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Old 4th Jan 2010, 13:08   #1
britboy4321
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What monthly dosh will I get from £500000 pension pot?

For the sake of simplicitly I am going to not bother with 'inflation' for this thread. So I'm just going to use 'todays money'.


If I retire with a total pension pot of £500,000 -- after tax approximately about how much money should I expect per month to live off ..? When I actually die, I want my missus to enjoy 50% of whatever I get until she cops it ... I want to retire at 55 -- and finally I want the payments 'inflation linked' so they don't devalue as time moves on ..??

Anyone got a very rough guestimate? At the moment I don't know whether I'll be getting £300 a month or £3000!
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Old 4th Jan 2010, 13:12   #2
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About £900 a month?
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Old 4th Jan 2010, 13:17   #3
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For a single person pension from age 55 increasing with RPI you are looking at about £1100-1200 per month

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Old 4th Jan 2010, 13:19   #4
britboy4321
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Cool thanks -- OK -- I can live with that (translation -- I HAVE TO live with that!)
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Old 4th Jan 2010, 13:20   #5
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Of course, if you invest with Equitable Life, you can just see all your money disappear a few years before you are set to retire.

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Old 4th Jan 2010, 13:26   #6
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http://www.fsa.gov.uk/tables/bespoke/Annuities

Fill it in and find out, it gives quotes from a few places.

Looks to be about £1000/month from 500k
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Old 4th Jan 2010, 13:27   #7
Gaidin109
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In todays money, if you bought an annuity with £500000 at 4% wil be £1,667 a month, add that to the £400 state pension and you will be on roughly £25k a year. You might want to wait until you are 60, because the pension will be worth more and you would probably get a better return on the annuity as well. It will also depend on what increase return you want, whether a fixed monthly income for life, or a set % increase or linked to RPI.
Last edited by Gaidin109; 4th Jan 2010 at 13:32.
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Old 4th Jan 2010, 13:31   #8
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£1270

http://www.moneymadeclear.fsa.gov.uk...alculator.html



Interesting to see how much it goes up for every year you postpone your retirement.

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Old 4th Jan 2010, 13:32   #9
britboy4321
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I don't think I'll get any state pension as I don't pay NI contributions (it's a long twisted story involving dividends and no salary!)

It's terrible really. £500,000 saved up? Have £1K a month ....

My pension contributions have to be EXTRODINARILY HIGH just to get to 500K (because I started at age 35! Me moron ...)
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Old 4th Jan 2010, 13:34   #10
britboy4321
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Thanks. Is that figure before or after tax please?
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Old 4th Jan 2010, 13:39   #11
Gaidin109
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I don't think I'll get any state pension as I don't pay NI contributions (it's a long twisted story involving dividends and no salary!)

It's terrible really. £500,000 saved up? Have £1K a month ....

My pension contributions have to be EXTRODINARILY HIGH just to get to 500K (because I started at age 35! Me moron ...)

Start paying voluntary NI contributions straight away if I were you, also I think you can pay a backdated amount. The DWP can help you with this. Getting a state pension is a guaranteed income whereas your annuity isnt.
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Old 4th Jan 2010, 13:53   #12
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It's terrible really. £500,000 saved up? Have £1K a month ....
£500k in a property would net £2.5-3k a month in rental depending on the area (obviously minus taxes and other ongoing costs of managing such a thing..).

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Old 4th Jan 2010, 13:59   #13
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Getting a state pension is a guaranteed income whereas your annuity isnt.

mmmm

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Old 4th Jan 2010, 14:00   #14
britboy4321
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£500k in a property would net £2.5-3k a month in rental depending on the area (obviously minus taxes and other ongoing costs of managing such a thing..).
Thats a good poinit actually. But I don't think I'd be allowed to buy a property with it .. I think you have to buy an annuity / something with more of a guarantee of income as one of the rules (??).

Basically if I understand correctly the government does not want you to have any chance of going down the bingo and wasting your pension fund then begging them for support .. if you bought a house with your £500,000 -- you could sell it 2 weeks later and chuck the money up the wall ...

The government basically do not let you get your sticky hands on your pension pot personally -- only in some way let you choose to make it so it will give you a regular income while you get old and rusty -- so they definately don't have to bother. Anyone, is this not right?


Might be wrong though ..
Last edited by britboy4321; 4th Jan 2010 at 14:03.
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Old 4th Jan 2010, 14:01   #15
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mmmm
currently. Its unlikely to be abolished either in reality.
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Old 4th Jan 2010, 14:03   #16
Gaidin109
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Thats a good poinit actually. But I don't think I'd be allowed to buy a property with it .. I think you have to buy an annuity / something with more of a guarantee of income as one of the rules (??).

Basically if I understand correctly the government does not want you to have any chance of going down the bingo and wasting your pension fund then begging them for support .. if you bought a house with your £500,000 -- you could sell it 2 weeks later and chuck the money up the wall ...


Might be wrong though ..


SIPPS allow for property ownership as part of your pension.

http://www.killik.com/financial-plan...FVoq3godUReVMQ
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Old 4th Jan 2010, 14:03   #17
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State pension = shopping at Lidl
Decent private annuity = Carry on shopping at Waitrose

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Old 4th Jan 2010, 14:04   #18
Gaidin109
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State pension = shopping at Lidl
Decent private annuity = Carry on shopping at Waitrose
The idea is to have both, not one or the other.
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Old 4th Jan 2010, 14:09   #19
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Sorry, I thought if you have private, the public is means tested? And subsequently, you end up with parking change? I'm in my twenties, so haven't given it much thought.

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Old 4th Jan 2010, 14:14   #20
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Sorry, I thought if you have private, the public is means tested? And subsequently, you end up with parking change? I'm in my twenties, so haven't given it much thought.

No the state pension isnt means tested, it is based on your NI contributions.

Start saving for your pension now, if I was you. the earlier you start the better the return.
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Old 4th Jan 2010, 14:21   #21
britboy4321
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Yea when I was in my 20s retirement seemed so ridiculously far away I never thought about a pension.

At 35 when I got shown the maths (namely how many years I'd added to my working life) -- to say it was gutting was an understatement.

The funny thing is loads of people told me to start thinking of a pension when I was in my 20s -- but I thought I was being cool or cocky when I answered 'Naah - I need a decent motor - I'm gonna die young anyway'.

Anyway I'm paying the price now -- big style .. with putting in double what I'd have had to -- just to try and catch up ..

It's all the compound interest I've missed out on that really hurts. 15 years compound interest of 7% annual, on just a £100 pension contribution at age 20, -- I would have had £257 in my pot at 35 -- and remember the £100 contribution is tax free! I only would have had to pay £78 out of my back pocket.




Every £78 turned into £257 for free (and that's just the first 15 years of investment - the final figure when I retire for my £78 I put in would be £2000!!!! Honestly! in the bag for giving up £100 aged 20 ..! (retiring at 65)) -- but nope -- I'd proudly tell everyone I'd rather spend the money on beers
It's all in the maths -- just start the thing early honestly -- take my word for it!
Last edited by britboy4321; 4th Jan 2010 at 14:30.
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Old 4th Jan 2010, 14:26   #22
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Getting a state pension is a guaranteed income whereas your annuity isnt.
Give over Gordon .

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Old 4th Jan 2010, 14:28   #23
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Thanks. Is that figure before or after tax please?
Before. All quoted as gross. Depends on how much your tax free personal allowance would be for the year you retire and any other income so they will only quote as gross.

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Old 4th Jan 2010, 14:44   #24
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Yea when I was in my 20s retirement seemed so ridiculously far away I never thought about a pension.
Should have bought a composite on Sensex index at the beginning of the year

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Old 4th Jan 2010, 15:33   #25
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I am 20 and have moved to the UAE for work, never paid any tax, how do I go about paying for my NI and how much will it be a month?
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Old 4th Jan 2010, 15:35   #26
britboy4321
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NI is 10% I think.

I personally wouldn't pay it if you don't have to .. state pension is going to be worth £1.70 and a bag of chips (per month!) by the time you're old enough to claim ..
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Old 4th Jan 2010, 15:49   #27
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SIPPS allow for property ownership as part of your pension.

http://www.killik.com/financial-plan...FVoq3godUReVMQ
commercial property only - not residential mind you
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Old 4th Jan 2010, 15:50   #28
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Every £78 turned into £257 for free (and that's just the first 15 years of investment - the final figure when I retire for my £78 I put in would be £2000!!!! Honestly! in the bag for giving up £100 aged 20 ..! (retiring at 65)) -- but nope -- I'd proudly tell everyone I'd rather spend the money on beers
It's all in the maths -- just start the thing early honestly -- take my word for it!
I always rember been shown a chart when I was 20 and started my pension which showed that if you wanted two thirds of your final salary at retirement then the contributions weren't too bad at 20 (10% monthly salary from memory) but by the age of 40 you would need to put more than half your monthly salary into your pension to have that at 65

The younger you start even if it's only £20 per month, the better it is.

My dad started a life savings with profit investment when I was born in 1968 which he paid £11 annually. I took over the annual £11 payments when I was 18. When it matured at 40 last year they paid me out over £6000 which wasn't bad for £440 of investment!

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Old 4th Jan 2010, 16:01   #29
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It's terrible really. £500,000 saved up? Have £1K a month ....
My old boss used to say pension funds were worthless if you didn't have at least a million in them (easy for him to say when he had £3m in his 10 years ago )

The reasons your monthly amount is low is because of your wish for your wife to still get paid after your death and your early retirement age of 55 (and having it indexed linked). Already today you are expected to live to 78 so your annuity will be paying out for 23 years compared to the 20 years you have been paying into it. Add the fact your wife is expected to live another 4 years longer and both of you will live longer as time goes by so in another 20 years when you are 55 you may well be expected to live for 27 years and your wife 31 years if the trend keeps going. £500,000 paying out £1200 per month over 31 years indexed linked doesn't seem that bad of a return if you look at it that way. Non indexed linked and none for your wife would get you another £1000 per month giving you £2360 per month from your £500,000.

That is why people are expected to work past 55 now as if you try to aim to retire at 55 you may have as long to live as you have actually worked so difficult to have paid enough into pensions/savings to live in comfort for that long.

Delaying your retirement by 5 years to 60 and not paying anymore into your pension would get you another £400 per month alone.

Unless you are very successful financially in life, the dream of retiring comfortably at 55 is beyond most people. 27 years is a long time to fund without working. My inlaws managed to retire at 55 but she had a final salary work pension which paid her 2/3rds of her final salary as a director of social services (so well paid I guess) and they sold their house and moved to Greece where the cost of living is much cheaper. Even then they have to be careful with money if they want it to last.

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Last edited by Greebo; 4th Jan 2010 at 16:11.
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Old 4th Jan 2010, 16:07   #30
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To get a pension pot worth 1,000,000 (2K per month to me when I retire at 55) -- at my age -- I'd have to increase my contributions to ..

Wait for it ...

£4120 PER MONTH!!!!

And yes, you did read it right! £4120 per month -- out of my back pocket -- thanks very much
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