[Closed] Just checked my pension pot...yay I'm rich....oh hang on...

Estimated pension pot at age of 62 is 355k...this seems like alot!

Very much depends on when you will be 62. If it's tomorrow then yeah that's quite a bit but if it's far into the future then not so much, The 8k is likely to be amount you would get converted into todays money i.e. the amount that you will get in the future will be the equivalent of £8k today.

Indeed, that's why final salary schemes are worth so much. 30 years as an MP and you have the equivalent of £1.6m

They did change the rules to allow you to take it all as a lump sum but you'll pay 40% plus tax on it

That £8k will be based on buying an annuity though.

I wouldn't be sticking £355k in an annuity. Even assuming no growth that £55k will give you £8k a year for over 44 years. So unless you live past 106, and assuming zero growth on the capital, there's only going to be one winner.

Hardly seems worth it...I'd rather just take the lot as a lump sum and spunk it on hookers and coke, dying beautiful at the age of 70.

Pre redundancy I was earning £45k

After Tax, pension, student loan that was about £2100/month, after the mortgage and savings have been paid into it's more like £800 for household bills and disposable income.

£800*12= £9600, not far off £8k (and well under the personal allowance). So once I've got the mortgage paid off before retirement my income needs will be a fraction of what I was earning.

Also, that's not including state pension.

Also, that's not including state pension

Depending on how old the op is that may kick in when he's 106.

Or if he's been contracted out, with or without his knowledge. COPE is the next pension time bomb when people get less than they thought.

I've not even got a mortgage and I'm 29... it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by

it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by

If you have little understanding of pensions then good luck finding that 'more tangible form of investment'

Can you take the 355k all in one go?

as I understand it yes...but at 40% tax.

Can you take the 355k all in one go?

Yes and no.

You can take 25% tax free when you retire.

You can then put the remainder into a draw down pension, which is basically a savings account that you pay income tax on withdrawals from. So under the allowance it's free, then 20%, then 40% etc. So you could access it all tax free given sufficient time, but not to splurge on a Ferrari on day 1. then if you don't spend it your kids inherit it (or it pays for a slightly prettier person to change your incontinence pads).

Ok so taking £344k as a lump sum less 40% tax you could only draw £8K for 26 years - an annuity does sound quite so bad then. What are the other options for a pension pot?

Edit: 30 years if first 25% is tax free.

There is more freedom than that now if the scheme rules allow. You can take the whole lot as cash, 25% tax free with the remainder taxed as income. This is also brewing to be a future mis-selling scandal

I wouldn't be sticking £355k in an annuity. Even assuming no growth that £55k will give you £8k a year for over 44 years. So unless you live past 106, and assuming zero growth on the capital, there's only going to be one winner.

so can i draw it down at say 20k a year for 20 years and avoid top rate tax?

im 40 btw...never given it a moments thought before but on previous calculations thought i'd be getting at least 15k per year.

so can i draw it down at say 20k a year for 20 years and avoid top rate tax?

I figure if I aim for 90, then once past that what use is there for that much money? Assuming the state pension will be enough to keep a flat warm somewhere near the sea.

Ok so taking £344k as a lump sum less 40% tax you could only draw £8K for 26 years - an annuity does sound quite so bad then. What are the other options for a pension pot?

You can draw down your £8K p.a. without the 40% tax. All academic though as the OP probably isn't anywhere near age 62 and the rules will change a few more times by the time he is

Or if he's been contracted out, with or without his knowledge. COPE is the next pension time bomb when people get less than they thought.

Opting out of SERPS means that people where never going to receive that money from the government, instead it would be rolled up as part of the their occupational (and later personal) pension. They won't get the second pension because they didn't contribute to it. Instead they will get more from their other pensions than they otherwise would have.

62 is a fairly young age to retire though?

tpbiker - i'm 12 years older & have just £130k so far, plan to work till 70 & then live to 135 so annuity all the way for me 😆

[I]I've not even got a mortgage and I'm 29... it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by [/I]

The key 'benefit' of pensions is the Govt/Taxpayer giving you the taxc back.

But on the opposing side, returns from annuities are currently at an all-time-low with £100k generating less than £5k whereas 10 years previously they were over £7k (all index-linked). Which also does imply that the OP's £355k is worth a bit more than £8k, in fact nearer £17k.

http://www.sharingpensions.co.uk/annuity-rates-chart-latest.htm

Just checked and to get state pension I'll need to be 70, best hope my private pension and investments work out.

im 40 btw...never given it a moments thought before but on previous calculations thought i'd be getting at least 15k per year.

add in the state pension (currently 8K, although I think we've reached a high point there) and you will be.

also who retires at 62 anyway?

I'm in a similar boat to you but I just had a look on a tax calculator, and 8K pension plus 8K state gives you about £1150 a month after tax to live on. With no mortgage costs I think that's quite a lot!

Which also does imply that the OP's £355k is worth a bit more than £8k, in fact nearer £17k.

The £355 is the projected value when he is 62, not what it is worth now.

62 is a fairly young age to retire though?

Is it? I'll be retiring at 55.

I've not even got a mortgage and I'm 29... it doesn't sound worth it from my little understanding .. I'm going to try and find a more tangible form of investment to see me by

That used to be owning a buy to let (or 2) but the tax rules and regulation on landlords are tightening there. The only sure thing is the current generation of old farts have had it far far easyer than my generation will (say age 40 and lower). I managed to get about 5 years on the final salary scheme before they closed it down and it will not make much difference in the end. I am expecting my pension to be about 20% of my final wage where as a final salary scheme would typically pay around 75%.

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

Quick pension question. I'm hoping to contribute via AVC's a portion of my salary that would ordinarily be taxed at a higher rate. Ie I want to pay in to keep me under the tax threshold, is this a good idea or am I missing something?

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

That sounds like crap advice! That house would be costing council tax, insurance etc and the only upside would be when you sell it and you would pay capital gains tax.

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

I think that is how it works but dont take my word for it!

A friend is trying to retire within 12 years or so and was told by a financial advisor they were better off buying a 2nd house rather than a pension or ISA. It's a 10% deposit mortgage, so can't even be rented out, so there's a nice 2 bedroom habitable house in the centre of town just sat empty.

You can turn a residential mortgage into a let property, just ask the mortgage company permission to let it out, I'd not do it so soon after taking the mortgage though.

Quick pension question. I'm hoping to contribute via AVC's a portion of my salary that would ordinarily be taxed at a higher rate. Ie I want to pay in to keep me under the tax threshold, is this a good idea or am I missing something?

Yes it's a very good idea, assuming you can afford to lock the money away until retirement.

[i]The £355 is the projected value when he is 62, not what it is worth now. [/i]

Ah, missed that.

You can turn a residential mortgage into a let property, just ask the mortgage company permission to let it out, I'd not do it so soon after taking the mortgage though.

I've been renting out a property on a residential mortgage for 20 years. When I bought the place 'buy to let' mortgage wasn't an option. It's never been an issue. I changed lenders about 10 years ago and the bank advisor said 'I won't tell if you won't'

I won't even dare look at mine, it was a gold plated, final salary pension from RBS, but I left 7 years ago and haven't paid a penny in pension since. Haven't had the cash. I think it said £100k about 4 years ago.

Things are *just* about good enough again now to start putting something aside again. We've got a Pension guy coming to work soon to explain to us all in small words just how ****ed we all are. I'll take some comfort from the fact that whilst ****ed, I'll not be as ****ed as my colleagues - they've never had a pension, and are older than me.

Most of my friends retirement plans are based around sticking their parents into a shit retirement homes when the time comes so they don't live too long and squander their retirement pot (their Folks's houses)on care.

Mine is based on having our house paid off, a bit of good pension, a bit of crap pension, a bit of state pension and my wife's opted out state pension - yeah how wonderful state pensions are they're worth a fortune - no one ever says how much you have to pay in to get them! it's 3 times what I was paying in RBS for 2/3rds the salary.

Is it? I'll be retiring at 55.

ditto.

I've got final salary pension and a career average scheme (which is defined benefit) I've been given a projected value to 65 but not what it's worth in total. How do they work that out if you pull the pension from retirement age till you die if this could be 1 year or 25?

Hedge funds and property, there's no ****ing way I will be putting my money into a pension scheme.

I've got final salary pension and a career average scheme (which is defined benefit) I've been given a projected value to 65 but not what it's worth in total. How do they work that out if you pull the pension from retirement age till you die if this could be 1 year or 25?

Your pension pot has a value today and they can estimate what it would be going forward assuming you continue to pay in. At the point you retire you can then assume you convert the estimated pot all into an annuity which is basically turning it into a monthly payment for life. In reality there are more options and it is complicated but having an estimate of your pot at retirement and knowing what that would convert to as a monthly payment is a good indication of how piss poor you are going to be!

there's no * way I will be putting my money into a pension scheme

there's no * way I will be turning down an employers contribution into a pension scheme

there's no * way I will be putting my money into a pension scheme.

Why not? You're happy to invest in hedge funds but not into a pension which may invest the pot in things similar to er hedge funds but with a tax benefit.

there's no * way I will be turning down an employers contribution into a pension scheme

Damn right, exclaiming there's no way you'll invest in a pension but instead stick money in a hedge fund suggests you don't really know what you're on about.

Maybe, I'd still rather trust my money with a good quantitative based investor like Winton Capital and property. Perhaps I could mix and match a bit though.

Your pension pot has a value today

He doesn't have a pot as such. His final salary scheme was based on service and final pensionable salary whilst his career average scheme is based on service and the average of his revalued salary over his entire service.

You are thinking of defined contribution/money purchase pension schemes

trickydisco - Member

I've got final salary pension and a career average scheme (which is defined benefit) I've been given a projected value to 65 but not what it's worth in total. How do they work that out if you pull the pension from retirement age till you die if this could be 1 year or 25?

That's the 'gamble' of pensions, or spread risk if you prefer - they offer set pensions to people based set criteria - if you live to 110 you 'win' they've paid out more than they took in (or possibly not, there are some shit ones around) if you keel over on your way home from picking up your gold watch, they 'win'.

If you plan to die early, die whilst you're still employed - 'death in service' pay-outs can be quite generous.

Maybe, I'd still rather put my money into a good quantitative based investor like Winton Capital and property. Perhaps do both.

...and I'll lay odds that you could get that or something very similar to that but wrapped up in a pension.

When it was the case that you had to buy an annuity with your money then I'd sort of understand it but when an investment would have to make a 66% return (based on being a 40% tax payer) just to get to the initial value of a pension investment, being anti pension seems like a very strange position to take.

You are thinking of defined contribution/money purchase pension schemes

that's it. Mine's defined benefits which i'm told is the gold standard so not as much as a gamble as other pension schemes out there.

I'd still rather trust my money with a good quantitative based investor like Winton Capital

Which will perform the same as just about any other investment fund over the long terms.

Only you lose out on the tax benefits of a pension.

That makes no sense at all.

I'd just rather be on first name terms with the people who are investing my money, a lot can happen in forty years. The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

I guess I like that extra bit of control and knowing that I can take all my money back at a moments notice and splurge it all.

Perhaps a mix, but I definately don't intend to entrust my retirement wholly to a pension scheme.

The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

And the same can happen to whoever you invest with.

I'd prefer to stick with my matched contributions and the uplift in tax to my own contributions for the sake of control.

Would be worth your while still doing the pension and the other investments.

[i]Edit[/i]

Perhaps a mix, but I definately don't intend to entrust my retirement wholly to a pension scheme.

Ah right so you are going to be putting money in a pension then 🙂

And no neither would I.

I'm 43 and have been paying into our work 'defined contribution' scheme for he last 9 years.
I put in 5% and my employer matches it.
No idea if it is any good, but I get 40% tax relief on what I pay in, and I figure it'll have to perform spectacularly badly to loose the 50% my company put it and start eating into 'my' money.

The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

Has this ever actually happened to a pension investment? Even if the company managing the investment goes bust you'd still own the investments themselves.

The fact that these days you can withdraw it in a lump sum, does make me feel better about it Gary. My reaction to them is more emotional than rational.

Has this ever actually happened to a pension investment? Even if the company managing the investment goes bust you'd still own the investments themselves.

I've read stories, but maybe they're just that - stories. I heard a while back the the pension protection fund is going to have to cover something like 90 percent of pensions in the future. If it's true, that worries me. Mismanagement, overselling and a protection scheme that is open to political risk......I dunno.

Mine is also projected to be somewhere around £8k a year equivalent. And the growth assumptions for it to ever reach a £350k pot are rather optimistic looking at performance over the last 5-10 years.

Draw down looks the best option, but don't forget that inflation means today's £8k "equivalent" will be a much bigger number in actual cash at the time - £8k of purchasing power now might then cost £20k, £30k, £40k in actual cash (nobody knows). So a £350k pot could get emptied pretty quickly.....

heard a while back the the pension protection fund is going to have to cover something like 90 percent of pensions in the future. If it's true, that worries me.

I think the 90% is more that that is the maximum amount that will be paid out to someone by the protection fund, assuming they haven't retired. i.e if the accrued benefits were £10k then the most they'd get is £9k. It's not that they expect to pay out on 90% of all pension funds, the UK tax payer couldn't afford that

I'd read it was roughly 90 percent of all pension funds, that they are something like 400 odd Billion in the red.

I'd read that it was something like 90 percent of all pension funds, that they are something like 400 odd Billion in the red.

What do you mean by a pension fund being in the red?

The pension funds can't meet their obligations to the pensioners. I'm cynical about pensions, if it smells to good to be true, it's probably because they are. Employers contributions are great and all, really though, I'd rather they just gave me pay rise and let me handle my retirement or spend everything before ending it all in a digitas clinic.

The pension funds can't meet their obligations to the pensioners.

You (and your employer) pay into a pension fund. That fund then invests it in something (a hedge fund, shares, government bonds, gold, cash, etc). It's just a savings account a that point.

At your retirement age you use that account to buy an annuity.

An annuity provider could be in the red if they've not balanced their books. But that isn't the same as your pension fund that you pay into. Usually you're paying into a fund managed by an investment broker, the annuity is bought from an insurance company.

To my knowledge the PPF only covers defined benefit schemes. The employers contributing to these schemes pay a levy each year which builds up the fund - it is a kind of joint insurance scheme.

If you invest in a DC or money purchase scheme your investment is held by a fund manager and your pot builds up like any other investment - ie S&S isa.

Should add the PPF only steps in when the employer goes bust and can no longer make the necessary payments to the DB pension fund.

I think you are right that it only guarantees 90% of the benefits accrued.

You are also right the most DB schemes are in significant deficit - Brexit hasn't helped that position.

Mines showing a 26% increase in the last 12 months which is more money than I earned annually for the first 15 years of working life.

So I'll be taking 25% at 55 give some to the kids, spunk the remainder and work till I drop.

Happy to provide pension planning advice.

This is confusing to me, so what we are saying is unless your employer pays in it's a waste of money?
Pensions are tax efficient but if they lose money anyway you might as well pay the tax and invest elsewhere?
Someone explain the benefits of a private pension scheme for me I'm genuinely struggling to see any positives

This is confusing to me, so what we are saying is unless your employer pays in it's a waste of money?

No it's not a waste, just that employers contributions make it more worthwhile.

Pensions are tax efficient but if they lose money anyway you might as well pay the tax and invest elsewhere?

A Pension isn't some special type of investment it's just a tax efficient way of making the investment. Whatever criticism you can make against a pension investment can be made against any non-Pension investment.

Someone explain the benefits of a private pension scheme for me I'm genuinely struggling to see any positives

All a pension is is a savings/investment pot. Fundamentally it is no different to any other investment you could make with a couple of important difference. The first one is that you get to invest the money without having to pay tax on it. If you are normal tax payer and you put £80 into an investment it would start to grow from there. If you put it into a Pension fund the government would add another £20 to it so your fund would start growing from £100. Once you start doing the compound growth, because we are talking long time periods here, that becomes a huge multiplier. The downside of a pension investment is that you can't access it whenever you want, you have to be over 55.

Basically it's the best way of saving for your retirement. They are getting criticised now because of Annuity rates, but that's nothing to do with the saving side of a pension that's the spending side.

There's a much better write up here.

http://www.moneysavingexpert.com/savings/discount-pensions

I'd read that it was something like 90 percent of all pension funds, that they are something like 400 odd Billion in the red.
What do you mean by a pension fund being in the red?

Yeah, you're not wrong. There was an article in the FT yesterday about several Blue Chip companies with between 20-50% pension pot shortfalls, which they have little intention of addressing, preferring to keep the dividend at unsustainable levels.
Maybe it's in other papers too, as you won't get nowt if you dont't subscribe to the FT...
http://www.ft.com/cms/s/0/a0cf5e4a-7980-11e6-a0c6-39e2633162d5.html#axzz4KJ7reEmB

This is interesting too..
http://www.bbc.co.uk/programmes/b054qct9

Has this ever actually happened to a pension investment? Even if the company managing the investment goes bust you'd still own the investments themselves.

Yes it has, to a very big Pensions Co, a few years back. Can't remember the name though...

[url= https://en.wikipedia.org/wiki/The_Equitable_Life_Assurance_Society ]Equitable Life[/url]

That's the fella!

The law has changed since then to prevent it. Bear in mind though that that risk is there for every investment whether bound by a pension wrapper or not.

I reckon you try and save in as many formats as you can. Property or ISA or pension.

Whether you are sble to or not depends on many things. If you are single it's hard to move up the property ladder. If you can combine resources its easier. I'm on about 11 000 a year so there is not much left over for saving.

current pot value worth 12000 saving for about 15 years. Considering buy to let for a decent return.

Thanks Gonefishin but why are people slating them so much? I know several people who haven't retired because their pension didn't perform as promised.
Also is this true, you retire you draw your pension of you die before your wife she then gets 50% if she dies that's it pot gone? If they both died a week after retirement it's all gone up in smoke?

The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

What a load of nonsense.

Currently defined benefit schemes are underwritten by the Pension Protection Fund at 90%.

With Defined Contribution schemes, if they are FSA regulated UK companies, you still own all the investments, which will be spread over 100s of companies (unless you're a fool), so unless they all go bust, you're ok.

The real risk is sticking the money in unregulated bonds or Hedge Funds where you could lose everything, but no pension advisor would recommend this.

248 days till I take my final salary pension. 🙂

Point taken.

Still don't like the idea of not having access to the cash before I'm 55, maybe the NHS goes under and my wife gets ill - I would want that money to pay for the best treatment for her and **** whether I'm going to stave at 70. Maybe over a 40 year period the markets collapse hard, not being able to get at that money quickly and invest it in alternatives to shelter the value bothers me. At the end of the day, I don't trust some big faceless corporate to look after my money over a 50 year period. I'm 28, I've seen a number of market crashes now - what am I going to see over the next fifty years? The fact that defined contributions have tax benefits and the benefit of an employer paying in as well irks me - I want to look after my own financial future - not be paternally goaded into investing in a scheme where that money is kept from me.

There's a lot of myths being banded around here (as to be expected I guess). But a tax free, company contributed pension will give you a better investment out there than most other investments. And most pensions you can even choose where and the amount of investment 'risk' you're willing to take to make better gains.

Me, I don't have a pension, I simply haven't be able to justify one up until now and as such have basically invested into property–whilst keeping my head firmly in the sand. Now, at 38, if I were to put the minimum 4% (+3% company, 1% tax ) into a pension, come 67 I'd be looking at a potential income of about £3500 a year + state pension of about £9k at today's figures. That scares the crap out of me.

The only saving grace is that Mrs E has a public service pension. 😕

I'm 28, I've seen a number of market crashes now

Still don't like the idea of not having access to the cash before I'm 55,

Me neither, so open an S&S ISA and put [i]some[/i] money in there to tide you over between your retirement and age 55 or for long term rainy day money. (Also keep some rainy day money in cash!)

Equitable Life. Very complicated, its older funds where co-mingled so yes you owned assets but also the fund had liabilities ie guaranteed payments to older members and those guarantees where very high. I know as I had some money with them from the 1980's. Got compensation but small relative to fund growth we should have had.

Biggest compelxity imo with pensions is you don't know what the legislation will be when you come to retire, eg cash free lump sum, annuity, can you just take cash etc. Also you are a sitting duck for governments looking to raise money and seeing a "big juicy pot"

As Tom says I would suggest people have a mix of investments inside and outside pension. Also typically people would look at downsizing property or moving to a cheaper area.

Some good stuff mixed in here.

Some of the annuity figures look small but you have to plan to be done with a mortgage, any loans and whatnot by retirement time. i.e. reduce your outgoings a significant amount. Moving to a smaller house or cheaper neck of the woods (remembering you don't have to find work any more) is also an option. Plus there will be some state pension to add on.

Some employer contributions are excellent and can't be sniffed at. My wife's old joint would double her (pre-tax) contributions up to around 7%, which meant she had 21% of salary going in to the pot, and 93% going to her as salary.

I would aim to build up a fund of shares in an ISA (and get one in your partner's name). Despite crashes the stock market long term is where it's at. Take Sound Energy, for example, they have 'potentially' found a gas reserve the size of Belgium. The share has gone up 50% since August 22 and 600% over the year. It looks very much like this story will run and run for at least a year or 18 months. A little flutter on a firm like that could ease your worries about retirement but you'd never get such dramatic returns from a fund or trust. However, IANAFA and WTFDIK.

http://www.malcysblog.com/2016/09/tiptv-ceo-interview-james-parsons-of-sound-energy/

Is it? I'll be retiring at 55.

That's my plan. Currently making 22% contributions. May go - very - part time instead at that point if I'm still alive.

Just as an illustration:

I pay 6% contributions, my company pay 12%. I am a higher rate tax payer, so, for every £100 I earn, my £6 contribution only costs me £4, but £18 goes into my pension pot.

Last year my investments grew by 30%, so my £4 turned into £23. I don't know many hedge funds who could do that!!

Even in a bad year, if the fund fell by 20%, my £4 still turns into £14, so even in a falling market my money still does very well.

Equitable Life. Very complicated

a shame as Equitable and London Life were the only ones using salaried salespeople so they were the only pensions that didn't suffer badly because of the commisions the sales people wouold get out of your fund.

Used to get recommended by Which a lt because of that, I think.

London Life stopped selling pensions as well, then got bought by AMP, passed around a bit and is now with Phoenix Life.