). Also if married, spouse get a widow pension. It's not as generous as it used to be, but it's still a hell of a lot more generous than what you'd get in the private sector

 

[DaveH]

Can anyone with knowledge of the NHS pension explain if its any good?

I feel people just say its good because they've been told it is so, or maybe the older NHS pension was good. Have no idea how it works in its current form

It looks canny. A very brief look, looks like it is better than the university pension scheme, which I know is very good.

High personal contributions, but also high employer contributions. For every year you earn, you get 1/54 of that back per year as your pension (minus early retirement penalties).

So, a doctor that has moved from being a junior doctor to having a speciality will be on £43-£63k. If they are in the middle at £54k, for every year they work, they will get £1k per year back when they retire. Do that for 30 years and you have a £30k per year pension.

This just a very brief look mind. The university one I'm in is 1/75 of your earnings per year, you get back as a defined benefit per year, so you would need to be on £75k per year to get £1k per year back as a pension (for each year worked).

 

[Darlo1973]

Some of the reports suggest that £40k is the lower end of comfortable living with a few luxuries as a treat. But looking at that it is feeling like more than enough compared to what we spend now.

£40k is certainly at the upper end of "comfortable" and would allowed several holidays per year and no worries about paying the bills but when reading these reports from investment firms you have to consider their intended audience. It wouldn't be in HL's interest to tell their clients "Don't worry, you have loads of money" but rather to get them to increase their contributions.

 

[DaveH]

£40k is certainly at the upper end of "comfortable" and would allowed several holidays per year and no worries about paying the bills but when reading these reports from investment firms you have to consider their intended audience. It wouldn't be in HL's interest to tell their clients "Don't worry, you have loads of money" but rather to get them to increase their contributions.

I agree. if you already have an affluent life, then a £40k pension will feel like a drop. I don't have such a life.

The pension estimator on my scheme breaks down the whole thing per day, then rounds down each day to the nearest 10p. Do that over 20 years and the difference is huge. I reported that to them and they fobbed me off. I had gone to the point of reading through all the javascript to work out why it was far lower than the spreadsheet I had done. I'm taking of a £6k per year difference.

They are all interested in you working longer and contributing more.

I've started tracking my estimate vs their estimate on an annual basis. I suspect as the years tick by and I have more pension banked, mine should stay about the same and their estimate will go up to be closer to mine.

 

[Ned Land]

It looks canny. A very brief look, looks like it is better than the university pension scheme, which I know is very good.

High personal contributions, but also high employer contributions. For every year you earn, you get 1/54 of that back per year as your pension (minus early retirement penalties).

So, a doctor that has moved from being a junior doctor to having a speciality will be on £43-£63k. If they are in the middle at £54k, for every year they work, they will get £1k per year back when they retire. Do that for 30 years and you have a £30k per year pension.

This just a very brief look mind. The university one I'm in is 1/75 of your earnings per year, you get back as a defined benefit per year, so you would need to be on £75k per year to get £1k per year back as a pension (for each year worked).

LGPS career average scheme from 2014 onwards is 1/49th.

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Combined with other decent benefits then working at *some* universities is worthwhile.

Having a DB pension changes everything (I don't, though the missus will have a very small teaching one which might pay for a holiday each year). My retirement date will depend entirely on how well my pension investments (from work schemes I've been paying into for nearly 30 years) perform. I'm definitely working at the highish risk end in terms of where that money is invested but it's a strategy that has paid off so far largely and which I will probably stick with. There have been a few years where the pot value has gone down (even with contributions going in) and that is scary but it has otherwise been good. However I know that a major stock market crash could ruin everything. Hence wondering if a bit of cash contingency in the pension might give a little peace of mind or provide an opportunity for at least some upside if that happened, without significantly altering the general approach.

The conventional wisdom was to move more of the portfolio into bonds but people would have taken a hit over the past few years.

Hence why I thought an increasing % in money market funds would preserve capital.

 

[42]

LGPS career average scheme from 2014 onwards is 1/49th.

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Combined with other decent benefits then working at *some* universities is worthwhile.

The conventional wisdom was to move more of the portfolio into bonds but people would have taken a hit over the past few years.

Hence why I thought an increasing % in money market funds would preserve capital.

As far as the bond markets go, that was down to interest rates rising as rapidly as they did. I guess now they're a decent rate, it makes bonds now more attractive. Also if rates do drop like they're expected to the gains will be better. Then if they do go sub 1% then switch the bonds to equities to realise those gains since we know if rates then go back up, the value if bonds will decrease.