I have a personal pension with Standard Life and was looking at it and have it invested in 7 funds of all sorts, US tracker, Far East, FTSE and a couple of Special Situations amongst them. I have a decent understanding of risk but have always thought I don't have the time or expertise to do better than a tracker fund. I've noticed that some of the funds have performed really badly. Should I simplify the allocations into a global tracker or use one of their lifesyle profiles? I'm 54.
Certainly dont do a Lifestyle fund. They usually dis-invest your money out of equities & into fixed interest/cash the nearer you get to retirement. Last year Government Gilts were the worst performing asset with funds losing between 25% and 45%.
Trackers are cheap but they do what they say on the tin - track the index/market/asset they are aligned to.
Ask @PragueAddick how his low cost Vanguard Lifestyle 20 fund did last year.
Thanks, I do understand about trackers but it's really difficult to out perform them for regular Joe's isn't it?
I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even. Now, I know I am not one of life's optimists but that seems to be pushing it. Why wouldn't I take the money as a lump sum (again) and pay my own income. Or spend it on drugs sanatogen and fast cars mobility scooters?
Tax is the main issue. If you (need to) transfer it out in order to draw it down only 25% is tax free. So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable. I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax.
I'd get 14450 after tax. It's just a standard employee/ employer contribution pension. What I don't understand is how they can get away with paying such a low income.
If it's a DC scheme then take an open market option & source your own annuity. Rates are a lit better than they have been for years thanks to Truss & inflation. I would have thought you'd get around £800 pa. But that would be based on a single life with no escalation. As @Rob7lee said, the more options you build in the less you get.
I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even. Now, I know I am not one of life's optimists but that seems to be pushing it. Why wouldn't I take the money as a lump sum (again) and pay my own income. Or spend it on drugs sanatogen and fast cars mobility scooters?
Tax is the main issue. If you (need to) transfer it out in order to draw it down only 25% is tax free. So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable. I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax.
Me too, taking £12,570 a year from the SIPP to supplement pension income from elsewhere.
I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even. Now, I know I am not one of life's optimists but that seems to be pushing it. Why wouldn't I take the money as a lump sum (again) and pay my own income. Or spend it on drugs sanatogen and fast cars mobility scooters?
Tax is the main issue. If you (need to) transfer it out in order to draw it down only 25% is tax free. So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable. I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax.
Me too, taking £12,570 a year from the SIPP to supplement pension income from elsewhere.
So you will be paying tax on every penny of the pension income from elsewhere?
I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even. Now, I know I am not one of life's optimists but that seems to be pushing it. Why wouldn't I take the money as a lump sum (again) and pay my own income. Or spend it on drugs sanatogen and fast cars mobility scooters?
Tax is the main issue. If you (need to) transfer it out in order to draw it down only 25% is tax free. So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable. I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax.
Me too, taking £12,570 a year from the SIPP to supplement pension income from elsewhere.
I have a personal pension with Standard Life and was looking at it and have it invested in 7 funds of all sorts, US tracker, Far East, FTSE and a couple of Special Situations amongst them. I have a decent understanding of risk but have always thought I don't have the time or expertise to do better than a tracker fund. I've noticed that some of the funds have performed really badly. Should I simplify the allocations into a global tracker or use one of their lifesyle profiles? I'm 54.
Certainly dont do a Lifestyle fund. They usually dis-invest your money out of equities & into fixed interest/cash the nearer you get to retirement. Last year Government Gilts were the worst performing asset with funds losing between 25% and 45%.
Trackers are cheap but they do what they say on the tin - track the index/market/asset they are aligned to.
Ask @PragueAddick how his low cost Vanguard Lifestyle 20 fund did last year.
I can vouch for Golf addicts comment on fixed interest/cash. My L&G pension declined by £10k in the tax year before last, waiting to see what happened in current period with Truss shenanigans. I don't know much about money /tax/pensions but I thought my money was safe with a big firm like L&G, should have taken annuity/cashed in 2-3years ago.
As do most people. Which is why it is important for most people to get advice from an expert like golfie. It is a very complex subject, although for a lot of people while working the answers can be relatively simple.
I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even. Now, I know I am not one of life's optimists but that seems to be pushing it. Why wouldn't I take the money as a lump sum (again) and pay my own income. Or spend it on drugs sanatogen and fast cars mobility scooters?
Tax is the main issue. If you (need to) transfer it out in order to draw it down only 25% is tax free. So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable. I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax.
Me too, taking £12,570 a year from the SIPP to supplement pension income from elsewhere.
So you will be paying tax on every penny of the pension income from elsewhere?
No, a few years ago when the markets were looking dodgy I took the allowed 25% of my pension pot out and invested it in various other places. Now I’m drip feeding funds from there plus the £12,570 from my SIPP plus my wife doing likewise with her £12,570 giving us enough to live on. Won’t have to start taking more from our pensions for another couple of years yet.
I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even. Now, I know I am not one of life's optimists but that seems to be pushing it. Why wouldn't I take the money as a lump sum (again) and pay my own income. Or spend it on drugs sanatogen and fast cars mobility scooters?
Tax is the main issue. If you (need to) transfer it out in order to draw it down only 25% is tax free. So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable. I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax.
Me too, taking £12,570 a year from the SIPP to supplement pension income from elsewhere.
So you will be paying tax on every penny of the pension income from elsewhere?
No, a few years ago when the markets were looking dodgy I took the allowed 25% of my pension pot out and invested it in various other places. Now I’m drip feeding funds from there plus the £12,570 from my SIPP plus my wife doing likewise with her £12,570 giving us enough to live on. Won’t have to start taking more from our pensions for another couple of years yet.
Understood - so not touching the 75% that was left in the pension pot. Makes sense.
As an IFA I am well qualified to advise you on this..............but as cafcfan says, I would need much more info to give you specific advice on this and the FSA would have kittens if I gave ANY sort of advice on a site like this with the minimal info given.
HOWEVER
It it were my pension plan I would prefer to have control over it than to have it still in the hands of an ex-exployer - but then I am an expert. I would say that it is not neccessary to invest into a SIPP, which is just a glorified personal pension with higher charges..........unless you specifically want to invest directly into individual shares or commercial property.
Nowdays many pension providers offer decent run plans with low charges, many of which a reduced once your fund exceeds £30,000 - £50,000. and would look at Scottish Widows, Scottish Life, AXA, and Aviva.
hope this helps
‘Well qualified IFA’ says FSA would have kittens if he gave advice on this site. Presumably that’s the Football Supporters Association, not the Food Standards Agency ?
As do most people. Which is why it is important for most people to get advice from an expert like golfie. It is a very complex subject, although for a lot of people while working the answers can be relatively simple.
I agree, starting point I always say to people.
1. If you are employed make sure you are in the employers pension scheme and make the most of any contributions they pay (some pay a minimum then match what you put in up to a limit etc). 2. Try and establish what you would want per annum once retired and work backwards from there.
Start as early as you can no matter how small the contributions. £250 a month (between you and your employer) from age 21 should see quite easily £600k at 67.
I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even. Now, I know I am not one of life's optimists but that seems to be pushing it. Why wouldn't I take the money as a lump sum (again) and pay my own income. Or spend it on drugs sanatogen and fast cars mobility scooters?
Tax is the main issue. If you (need to) transfer it out in order to draw it down only 25% is tax free. So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable. I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax.
I'd get 14450 after tax. It's just a standard employee/ employer contribution pension. What I don't understand is how they can get away with paying such a low income.
If it's a DC scheme then take an open market option & source your own annuity. Rates are a lit better than they have been for years thanks to Truss & inflation. I would have thought you'd get around £800 pa. But that would be based on a single life with no escalation. As @Rob7lee said, the more options you build in the less you get.
Thanks Golf. I had a look - L&G annuity offers guaranteed income of £57 per month with 3% yearly uplift which is a lot better than the £30 a month my DC scheme offers.
As do most people. Which is why it is important for most people to get advice from an expert like golfie. It is a very complex subject, although for a lot of people while working the answers can be relatively simple.
I agree, starting point I always say to people.
1. If you are employed make sure you are in the employers pension scheme and make the most of any contributions they pay (some pay a minimum then match what you put in up to a limit etc). 2. Try and establish what you would want per annum once retired and work backwards from there.
Start as early as you can no matter how small the contributions. £250 a month (between you and your employer) from age 21 should see quite easily £600k at 67.
If I am targeting 2/3 of my current take home salary, what should my target total pension pot be? Is it just a multiplier? Or, more complex?
I have a personal pension with Standard Life and was looking at it and have it invested in 7 funds of all sorts, US tracker, Far East, FTSE and a couple of Special Situations amongst them. I have a decent understanding of risk but have always thought I don't have the time or expertise to do better than a tracker fund. I've noticed that some of the funds have performed really badly. Should I simplify the allocations into a global tracker or use one of their lifesyle profiles? I'm 54.
Certainly dont do a Lifestyle fund. They usually dis-invest your money out of equities & into fixed interest/cash the nearer you get to retirement. Last year Government Gilts were the worst performing asset with funds losing between 25% and 45%.
Trackers are cheap but they do what they say on the tin - track the index/market/asset they are aligned to.
Ask @PragueAddick how his low cost Vanguard Lifestyle 20 fund did last year.
I can vouch for Golf addicts comment on fixed interest/cash. My L&G pension declined by £10k in the tax year before last, waiting to see what happened in current period with Truss shenanigans. I don't know much about money /tax/pensions but I thought my money was safe with a big firm like L&G, should have taken annuity/cashed in 2-3years ago.
What isn't generally understood is that the purpose of moving into fixed interest is to reduce the volatility of the INCOME value of your pension pot, nothing to do with maintaining nominal values. As Golfie says annuity rates have improved - which coincides with the drop in value of fixed interest investments - so in theory your pension pot still buys the same annuity as it did before because the price of annuities have dropped commensurately. So this strategy makes sense if you are buying an annuity - which used to be the only option.
A simple analogy is to ask what is best - 1) an equity cash pot that when it was worth £10,000 could buy £200 of annuity income and when it was £20,000 could only buy £150 of annuity income or 2) a bond cash pot that guarantees £175 of annuity income regardless of the price of gilts or price of equities.
If you intend to stay invested and drawdown an income, a decent scheme offers a different Lifestyle option that keeps an element of growth assets post retirement.
What is wrong with most LIfetsyle schemes is that they don't have enough invested in growth assets in the early years in the belief that investors fear volatility, even though its the long term value that counts, not this year's value compared to last years.
As do most people. Which is why it is important for most people to get advice from an expert like golfie. It is a very complex subject, although for a lot of people while working the answers can be relatively simple.
I agree, starting point I always say to people.
1. If you are employed make sure you are in the employers pension scheme and make the most of any contributions they pay (some pay a minimum then match what you put in up to a limit etc). 2. Try and establish what you would want per annum once retired and work backwards from there.
Start as early as you can no matter how small the contributions. £250 a month (between you and your employer) from age 21 should see quite easily £600k at 67.
If I am targeting 2/3 of my current take home salary, what should my target total pension pot be? Is it just a multiplier? Or, more complex?
This is just how I personally view it;
I want to have 16x annual salary, so for ease of numbers say the salary is £100k so I'd want a pot or £1.6m (not necessarily all in a pension pot, but made up of ISA's etc).
I'm assuming my pot will at least keep up with inflation as will remain invested and state pension is circa £10k, so on that basis were I to draw the 56k it's roughly 28 years worth.
Now if drawing at 65 onwards it's highly likely that were I to live 28 years I wouldn't need to be drawing so much out in those later years so should be fine.
That's just a very basic how I roughly calculate. But will depend on when you want to start etc
I have a personal pension with Standard Life and was looking at it and have it invested in 7 funds of all sorts, US tracker, Far East, FTSE and a couple of Special Situations amongst them. I have a decent understanding of risk but have always thought I don't have the time or expertise to do better than a tracker fund. I've noticed that some of the funds have performed really badly. Should I simplify the allocations into a global tracker or use one of their lifesyle profiles? I'm 54.
Certainly dont do a Lifestyle fund. They usually dis-invest your money out of equities & into fixed interest/cash the nearer you get to retirement. Last year Government Gilts were the worst performing asset with funds losing between 25% and 45%.
Trackers are cheap but they do what they say on the tin - track the index/market/asset they are aligned to.
Ask @PragueAddick how his low cost Vanguard Lifestyle 20 fund did last year.
No do not do that, it'll just trigger another furious rant.😂
Some very good answers above from some knowledgeable people on pensions. Thanks all.
Meanwhile there are a slew of generally small but welcome increases in interest on various easy access accounts. 3.2% now easily available without opting for some Arab or Nigerian outfit beloved of Raisin. Slightly odd that the one-year fixed rates have stagnated, though.
As do most people. Which is why it is important for most people to get advice from an expert like golfie. It is a very complex subject, although for a lot of people while working the answers can be relatively simple.
I agree, starting point I always say to people.
1. If you are employed make sure you are in the employers pension scheme and make the most of any contributions they pay (some pay a minimum then match what you put in up to a limit etc). 2. Try and establish what you would want per annum once retired and work backwards from there.
Start as early as you can no matter how small the contributions. £250 a month (between you and your employer) from age 21 should see quite easily £600k at 67.
If I am targeting 2/3 of my current take home salary, what should my target total pension pot be? Is it just a multiplier? Or, more complex?
This is just how I personally view it;
I want to have 16x annual salary, so for ease of numbers say the salary is £100k so I'd want a pot or £1.6m (not necessarily all in a pension pot, but made up of ISA's etc).
I'm assuming my pot will at least keep up with inflation as will remain invested and state pension is circa £10k, so on that basis were I to draw the 56k it's roughly 28 years worth.
Now if drawing at 65 onwards it's highly likely that were I to live 28 years I wouldn't need to be drawing so much out in those later years so should be fine.
That's just a very basic how I roughly calculate. But will depend on when you want to start etc
That's exactly how I view it. I'm retiring this year at 66 and let's say I'm going to live for another 25 years (I doubt I will though). I will spend around 65% of my retirement pot of savings and investments (not pension pot as I cashed in any I had a while ago) in the first 10-12 years and the balance of 35% will have to last! Front loading! Plus the two of us have state pensions of around £2,100 a month.
I've been extraordinarily fortunate in that I have been able to accumulate retirement savings from net income so I know that I will pay tax only on investment income as the retirement pot is not in a pension and therefore not taxable (currently!!). Drawings from the pot will be tax free!
Edit: I wouldn't suggest this approach as a norm - if you have a pension scheme where the employer contributes then absolutely use it.
my main and only concern is that I have enough pension tbh
How much is enough? That's a whole other topic but I've always based on I'd like 2/3rds* of my working salary (which doesn't have to all come from pension). * so I'm looking at roughly having 16x currently salary.
But with regards your initial 1st question - for me the questions is why would you NOT take the pension with your employer when they are probably putting in 25%+ of your annual salary (plus what you put in receives tax relief). You're likely getting 30% plus of your salary into pension at probably less than 5% cost to you.
It's almost free money!
It's COMPLETELY free money.
On the subject of transfers to LGPS, it is likely to be worthwhile only if your old pension was DB and also a public sector scheme, since the transfer "club" rules apply and gives you year for year transferred. Otherwise I think they still quote an added number of years which is not quite the same.
What is guaranteed is that added years will either be poor value or good value, and only by accident be equivalent value. If your future salary increases are more than the scheme actuary's assumed average you are a winner or if increases are lower you are a loser.
It is unfortunately the case that access to the relevant information which allows an informed view on inter scheme transfers involving DB benefits is not available to individuals at anything approaching a reasonable cost. Even then the information based on statistics and probabilities is more like a Peanuts Malloy assessment than pointing to a guaranteed winner.
As do most people. Which is why it is important for most people to get advice from an expert like golfie. It is a very complex subject, although for a lot of people while working the answers can be relatively simple.
I agree, starting point I always say to people.
1. If you are employed make sure you are in the employers pension scheme and make the most of any contributions they pay (some pay a minimum then match what you put in up to a limit etc). 2. Try and establish what you would want per annum once retired and work backwards from there.
Start as early as you can no matter how small the contributions. £250 a month (between you and your employer) from age 21 should see quite easily £600k at 67.
If I am targeting 2/3 of my current take home salary, what should my target total pension pot be? Is it just a multiplier? Or, more complex?
This is just how I personally view it;
I want to have 16x annual salary, so for ease of numbers say the salary is £100k so I'd want a pot or £1.6m (not necessarily all in a pension pot, but made up of ISA's etc).
I'm assuming my pot will at least keep up with inflation as will remain invested and state pension is circa £10k, so on that basis were I to draw the 56k it's roughly 28 years worth.
Now if drawing at 65 onwards it's highly likely that were I to live 28 years I wouldn't need to be drawing so much out in those later years so should be fine.
That's just a very basic how I roughly calculate. But will depend on when you want to start etc
As do most people. Which is why it is important for most people to get advice from an expert like golfie. It is a very complex subject, although for a lot of people while working the answers can be relatively simple.
I agree, starting point I always say to people.
1. If you are employed make sure you are in the employers pension scheme and make the most of any contributions they pay (some pay a minimum then match what you put in up to a limit etc). 2. Try and establish what you would want per annum once retired and work backwards from there.
Start as early as you can no matter how small the contributions. £250 a month (between you and your employer) from age 21 should see quite easily £600k at 67.
If I am targeting 2/3 of my current take home salary, what should my target total pension pot be? Is it just a multiplier? Or, more complex?
This is just how I personally view it;
I want to have 16x annual salary, so for ease of numbers say the salary is £100k so I'd want a pot or £1.6m (not necessarily all in a pension pot, but made up of ISA's etc).
I'm assuming my pot will at least keep up with inflation as will remain invested and state pension is circa £10k, so on that basis were I to draw the 56k it's roughly 28 years worth.
Now if drawing at 65 onwards it's highly likely that were I to live 28 years I wouldn't need to be drawing so much out in those later years so should be fine.
That's just a very basic how I roughly calculate. But will depend on when you want to start etc
16 x Gross or Net annual salary?
Not that I am near either
Gross.
Mine is probably way over the top, but it was just to give an idea, some may be happy on 35% of salary, therefore you'd need a lot less than 16x
Comments
So you will be paying tax on every penny of the pension income from elsewhere?
Assume you've already taken 25% tax free?
1. If you are employed make sure you are in the employers pension scheme and make the most of any contributions they pay (some pay a minimum then match what you put in up to a limit etc).
2. Try and establish what you would want per annum once retired and work backwards from there.
Start as early as you can no matter how small the contributions. £250 a month (between you and your employer) from age 21 should see quite easily £600k at 67.
A simple analogy is to ask what is best -
1) an equity cash pot that when it was worth £10,000 could buy £200 of annuity income and when it was £20,000 could only buy £150 of annuity income or
2) a bond cash pot that guarantees £175 of annuity income regardless of the price of gilts or price of equities.
If you intend to stay invested and drawdown an income, a decent scheme offers a different Lifestyle option that keeps an element of growth assets post retirement.
What is wrong with most LIfetsyle schemes is that they don't have enough invested in growth assets in the early years in the belief that investors fear volatility, even though its the long term value that counts, not this year's value compared to last years.
I want to have 16x annual salary, so for ease of numbers say the salary is £100k so I'd want a pot or £1.6m (not necessarily all in a pension pot, but made up of ISA's etc).
I'm assuming my pot will at least keep up with inflation as will remain invested and state pension is circa £10k, so on that basis were I to draw the 56k it's roughly 28 years worth.
Now if drawing at 65 onwards it's highly likely that were I to live 28 years I wouldn't need to be drawing so much out in those later years so should be fine.
That's just a very basic how I roughly calculate. But will depend on when you want to start etc
Some very good answers above from some knowledgeable people on pensions. Thanks all.
Meanwhile there are a slew of generally small but welcome increases in interest on various easy access accounts. 3.2% now easily available without opting for some Arab or Nigerian outfit beloved of Raisin. Slightly odd that the one-year fixed rates have stagnated, though.
I've been extraordinarily fortunate in that I have been able to accumulate retirement savings from net income so I know that I will pay tax only on investment income as the retirement pot is not in a pension and therefore not taxable (currently!!). Drawings from the pot will be tax free!
Edit: I wouldn't suggest this approach as a norm - if you have a pension scheme where the employer contributes then absolutely use it.
On the subject of transfers to LGPS, it is likely to be worthwhile only if your old pension was DB and also a public sector scheme, since the transfer "club" rules apply and gives you year for year transferred. Otherwise I think they still quote an added number of years which is not quite the same.
What is guaranteed is that added years will either be poor value or good value, and only by accident be equivalent value. If your future salary increases are more than the scheme actuary's assumed average you are a winner or if increases are lower you are a loser.
It is unfortunately the case that access to the relevant information which allows an informed view on inter scheme transfers involving DB benefits is not available to individuals at anything approaching a reasonable cost. Even then the information based on statistics and probabilities is more like a Peanuts Malloy assessment than pointing to a guaranteed winner.
Not that I am near either
Mine is probably way over the top, but it was just to give an idea, some may be happy on 35% of salary, therefore you'd need a lot less than 16x