How much will your monthly pension be?

[the_worrier]

I am 42 in Sep 17. I retired from the RAF back in Apr 16 after 18.5 years service with an immediate pension. I commuted the maximum allowed into tax free cash as you just never know how long you'll live. The pension I now receive luckily pays my mortgage each month but I lose 40% of it to tax!

I am lucky to earn a nice salary aswell and just opted out of my new employers PP scheme after 16/17 months of contributing into it as I suspect I will be moving on in the next few months and would rather have the cash.

I know I am fortunate (won't say lucky as I worked hard to get where I am...4 Uni courses, 6 deployments) but I have paid an awful lot of tax/NI so will be really cheesed off if I don't get my full SP at 68! Am I out of order for feeling this way? I wouldn't mind if my kids were going to get free Uni tuition fee's!

 

[Amp34]

So you're only looking at a 1% annual return in real terms. That's incredibly pessimistic over a period that long.

I specifically stated at the end of my post that I hadn't accounted for inflation. Even the 3% low bound estimate I did is on the pessimistic side for real terms over a long period.

Yet inflation is a very important part of the whole thing, which the online calculations will take into account. You can't really ignore it and then say you're not getting the same results.

I used 3, 5 and 10. The 3% taken from the example you used and 5% as probably a more realistic amount.

As I said I previously those numbers align more with the pensions calculators reasonably well - inflation is important.

Reality is you need to put a huge proportion of your pay into a pension to get anything reasonable out of it if you're on a reasonable wage and you don't have significant contributions from your employer - which is what you initially found out. If you're on more than around £35k a year you need to be looking at around 30% of your pre tax pay to get what's recommended.

Something I think many of the older generation don't quite realise.

Edit:

Nominal return of around 6% on a mixed investment portfolio is considered average/good. Adding in inflation which for the UK over the last :

20 years - 2.77%
50 years - 5.92%
100 years - 4.78%

Future near term inflation is predicted to be between 2-3%

So add all that together and that 5% return with 2% inflation (so around 3% real) is probably not far off a good prediction unless you're looking st high risk investments. If however inflation over the next 30-50 years hits similar inflation levels to the last 50 years here's hoping investment returns increase significantly...:/

 

[danielanthony]

I've got the majority of my pension in a HL SIPP, invested in shares rather than funds in order to avoid management fee's.

Made quite a bit when ARM got taken over, then invested in tech, biotech and house builders(!). Up another 20% this year so going well. I expect to hit the lifetime allowance by the time I hit 55 (17 years) and then will probably go contracting and work 3 months on, 3 months off, just to keep my mind working.

 

[eddiemcgarrigle]

Half of what I signed up to thanks to 'modernising' by Labour and then the Tories. Paying in 14.2% for 36 years for a return of around 13k per annum. Gold plated eh?

 

[The_Abyss]

Yes, gold plated.

 

[danielanthony]

Half of what I signed up to thanks to 'modernising' by Labour and then the Tories. Paying in 14.2% for 36 years for a return of around 13k per annum. Gold plated eh?

You would need a pension pot of about £400,000 to get an annuity paying that amount in the private sector. You also don't say at what age that amount kicks in, plus it will be index linked, nor if that amount is after taking a lump sum.

So not bad really, there will be plenty more far worse off than you, especially as the state pension will take your retirement income to +£21,000.

 

[Rotty]

Half of what I signed up to thanks to 'modernising' by Labour and then the Tories. Paying in 14.2% for 36 years for a return of around 13k per annum. Gold plated eh?

depends on what its 14% of, if it's of 20k then its a decent deal, if it's of 50k then not

 

[413x]

Probably not enough.

Thank goodness I don't want kids as I couldn't afford them!
I've started too late and moved around a bit for jobs so don't own a property yet, have enough for a deposit but don't think I'll be in this area for more than 6 more months.

500ppm is going into my pension currently

 

[Vern1961]

Well a surprise this morning when a letter arrived from the pension management to advise my contributions cease from September this year (not 2018 as I expected) as I've reached 40 years in the fund! AVC's continue (which I will probably top up with some of the value of the pension contribution) and I do believe due to government regs even though I now have a fully funded FS pot waiting they re-enrol you in a cash purchase type scheme for the remainder of your career. Still too early to consider going as there's the slight matter of the mortgage to finish off but it did generate a ripple of excitement as there is light at the end of the tunnel. Still looking to go at the end of next year.

Downside is I now feel rather old with the thought I've been working solid for 40 years...

SWMBO already drawing up lists of jobs to do around the house and garden...

 

[Slam62]

Wait, you've been working 40 years and still got a significant mortgage

 

[Vern1961]

Wait, you've been working 40 years and still got a significant mortgage

Bit judgemental, aren't we?

Where did I say it was significant? Just over £20k which we will hopefully clear in the next 12 - 18 months. Relatively small bills, at this stage.

People do move house and upgrade, y' know? Not going to stay in a two bed mid terrace with postage stamp garden nor did I buy my first house on starting work (it was some years later).

 

[rodders]

Naff all. 14k a year in 2046.

 

[KNiVES]

Naff all. 14k a year in 2046.

Increasing your monthly contributions even by just a percent at the age of 39 (assuming you're retiring at 68 in 2046) will make a big difference, it's worth looking at.

 

[Rifte]

At the moment not a lot, and now I have left the UK I have stopped paying into my state.

I decided a number of years ago to use property as my pension plan and fortunately I do have a decent portfolio across 3 countries.

All being well they will all be paid off well before I retire, so I should have a nice income.

I am aware that there is a dice roll with this though, nothings certain with what I am doing. I just made a decision a number of years ago that a private pension plan wasn't the way to go.

 

[rodders]

Increasing your monthly contributions even by just a percent at the age of 39 (assuming you're retiring at 68 in 2046) will make a big difference, it's worth looking at.

I looked at this and it didn't appear to make much difference on pension predictors. I would need to up it to 10% to really do anything, but then that's a big chunk.

 

[SpeedFreak]

I must admit, I am a little envious of some of my older colleagues. I have it pretty good, but a few are on on a final salary, zero contibution scheme. It is based on 42nds and capped at 30 years of service. He's set for 50k+ per year pension.

 

[Puzzled]

Seems those that do have a good pension might find the funds aren't there to actually pay for it

The deficit at the UK university sector’s main pension scheme has soared by £9bn over the past year to £17.5bn, making it the largest on record at any British retirement fund and putting the rocky finances of higher education under further pressure. The Universities Superannuation Scheme — which provides pensions for academics and has more than 390,000 members — recorded retirement liabilities of £77.5bn at March 31, dwarfing its assets of £60bn. USS deficit is much higher than that recorded by BT, the telecoms group which has the largest pension scheme of any UK company. BT recorded a deficit of £9bn at March 31.

John Ralfe, an independent pension consultant, told the Financial Times the options for fixing USS deficit were all “unpalatable”. Academics would have to contribute more to their retirement or have future pensions diluted, which would be strongly resisted, he said. Alternatively, student fees would have to be raised, or more money would have to be diverted from teaching, he added.

https://www.ft.com/content/914d9cba-7232-11e7-aca6-c6bd07df1a3c

Allocating further funds from current tuition fees seems to be a given but putting them up will not be popular.

 

[dowie]

it is just a silly system, we shouldn't have average salary or final salary schemes in the first place - with stuff like that that then needs to be funded/topped up by present and future revenues rather than contributions made at the time you're just robbing future generations

 

[kiteloopy]

Putting away 650pcm into mine. Been doing that for the last 18 months or so. Prior to this I was a bit lax with it and because it I was saving for my flat's deposit and buying home stuff.
5% of my salary and company puts in 10%. I'm putting a further 5% into mine on top.

 

[Destination]

Putting away 650pcm into mine. Been doing that for the last 18 months or so. Prior to this I was a bit lax with it and because it I was saving for my flat's deposit and buying home stuff.
5% of my salary and company puts in 10%. I'm putting a further 5% into mine on top.

So it the £650 the 20%, or is that the your 10% component, or a 5% component?
Its a decent amount, especially if you can maintain it, as in 10 years, that amount well invested will hopefully make as much as the contributions are worth in investment potential.