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I often do wonder how many normal folk have amassed a pension pot >£750k or so when they retire. That seems to be the number bandied about for a moderate type existence, with £1M+ for comfortable, whatever that is.
I might get part way to the lower number, with a fair wind and a lot of luck, though being in my late 50’s time isn't on my side.
Most people earn much less than the average salary
Yup.... Averages are bolleaux.... The majority of people are earning way below the average.
I often do wonder how many normal folk have amassed a pension pot >£750k or so when they retire.
A bit less money spent on multiple new cars and multiple high end bikes might have put you in the same situation? There is nothing wrong with having those things, but we all choose our compromises (those of us in a fortunate position to be able to afford expensive toys or putting money into a pension - clearly this isn’t everyone)
A bit less money spent on multiple new cars and multiple high end bikes might have put you in the same situation?
I presume you know me ? …. 😁
😀 You do always seem to have nice bikes and cars, nowt wrong with that, there no guarantee any of us will make it to retirement
Many folks a generation ago didn't enter the workforce in their mid to late 20s.
The idea that everyone needed to go to university in order to get a job is massively flawed.
I started part-time work at 16 and was guilty self employed at 20. Many of my friends didn't start work until they were finished with uni, so mid 20s.
In Germany the age that university students start work proper is closer to 30 than 20.
The majority of people are earning way below the average.
I think most of the average salaries people have referred to in this thread is the median (which is what the media and ons use), so by definition the majority won't be earning below that as it's the mid point.
As soon as I can unlock my pension I’m going after it. Whether that is to fully retire I’m yet to see but I’ll use it to reduce hours/change jobs so I’ve more free time. If it runs out 80’s plus, well meh.
Ya think?
Christ sometimes I am honestly glad I have no money if sounds quite stressful worrying about amassing a million quid 😄
This thread has turned into an absolute trainwreck since Krypton posted those bloody stupid numbers without any of the obviously essential info about what they actually are for....
Also loving Ewan's contribution 🙂
I'm ****ing loaded, all you poor people are ****ed"
Thanks Ewan 🙂
Wild guess here, but you’ve never lived on or below the breadline have you?
I was a self-funded student for 3 years, living off £4k per year which I earned by working minimum wage job at the local supermarket, and after that my first job paid £15k/year (equivilent to £24k/year now, so just above minimum wage) for a couple of years. So I'm pretty familiar with the idea, yep. £32k (as suggested above) is not on or below the breadline.
posted those bloody stupid numbers
The were from Sky news and from the same sources posted by others later on, sorry but I often read STW during the 20 mins I have to eat breakfast, I don't have time to do the full research.
I'm usually pretty good with numbers, but pensions baffle the bejesus out of me. DB, salary sacrifice, employer matched (up to a value) AVCs, index linked. Pot to be worth X, with drawdown Y but with inflation, its really Y*1.0(AvInf)^n....Gosh it's complicated.
Ploughing "thousands" in each year doesn't really square with the million figure.
Tens of thousands, perhaps.
Few people have that sort of disposable income. For those that do, great.
Chuff my pension will have me in squalid poverty after 30 years of teaching, according to the numbers up there.
You need to consider how compound interest works.
Something like 6k a year for 40yrs would have you over a million. Using a modest figure around 7% year on year.
Inflation would obviously ruin a lot of that return mind.
Average pension pot when retiring is about 70K currently I think?
Just under 20% have no pension pot at all.
I think that if you're on course for £1 million in a pension pot, then a good dose of humility is probably the order of the day.
My parents have retired on the state pension and have a very modest amount of savings (think 1 year of median salary as a ballpark). I'll be honest, I really worry about them.
Did I hear correctly on the news tonight that for a woman to achieve a comfortable retirement according to those figures she would have to start saving from the age of 3 ? 🤔
Something like 6k a year for 40yrs
Yet how many people can afford to save/invest that from an assumed working age of 20..... (£500 a month).
I was a self-funded student for 3 years, living off £4k per year which I earned by working minimum wage job at the local supermarket, and after that my first job paid £15k/year (equivilent to £24k/year now, so just above minimum wage) for a couple of years. So I’m pretty familiar with the idea, yep. £32k (as suggested above) is not on or below the breadline.
Given that fact does your previous post make any sense then? You speak of compromise at every level, yet still seem to not understand that compromise for some, including me at one point, is eat or have power. Where does putting money aside for a pension fall in that equation?
My first job paid £35 per week on a YTS scheme. When they took me on it was a £1 an hour. Had to rent a house at 17. Saving wasn’t in my vocabulary until my mid 20’s
£500/mth for 45 years at 5% compounded will generate c£1.1 million.
Who has £500 month to save?
@Ewan the £38800 figure is the mean, the median is £29900, the mode is £23200.
I earn less than the mode, work till I am 71 I can't see any attractive alternative. Hope my health holds out but you know the low wages and poor health thing
More to the point, who had 500 quid per month spare 45 years ago when the typical gross salary was probably around 10k pa? (Wild guess someone can look it up if they care).
In 26 years your million won’t be worth anything like the million that’s being talked about for someone retiring today.
In 26 years your million won’t be worth anything like the million that’s being talked about for someone retiring today
Yeah. I'll admit I've not tried modelling that / understand. I say model, I've just got a spreadsheet which increases the size by an average of 5% each year which I got by average stock market increase (7% pa) minus 2% for average inflation which I figured allowed me to stay in today's money. I'm guessing that's wrong - what's the correct way to do it?
Given that fact does your previous post make any sense then? You speak of compromise at every level, yet still seem to not understand that compromise for some, including me at one point, is eat or have power. Where does putting money aside for a pension fall in that equation?
this is what the state pension and auto-enrollment attempts to solve for. It doesn't give a comfortable retirement, but you probably have a similar retirement to the working life you had.
Compromise exists more when you're earning a little more, and you're choosing between having a nicer life now or a nicer life later. That is where compromise starts to come in. You might not think that on, say, £30k you can afford to save anything, and I'd agree it would be tough, but if its possible to live on £29k (and most would agree it is), its possible to save £1k/year.
That's a simple model but will, probably, produce a reasonable estimate.
As for having a pension pot worth £1 million today - assume...45 year working life as an employee (self employment and personal pensions are outside of this), reasonable progression/promotion, annual salary increases broadly equal to inflation, employee and employers combined contributions of 10% throughout, compound interest.
That will produce £1 million.
All are reasonable assumptions looking into the past; as for the future, that will be different - possibly very different.
Not to underestimate the task of accumulating a pension pot, but just a reminder that the state pension is c£12k (I think), which an actuary will tell you is worth £240k as a pot of valued at 20x that payment (or £300k as implied by a 4% withdrawal rate). And that payment is currently index linked and guaranteed for life. Not enough if you have nothing else but does need to be bought into calculations.
I don't think it'll still exist in its current form when I retire. It'll be means tested and not start to 75.
Current full new state pension is £203.85/wk; will increase to £221.20/wk for 2024/25.
These are max figures and are dependant on full NI qualifying payment history.
Lower rates apply to pensions effective
pre-2016.
I can’t predict the future terms of the State pension, but before we’re all totally depressed by the savings challenge I thought it worthwhile reminding ourselves that the State currently gives us some measure albeit modest of closing the gap, and the current terms make it relatively high quality.
I'm in my mid-30s and hold no hope for this being solved. It's a mishmash of many unsustainable issues, a complex equation which simply cannot be balanced. That's on a foundational level, regardless of the flaws of politics etc. There simply isn't enough of anything.
I word a sedentary job and save enough into a SIPP to meet the minimum figures released today. However I'm kinda primed for some of the stuff Ewan said earlier to hit. Radical policies could become popular. And I don't expect to get anything for my NI contributions.
Well, you only need a million pounds pot if you're planning on living for 25 years after you retire.
Fortunately, the Tories have already figured out the answer to that....
I often do wonder how many normal folk have amassed a pension pot >£750k or so when they retire.
Certainly not folk like my mum who worked in the forestry, hotel cleaner, fish factory, care home, pate factory before retiring at 65 (now 69) on the state pension and £126 month pension from working at council run care home for 13 years. Dad worked as blacksmith, fisherman/skipper, forestry/wood cutter, fisherman (again), welder/fabricator before retiring at 69 and one week later being diagnosed with blood cancer and dying 4 months later, a % of his private pension was paid to mum for 3 years after his death, not very much at all. Thankfully their house was paid off one year before his death and money was always very tight growing up, no frills/new cars, the first house they bought in 1989 and is the one my mum owns now.
Christ knows how folk are going to cope come their retirement if they don’t own their own house and have survived on minimal wage jobs throughout their lives. I’ll be long gone before I hit retirement age but as I’ve survived on disability benefits/tax credits most of my adult life I can certainly sympathise with what’s coming.
Of course the elephant in the room is that the model of infinite growth seems to clash with a world of finite resources. It works as long as we're happy to Allow corporations to achieve growth at human and environmental costs. But sustainability is a factor here.
Of course the elephant in the room is that the model of infinite growth
Well this is the crux if the issue realy, there are too many people for the eco-system.
The earth has finite capacity for such things, and humans, I suspect will die off in due course, just another species extinct, and then it's just back to business as usual.
One of the issues is there are more and more wealthy people which inflates prices, putting average pleasures out if reach....
Just look on an average campsite these days full of 80-90k motorhomes, cant blame the owners of the sites looking and thinking,...i want some of that...right its now 45-50 pound a night...
Our country is dripping in money, its the divide and greed thats is destroying it...i really worry , im so pleased i chose not to bring a child into this world.
In many quarters out there its a feeding frenzy....
Oh these million pound pots drawdown at 5%, dont forget thsts 50k a year with say 5% growth,
you still have ya million pound ...it never gets spent ..
You do always seem to have nice bikes and cars, nowt wrong with that, there no guarantee any of us will make it to retirement
Yep, if only we knew when we were going to die it would be very helpful with monetary priorities. For those who could save into a pension there is also the decision on whether to enjoy yourself more when younger and then have less money when older when enjoying yourself is probably not quite so important as long as you have enough to live on.
At 56 I am less materialistic than I was at 20 and with no mortgage when retired I need less to live my life in the way that I want than I did when in 20's.
There is also always that chance of dying at 65 with a £1MM pension pot that would be a tad annoying...
As the saying goes, “no point being the richest person in the graveyard “
Or there's no pockets in shrouds .
you still have ya million pound …it never gets spent ..
I think the point of the 3-4% is that it probably never gets spent, but under some scenarios it will if you go higher than that.
There are a bunch of calculators / scenario generators which use historical data to show how often you would have run out of money over the the past 100 years or whatever of the stock market. For example a random one I googled - https://www.wearejust.co.uk/retirement-calculators/drawdown-risk-calculator/
That calculator suggests that if you retire at say 60 and take the moderate income scenario from your hyperthetical million quid, then you'd run out of money 11% of the time. Obviously risk tolerances vary, but to me a 11% chance of having no money (other than 12k a year) strikes me as waaay to high. Obviously there are lots of assumptions and real life is not so simplistic, but that's why the 3/4% suggested draw down rate exists - it's not so you die with a million quid, it's so you are almost certain not to still be alive with no quid.
And your million quid 25 to 30 years down the line will buy you considerably less in real terms.
Just imagine putting all your eggs in one basket . Save like a demon to the point of never enjoying yourself your whole working life on the promise of jam tomorrow then croaking not long after you crossed the finish line . That would be a tad annoying wouldn't it ? Not that you'd know much about it 🙄
One of my colleagues retired in mid-22, aged 67, he was dead before Christmas. 😥
But this sort of brings us full circle. The retirement age originally did suppose you lived for just a few years before you died, probably quite quickly too. Medical advances mean many more people live much longer but with huge demands on services the State provides.
That calculator suggests that if you retire at say 60 and take the moderate income scenario from your hyperthetical million quid, then you’d run out of money 11% of the time. Obviously risk tolerances vary, but to me a 11% chance of having no money (other than 12k a year) strikes me as waaay to high
I’m not sure how you would spend a million quid if all you do is sit around looking at spreadsheets. I suppose a beefy new computer every couple of years to run the models soon adds up.
For those who could save into a pension there is also the decision on whether to enjoy yourself more when younger and then have less money when older when enjoying yourself is probably not quite so important as long as you have enough to live on
The other way for me. We live close to “functional” of our basic salaries with the exception of bikes, opportunities for the kids like a recent school trip to Japan, and a family holiday, these are considered lucky opportunities and we want to provide those for the children if we can. Otherwise I try to save quite a bit and maximise my work pensions on the basis I watched my parents and grandparent retire only to sit and stare at each others armchairs, and don’t want that for us.
Right now I see us with a circa £35k income, no mortgage and enough pots of ISAs to facilitate an annual (SAGA 😂) holiday and our hobbies for 10 years.
Franky other than that I just want to use our equity to move somewhere quiet and enjoyable to sip coffee in the morning and rum/wine at night outside in peaceful contemplation. I’d be pissed off if I worked and then died before I got to experience that.
Who has £500 month to save?
That's a lot of money net each month and I am not for one moment saying that is easy to find but bear in mind if you are a basic rate tax payer that is £400 from your take home salary. If you are a higher rate tax payer then that is £300. Your employer (if you have one) will possibly be contributing a large proportion of that, which will reduce the hit to you significantly.
Also bear in mind that any salary sacrifice scheme can't take you below NMW/NLW which will probably impact those most likely to be suffering come retirement.
I’m not sure how you would spend a million quid if all you do is sit around looking at spreadsheets. I suppose a beefy new computer every couple of years to run the models soon adds up.
Not sure that dig was completely required. I linked to a free calculator on the internet and explained why if you are expecting to use a draw down approach (which most people probably will) then you can only draw down at a small percentage to be reasonably sure that you won't run out of money.
Everyone can make their own decisions but personally just yoloing it and hoping that I die early would stress me out more than putting some money into a pension (esp with two kids and a wife who's pension isn't amazing + based on her relatives will live forever).
That calculator suggests that if you retire at say 60 and take the moderate income scenario from your hyperthetical million quid, then you’d run out of money 11% of the time. Obviously risk tolerances vary, but to me a 11% chance of having no money (other than 12k a year) strikes me as waaay to high
There's lots of ways to mitigate that risk though. It would become apparent well over a decade ahead of time that your cash is running low, so you could simply cut spending, or you are likely to be able to unlock value in your house at a reasonable rate by the time you do run out (as you would be in your 80s by that point)
Alternatively you can mix drawdown with a annuity, for a partially guaranteed income. Given that annuities are currently paying out 5%ish it makes drawdown kinda pointless anyway
Wasn't aware annuities had gone up so much. Is that a result of current high interest / inflation? Guess there's no way of predicting what they'll do in X years anyway.
it makes drawdown kinda pointless anyway
Only if you want whatever you have to be paid to you at that rate until you die. I don't, I want circa 7% for the next 3 years then roughly 4% for a couple and so on. I want more in the near future while I am relatively fit and healthy enough to enjoy it.
The other issue with this is similar to reducing co2, people will try their best realise they still have zero chance of succeding due to having more taken away, become so terrified by the future and just say, bollocks to this whats the point....which is a worse situation again
There's also the option of drawing a pension early. Yes, you may get penalties, but you could be recieving it for a fair few years at a reduced rate that is worth more overall than a scenario where you may only get 1 or 2 years at your official retirement age only to go and pop yer clogs!
I’m not sure how you would spend a million quid if all you do is sit around looking at spreadsheets. I suppose a beefy new computer every couple of years to run the models soon adds up.
I think it's this sort of attitude that is going to get people into trouble. As mentioned above people in their 40s now are probably the first generation that have to really worry about this stuff. In the past any job came with a final salary scheme so the risk was all on the employers side, in the future people will understand the pension situation better and be far more ruthless in terms of what their salary requirements are to cover funding that as well as living day to day. People who are spending 100% of their income while in their 40s now, who view spending 45 minutes downloading a planner and playing with some numbers to work out how to fund 20-30 years of your life as being too much hassle are walking blindly off a cliff. The worrying thing is that there are probably millions of them
some interesting points. The post a page or so back suggesting that for pot calculations we should add in 240k or similar to represent State pension is a new one on me. That will make a big difference for those of us who may retire in the next 5 yrs or so, before it becomes an ever decreasing benefit
Ewan, im suprised given your detailed financial analysis that you had not realised annuities had gone up with interest rates
On a different note, good luck to everyone.
Its certainly harder to live a content happy life these days due to the drive for more, people have always been driven by money, however more are now, nothing wrong with that in a way, others are happy with enough but its getting harder harder to live life by that mindset, due to others greed, this creates more stress more worry more mental and physical health issues..
There will be social unrest in the Uk big time boiling point is here, the spilling over is next..
The folk who can and have the power to do something about it dont give a monkeys...
One of my colleagues retired in mid-22, aged 67, he was dead before Christmas
A man at the company I work at walked out of the office on his retirement day and had a fatal heart attack just outside the door.
There will be social unrest in the Uk big time boiling point is here, the spilling over is next..
People have been saying that for ages, but social unrest really isn't a much of a thing here in the UK.
Poll tax riots were possibly the only occasion I can think of in my lifetime?
So, many people are talking about the leveraging power of compound interest, but isn't a substantial part of that leveraging power eroded by general inflation?
So yes, looking at the figures, you might make a million, but even at a 4% drawdown, that's going to be £25-30K but in 20 years time, that is going to feel like £15k, no?
I think it’s this sort of attitude that is going to get people into trouble.
Yes, it was a flippant remark. And I do invest in a pension, I'm also paying off a mortgage, so will be rent free come retirement. I do think about and plan for these things, and I am privileged to be able to do so. In short I'll be fine, might have to cut my new kitchen aspiration down from every 10 years to every 20 though - yes that was one of the examples in that research.
Somebody who is stressing about whether their high 6 figure pension pot (or maybe 7 figure with a following wind) is going to be able to draw down £50k/year from 60 really has nothing to worry about.
There are people working physically demanding jobs with no hope of early retirement who are facing an old age of poverty, just bear that in mind.
Only if you want whatever you have to be paid to you at that rate until you die. I don’t, I want circa 7% for the next 3 years then roughly 4% for a couple and so on. I want more in the near future while I am relatively fit and healthy enough to enjoy it.
You can choose a non-inflating annuity which has that effect (pays the same amount each month, regardless of inflation) or put 80% in an annuity and drawdown the rest as you want extra cash.
Ewan, im suprised given your detailed financial analysis that you had not realised annuities had gone up with interest rates
I don't think i've done any detailed financial analysis (and it was pointed out it was wrong anyway on the last page - I'd like someone to tell me how to do it properly!). All i've got is a spreadsheet i track my pensions on and have extrapolated out at 5% growth (7% minus 2% for inflation) and current contributions and then two columns that shows what 3 or 4% of that total is.
To be honest, I normally avoid thinking about pensions other than in Jan when I update my spreadsheet as I find it a bit depressing. I decided sometime ago that drawdowns made more sense than annuities as the rates were (then) low and you were very constrained into having the same income each year. I also figured I had no way of knowing what the annuity rate would be at my retirement age (26 years time), so the best thing I could do is ignore them and plan for drawdown as I could at least have a chance of understanding my likely ballpark position. Obviously if I get there and the annuities are being offered at great rates, then i'll probably get one of those - hadn't considered a mix as 5lab mentioned above, as I say, I've not done a detailed analysis!
Just to help fill out the picture for those trying to figure out a spreadsheet assessing pension pots and spending, financial planners will point out that your retirement spending often doesn't start with (say) a 4% withdrawal and stay flat or rise in a straight line. A typical retirement spending pattern is an early bulge where you might spend on material items for your new found life of leisure (ebike?) or experiences (touring in the T5?), then a throttling back as you now have your material items and you are perhaps less able to handle the travelling, but then a final ramp up as your care needs escalate. That first phase explains why many old pension schemes give/gave you the lump sum upon retirement. Of course, you can't predict the timing of when any of this will happen to you but worth factoring in.
Thanks @blackhat - do you know if there are any modelling sites / spreadsheets you can download online? I'm guessing a IFA will have fancy modellers but is there something simple to use online?
Ewan - you’re probably better off posting your question on Reddit / ukpersonalfinance board. More likely to get a sensible reply than the inevitable “omg you privileged swot” you’re getting on here.
I'm on a civil service pension - alpha, it is based on 'normal retirement age' which is currently 68.
If I read it correctly, and I'm hoping I'm wrong, if the state pension age moves to 71, so does alpha. So it instantly devalues your accrued benefits. Roughly for 4% for every year. So civil servants on this scheme will suddenly see their pension pot devalue by approx 12%.
I'm really hoping I'm wrong. I've kind of accepted state pension will be unlikley by the time I get there, but I didn't factor in that I'd get hit with a 12% reduction on the pot I have been paying into (if I try to retire at 68).
Got to be alot of people in the same boat.
A man at the company I work at walked out of the office on his retirement day and had a fatal heart attack just outside the door.
my great uncle retired from a fairly senior role in civil service in the late 1980’s and is still drawing his pension now, I think he’s not far off being retired longer than he worked. Averages are great…
EwanFree Member
Thanks @blackhat – do you know if there are any modelling sites / spreadsheets you can download online? I’m guessing a IFA will have fancy modellers but is there something simple to use online?
i have used this, which was posted on here a while back :
my great uncle retired from a fairly senior role in civil service in the late 1980’s and is still drawing his pension now, I think he’s not far off being retired longer than he worked. Averages are great…
my grandfather was in a similar boat (a few years ago) - worked from 25 till 60, died at 97, so was pulling a pension for a couple of years longer than he worked, plus (given the era) it was something crazy like a 25/30ths final salary pension, so add in the state pension and he pretty much didn't take a pay cut.
my wife's a part-time teacher, and her pension (average salary plus state) will be more than she earns doing 2.5 days per week. Be nice to retire with a pay rise
Obviously risk tolerances vary, but to me a 11% chance of having no money (other than 12k a year) strikes me as waaay to high.
But that only comes to bare at the end of your life. Even if you're in good health you probably won't be riding bikes, or even driving a car into your 90s. £250 a week, plus whatever equity I might have when you downsize into a McArthy Stone flat will comfortably keep me in tea bags, Wiltshire Farm Foods ready meals and Mr Kipling cakes through the twilight years.
[quote[I’m on a civil service pension – alpha, it is based on ‘normal retirement age’ which is currently 68.
If I read it correctly, and I’m hoping I’m wrong, if the state pension age moves to 71, so does alpha. So it instantly devalues your accrued benefits. Roughly for 4% for every year. So civil servants on this scheme will suddenly see their pension pot devalue by approx 12%.
I’m really hoping I’m wrong. I’ve kind of accepted state pension will be unlikley by the time I get there, but I didn’t factor in that I’d get hit with a 12% reduction on the pot I have been paying into (if I try to retire at 68).
Got to be alot of people in the same boat.
@DT78 unfortunately, you're exactly right (see my post to poly earlier in the thread).
It's not just true of Civil Service pensions though, this is essentially across the board*. See, for example, this post from Hargreaves Lansdown on their SIPP: Can I withdraw my money at any time? (hl.co.uk)
"Can I withdraw my money at any time?
No. Once invested in a pension you cannot normally access the money until age 55. The minimum age will rise to 57 in 2028 and then in line with increases in the state pension age, remaining 10 years below (for example if the state pension age rises to 68, the minimum retirement age will rise to 58)."
* It wouldn't surprise me if pensions for the uber priviledged - CEOs, MPs etc, still have a fixed retirement age of 60. I haven't looked into this.
65 years.
i have used this, which was posted on here a while back :
Will give it a try. Have just noted that the 59k mentioned above for 'comfortable' is *after tax*. Lol.
There’s also the option of drawing a pension early. Yes, you may get penalties, but you could be recieving it for a fair few years at a reduced rate that is worth more overall than a scenario where you may only get 1 or 2 years at your official retirement age only to go and pop yer clogs!
Yep, I took out the tax free amount at 55 and am using it to build an extension and pay most of mortgage off.
I can then save the money I would have been paying on mortgage while having a very big new kitchen/lounge room where I will spend most of my time in until retirement and after so why wait.
Current lifestyle costs us as a couple ~22k a year and that includes private health care, occasional meals out, servicing our vehicle, fuel and bike park tickets.
How TF do 2 of you live in Germany for £22k - or is "lifestyle costs" stuff over & above basic subsistence rent/food/etc etc?