mac12:
That sounds good but doesn’t really answer the question if you earn £40000 per year working and then retire on a state pension of £10000 what do you live on
mac12:
That sounds good but doesn’t really answer the question if you earn £40000 per year working and then retire on a state pension of £10000 what do you live on
£10,000 - that is not sarcastic, just a fact.
You do not need 40K to live; £40K is not a breadline salary.
However, after many years on 40K a year before retirement you will have paid off the mortgage on any reasonable home, bought most big ticket items that any normal person requires to keep them content & have had money left over to invest in something in the meantime.
Now it is the investment side that is the risky bit - but don’t take the biggest risks, diversify & don’t trust somebody else to look after it for you. You are then likely to have more than 10K a year to live on.
Even if you don’t invest successfully, or at all, your living expenses as a 67 year old are not the same as a 30 year old with kids, a mortgage & all the other expenses setting up life requires.
Also going to work costs money - more than most people care to realise.
Most 67 year olds will be on the wind down. Most will have reached that couldn’t care less stage where the expensive frivolities of life no longer matter.
If you choose to spend the whole 40K on depreciating assets each year & leave the mortgage to settle itself at a pre-determined 35 year (post retirement) date then you will have to make hard choices.
You are not going to be taking holidays to expensive locations but you will live your life accordingly. You may have to downsize the house, work a few shifts a week - but be happy that you had a good time spending all that money to get there.
The Government encourage people to constantly spend what they earn to keep their precious economy growing (i.e. filter money up the chain) but you don’t have to fall for that.
I really do find the best things in life are free. I know that is not for everybody but there is a middle ground anybody should be happy with.
Many retired persons currently on a 10K pension would love to have had 40K for many years pre-retirement but will not have had that luxury - they are still surviving; though obviously not lavishly.
But isn’t it something like 15% who go Into care so what about the other 85%. If people can retire on £10000 state pension then why don’t people save up and retire at 55
mac12:
£2322 is handy to have but it’s 25 years to get my money back and I’ll be 90 that doesn’t sound good
What you need to take into account is if your pensions dont meet your basic living costs you will get it in other benefits above the state pension from the government BUT that £40 pound a week pension will be taken into account. So is it worth having if you would get it any way in benefits or having the money now when you could probably live a little with it
I’ve been checking another pension and it’s got £64300 in it and they say it will pay £433
9 from the age of 65 for life so still going to be well into my 80s before being in profit
mac12:
I’ve been checking another pension and it’s got £64300 in it and they say it will pay £433
9 from the age of 65 for life so still going to be well into my 80s before being in profit
This seems like a reasonable post to reply to.
I guess the starting point is how much of that £64,300 has come from contributions you’ve actually made?
I’m lucky that I’ve had some decent pensions that match higher percentages of contributions (like now my lot will match up to 7.5% rather than the bare minimum my last job offered) and qt age 39 I’ve got a small final salary pension and also a pot of around £90,000. But I’ve paid in less than half of that over the years - around a third. The rest has come from my employers and some in the form of tax relief and some investment growth.
So if we do the same with your figures but just call it 50/50 (it’s crude but handy comparison) split between what you’ve paid in and what others have paid in, so you paid in over the years say £32,000 - or half the pot. At £4339 per year you’ve got “your” money back in about 7.5 years, so by age 72. All years after that others are paying, or have paid over the years, for your income.
It’s a common misconception. People look at it as “their” pot which it is of course, but its not fully funded by one person which is why a workplace pension is often hard to lose on over the years, even though they’re not as good as they once were.
mac12:
I’ve been checking another pension and it’s got £64300 in it and they say it will pay £433
9 from the age of 65 for life so still going to be well into my 80s before being in profit
£64,300 is only £45,000 after tax if you cash it in. So it will pay for itself in 10 years, i.e. live passed your 75th birthday.
Alternatively, you don’t have to turn it into that £4339 annuity, just put it into drawdown and you can take what you like out of it only paying income tax after the first 25%
When I add both my private pensions together the cash amount is roughly £12000 with still another 5 years to go so to cash them in I’d pay lots in tax so drawdown could be a good idea but my pensions have a guaranteed annuity rate so I don’t know if drawdown is allowed. I’ve also got a company pension that I’d currently showing around £5000 per year
toonsy:
so you paid in over the years say £32,000 - or half the pot. At £4339 per year you’ve got “your” money back in about 7.5 years, so by age 72. All years after that others are paying, or have paid over the years, for your income.
What happened to all the growth in that pot since the start of contributions to age 72.
That’s also 32k that has to added to the mortgage amount and time + compound interest.
Then the £4k or whatever will be taxable when added to state pension according to tax thresholds.
There’s also even a reasonable chance of dying before age 72.
While the reality is that you’ll need around £100k in the pot for that £4k pa pension no one is going to allow you to take £4k pa based on a 72 years life expectation.The whole scam is based on providers rigging the system so that the odds of dying before the pot is all paid out are in the pension providers’ favour.
Which makes the choice between paying the cash into the mortgage instead of a rip off pension a no brainer.
Pension systems work as long as the generation currently contributing is doing it in a larger amount than the generation drawing it down.
Its all a pyramid scheme, literally. And the demographic pyramid doesnt look too good to maintain such a system much longer. Hence work pension schemes became law, so to push the responsibility or outrage when it fails, away from the state and into wall street and the city of london. Plus the always increasing retirement age.
adam277:
Now I gotta find all my old pensions xD
probably had 5 employers with different pension plans
I spent some time doing just that when I was furloughed for 3 months in 2020. I discovered/remembered I ‘opted out’ when I was 2? in the early 90’s and never thought any more about it. Turns out I’d been paying something to somewhere until the mid 2000’s and had accumulated £25k! Yes I know it’s not a lot in pension terms but quite a nice surprise. I’m 55 in 4 years so will maybe draw it and finish off my mrs mortgage for her. She’s been nhs all her working life so will have a decent pension.
TBH, I’m absolutely useless at finances and got bits of pension here there and everywhere. I really do need to get it sorted out.
I’m the same with pensions ^^^^ I recently got tracked down by a Co I’d not left a forwarding address to and it turns out that my pot with them is a tad over £130k. That was a nice surprise. I currently massively overpay my present company pension provider but as I’m now 57 I’m seriously considering releasing 25% of the £130 grand one in order to go a little wild. I don’t owe any money and there’s no guarantee that I’ll live to pension age,so my thoughts are “why not?”
There are probably very good reasons why not,but what the hell?
the maoster:
There are probably very good reasons why not,but what the hell?
The only reason why not, is if you’re not buying an annuity, if you’re going to leave it invested and go into drawdown. Then presumably what’s left invested will grow so that all your drawings are a lot more than £130k (say, £200k) 25% of each drawdown could be tax free (if you don’t take it up front) so in total, this example, £50k would be tax free instead of £32500…but up to you.
the maoster:
25% of the £130 grand one in order to go a little wild. I don’t owe any money and there’s no guarantee that I’ll live to pension age,so my
the maoster:
There are probably very good reasons why not,but what the hell?
but up to you.
Everyone’s needs…
Will differ. For my own part, I cashed the lot when I got to 55 and spent some on doing the things I wanted to do. I thoroughly enjoyed it all.
The way I see it, by the time I get to 66, airports, travelling and doing those things I can do now, will be too tiring to bother with as I get older. I already find flying a ball-ache and that’s in business class.
On the day before I die, I will have £50 to my name. On the day I die, I’ll be be skint, at least that’s the plan anyway.
the maoster:
There are probably very good reasons why not,but what the hell?
The only reason why not, is if you’re not buying an annuity, if you’re going to leave it invested and go into drawdown. Then presumably what’s left invested will grow so that all your drawings are a lot more than £130k (say, £200k) 25% of each drawdown could be tax free (if you don’t take it up front) so in total, this example, £50k would be tax free instead of £32500…but up to you.
I thought you were only allowed one bite at the 25 % tax free cherry (so to speak).
From I own example I took the whole of a UK pension pot. The pension provider automatically deducts the tax and I reclaimed it.HMRC paid it back to me after a couple of months,but the paperwork is something else.
I then declared it in France as part of my income, the difference being £ 20 000 in my favour.
the maoster:
There are probably very good reasons why not,but what the hell?
The only reason why not, is if you’re not buying an annuity, if you’re going to leave it invested and go into drawdown. Then presumably what’s left invested will grow so that all your drawings are a lot more than £130k (say, £200k) 25% of each drawdown could be tax free (if you don’t take it up front) so in total, this example, £50k would be tax free instead of £32500…but up to you.
I thought you were only allowed one bite at the 25 % tax free cherry (so to speak).
From I own example I took the whole of a UK pension pot. The pension provider automatically deducts the tax and I reclaimed it.HMRC paid it back to me after a couple of months,but the paperwork is something else.
I then declared it in France as part of my income, the difference being £ 20 000 in my favour.
Assume you have 100k in pot.
You can access 25% tax free. (25k)
If you only take out 5k tax free, then only 20k of your pot becomes “crystallized”, the remainder remains free to grow.
You can continue to add to that uncrystallized pot.
Free to correction, as I am not an expert. (in anything)
Ed to add…
If you`re that rich the coffees are definitely on you the next time!
One withdraw from a pension pot of 25% but after that the status of the pot is changed I thought .
If a person takes the whole 100 k you get a bigger portion tax free - although it’s taxable and depending on the individuals earnings in a tax year it will probably be top rate tax, which will sting.
Cheeky beggar Franglais. I bought the last coffee and you know I am on minimum wage .
OwenMoney:
One withdraw from a pension pot of 25% but after that the status of the pot is changed I thought .
If a person takes the whole 100 k you get a bigger portion tax free - although it’s taxable and depending on the individuals earnings in a tax year it will probably be top rate tax, which will sting.
Cheeky beggar Franglais. I bought the last coffee and you know I am on minimum wage .
Not sure what youre saying? 25k tax free, then tax at basic rate (depending on circs) on remaining 75k. Whether that 75k is taken this year or next doesnt matter I think?
Am I misunderstanding it?
If taking the whole lot in one hit puts you into a higher tax band, the it would possibly be better to spread out the time you collect it?
Wouldn`t apply to those like you, living in Monaco.
If you take the whole 25% allowed in one hit, then the remaining 75% is taxable.
If you only take a part of that 25% (5% in my example, one fifth of what is allowed) 80% (4/5) remains uncrystallized.
That 80% can be added to, and over a period may become 100k again.
If you only need part of the possible 25% allowed, then you might be better off only taking what you need.
I took a few quid* out of my pot recently, all tax free, but am still paying into the uncrystallized portion of it. Those investments still get added to by the tax man.
All done after taking professional advice. If I`ve explained it badly, that is my fault, not my advisors. I do advise anyone to look at paying a professional a few quid to sort things out. Do some reading yourselves, then get a written estimate from two or three approved advisors from the links in the Gov sites.
