Pension Pot question
Pension Pot question
Author
Discussion

Welshbeef

Original Poster:

49,633 posts

228 months

Wednesday 28th November 2012
quotequote all
Looking for some very general advice here


How large a pot do I need to earn £1k per annum pension from age of 65 ?

I'm asking that as then I can multiply it up to my required annual pension.



Thanks.

Edit I'm assuming its c£30k pot per £1k pa pension.
Would be very interested to know this as my back of fag packet calcs have left me thinking that excl my final salary and career ave salary that defined contribution pension with employer paying in 5% and say me paying in 6% the payback is pretty poor infact bloody poor (note I am doing it for now).


As such this may result in me looking at other possibilities as the prospect of having say a £50k pa pension maybe totally unviable yet with say 4 buy to let's all fully paid off they could yield that cash return in today's money. Plus classic cars wine etc.

fandango_c

1,993 posts

216 months

Wednesday 28th November 2012
quotequote all
You didn't mention that you mean an annuity, but if you do, 5 seconds using google produces this amongst other results:
http://www.ft.com/personal-finance/annuity-table

Different rates for different annuities.

CaptainSlow

13,179 posts

242 months

Wednesday 28th November 2012
quotequote all
At the moment I guess £20k

Welshbeef

Original Poster:

49,633 posts

228 months

Wednesday 28th November 2012
quotequote all
CaptainSlow said:
At the moment I guess £20k
Ok so lets say £20k = £1k pension pa.
now in my scenario 11% total so 6%

Given a £20k pot that would mean I'd have to pay in £12k.
So just to get my money back would take 12 years - any age beyond 77 I'm "up"

My final salary pensions one takes just 2 years rounded to get my investment a couple of other 3 years
While career average takes just under 5 years


See the huge change... There is no way in my lifetime that my generation has an expected life which will have increased by 10 years ....really highlights that retirement funding is very difficult and really costs a fortune.



CaptainSlow

13,179 posts

242 months

Wednesday 28th November 2012
quotequote all
Welshbeef said:
Ok so lets say £20k = £1k pension pa.
now in my scenario 11% total so 6%

Given a £20k pot that would mean I'd have to pay in £12k.
So just to get my money back would take 12 years - any age beyond 77 I'm "up"

My final salary pensions one takes just 2 years rounded to get my investment a couple of other 3 years
While career average takes just under 5 years


See the huge change... There is no way in my lifetime that my generation has an expected life which will have increased by 10 years ....really highlights that retirement funding is very difficult and really costs a fortune.
True but annuities are very low at the moment, in better times that £20k maybe be £15k, so you pay in £8k or £4k after tax (if Higher-rate payer), so this makes the payback closer to 4 years.

Welshbeef

Original Poster:

49,633 posts

228 months

Wednesday 28th November 2012
quotequote all
CaptainSlow said:
True but annuities are very low at the moment, in better times that £20k maybe be £15k, so you pay in £8k or £4k after tax (if Higher-rate payer), so this makes the payback closer to 4 years.
Thing is with Govt bonds at such low rates and likely to be possibly for the next decade or more due to the financial mess were all in Im struggling to see the upside.

I suppose 2030's/2040's might be better but worryingly that's not too far off!!!

fandango_c

1,993 posts

216 months

Wednesday 28th November 2012
quotequote all
Welshbeef said:
CaptainSlow said:
True but annuities are very low at the moment, in better times that £20k maybe be £15k, so you pay in £8k or £4k after tax (if Higher-rate payer), so this makes the payback closer to 4 years.
Thing is with Govt bonds at such low rates and likely to be possibly for the next decade or more due to the financial mess were all in Im struggling to see the upside.

I suppose 2030's/2040's might be better but worryingly that's not too far off!!!
Annuities are not the only option. You can drawdown from a SIPP.

AdeTuono

7,626 posts

257 months

Wednesday 28th November 2012
quotequote all
fandango_c said:
Welshbeef said:
CaptainSlow said:
True but annuities are very low at the moment, in better times that £20k maybe be £15k, so you pay in £8k or £4k after tax (if Higher-rate payer), so this makes the payback closer to 4 years.
Thing is with Govt bonds at such low rates and likely to be possibly for the next decade or more due to the financial mess were all in Im struggling to see the upside.

I suppose 2030's/2040's might be better but worryingly that's not too far off!!!
Annuities are not the only option. You can drawdown from a SIPP.
Isn't the annual drawdown percentage of the pot limited to pretty much the same as the prevailing annuity rate though? Happy to be corrected if I've got this wrong; in fact, I hope I have.

jonny70

1,280 posts

188 months

Wednesday 28th November 2012
quotequote all
Dont know what age you are , r the implications if your pension, as im sure over the next few decades retirement age will be raised upwards

fandango_c

1,993 posts

216 months

Wednesday 28th November 2012
quotequote all
AdeTuono said:
Isn't the annual drawdown percentage of the pot limited to pretty much the same as the prevailing annuity rate though? Happy to be corrected if I've got this wrong; in fact, I hope I have.
Not sure.

My point was that drawing down enables you to avoid annuity returns and to invest in other assets.

Welshbeef

Original Poster:

49,633 posts

228 months

Wednesday 28th November 2012
quotequote all
Just dug out the pension details ad there is a range of values but the lowest shows £20k based upon 2.5% growth - I quite like the 6.5% growth indicating an annual pension of £110k.

Don't believe any of it though mind.

Cheib

25,420 posts

205 months

Thursday 29th November 2012
quotequote all
At those indicated annuity rates I think you have to give serious consideration to buying a rental property at say a 4% yield ?

Issue would be that you would have to pay tax if you took the lump sum but you would get to keep the capital unlike some annuities.

Or you could perhaps buy a commercial property in your pension ? Not sure if you can buy properties outright but you can buy commercial property assets. You can't buy residential property in any form in a pension.

groak

3,254 posts

209 months

Thursday 29th November 2012
quotequote all
Quite a few PH btl 'cognoscenti' consider IO the 'best' way to handle btl mortgages. What do the 'yields' look like as retirement fund providers after loan payments (on top of a myriad of other costs) are factored in?

Actually, come to that, how do lenders feel about lending to OAPs on btls these days?

Zigster

2,004 posts

174 months

Thursday 29th November 2012
quotequote all
The FTSE 100 is yielding a little shy of 4% if that makes the comparison with BTL a bit more fair.

Cheib

25,420 posts

205 months

Thursday 29th November 2012
quotequote all
groak said:
Quite a few PH btl 'cognoscenti' consider IO the 'best' way to handle btl mortgages. What do the 'yields' look like as retirement fund providers after loan payments (on top of a myriad of other costs) are factored in?

Actually, come to that, how do lenders feel about lending to OAPs on btls these days?
Dunno. I certainly wasn't advocating a mortgage.......

jan50

56 posts

167 months

Wednesday 5th December 2012
quotequote all
Welshbeef said:
Thing is with Govt bonds at such low rates and likely to be possibly for the next decade or more due to the financial mess were all in Im struggling to see the upside.

I suppose 2030's/2040's might be better but worryingly that's not too far off!!!
At least you have some final salary and CARE pension schemes - they're worth their weight in gold at the moment.

It used to be the case that you could get an annuity of around 15% when I was a bit younger but now it's more like 5%. Therefore to get the same amount of 'pension' from a personal pension you need a pot that's triple the size.

This has made final salary pensions and their cash transfer values much better than they previously would have been.

Many of our pension complaints are from people who have been advised to transfer out of final salary schemes into a risk based pension!

98elise

32,727 posts

191 months

Thursday 6th December 2012
quotequote all
groak said:
Quite a few PH btl 'cognoscenti' consider IO the 'best' way to handle btl mortgages. What do the 'yields' look like as retirement fund providers after loan payments (on top of a myriad of other costs) are factored in?

Actually, come to that, how do lenders feel about lending to OAPs on btls these days?
If you have a big deposit they will lend to anyone. I recently bought a flat in block of 4 (whole block was reposessed).

One of the other buyers was an 84 year old propertly developer. He's still getting mortgages.