Ming the Merciless
There is no mercy
- Location
- Inside my skull
You contract out of the earnings related part of the state pension, not the basic state pension.
Retirement, how much?
- Thread starter oldfatfool
- Start date
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You contract out of the earnings related part of the state pension, not the basic state pension.
Low Gear Guy
Veteran
- Location
- Surrey
Under the new rules it reduces the amount of state pension payable but not below a minimum value. The relevant NI contributions were transferred to the company pension scheme.
If it is possible to make more contributions and claim the maximum state pension, this may be better value that paying into an independent stakeholder pension.
BoldonLad
Not part of the Elite
- Location
- South Tyneside
Yes, that is my understanding hence "Serps etc". My understanding is that the State Pension (excluding the various possible add-ons) is dependant on qualifying years of NI Contributions. I retired in 2012, so, I am no doubt, a bit out of touch with latest rules and regulations.
united4ever
Veteran
How do you feel about this 4% rule? So say you have 300k then by drawing down 4% a year the pot is apparently unlikely to erode in real terms. Just live off that 12k plus state pension as an example.
Also, my wife has no private pension but I do. If I opt for drawdown rather than annuity then is it right that the pot transfers to my next of kin at my death? i.e. keeps her looked after or my kids get it. If so, this sounds way better than an annuity though I know the annuity gives security.
Also, my wife has no private pension but I do. If I opt for drawdown rather than annuity then is it right that the pot transfers to my next of kin at my death? i.e. keeps her looked after or my kids get it. If so, this sounds way better than an annuity though I know the annuity gives security.
PaulSB
Squire
- Location
- Chorley, Lancashire
I wasn't aware of the 4% idea but it is otherwise how I have organised our finances. I retired five years ago with a private pension. My wife retired six years with an NHS pension. It is inevitable my wife will pay income tax when she begins to receive her state pension later this but not for myself.
Buying an annuity will expose you to paying income tax when the state pension kicks in and this will be outside of your control. By using drawdown you can control the amount of tax you pay by managing the drawdown amount. If you need £12k one year this income level will be taxed but if you only need £6k the following year your tax liability is less. The problem with an annuity is the income is the same every year regardless of whether you need it or not.
In our situation in a few months when my wife's state pension begins we won't need any income from my private pension pot. Should my wife die first I'll need to take an income, if not it's unlikely we will need, as opposed to want, to access it again.
I agree the state pension plus £12k is a reasonable figure to live off but acknowledge it will vary hugely according to individual circumstances. Your correct your pension pot passes tax free to your wife if you die first.
Bonefish Blues
Banging donk
- Location
- 52 Festive Road
Useful tool here. Providers are trying harder:
https://www.legalandgeneral.com/retirement/retirement-income-calculator/
https://www.legalandgeneral.com/retirement/retirement-income-calculator/
- Location
- Somewhere wet & hilly in NW England.
This doesn't really answer your question although you have received those already but...
... many years ago I decided that the best way to save for old age was to accrue enough of a 'pot' so that I and my wife could eliminate any dependency on pensions.
This was a change to my previous mindset where I guess I had been culturally brainwashed into a 'pension rules!' mentality.
So, once mortgage etc was cleared, we saved very hard and are now in a position to live off of our savings ad-infinitum.
There are any number of online calculators available where you can plug in personal data along the lines of How Long Will My Money/Savings last?
A good number of people appear to forget that their savings pot is an alternative 'fixed' income source.
Not saying the way I decided to do things is best - it's just that you don't have to follow the road well travelled. 😁
PaulSB
Squire
- Location
- Chorley, Lancashire
If you don't mind answering can ask if you managed this investment yourself? I don't have the knowledge and would be far too cautious to do so.
- Location
- Somewhere wet & hilly in NW England.
No problem re answering.
Yes, I do!
I'm a very risk-adverse person as well tbh so I tend to run with a lot of safety on my side.
Most of our monies (ie everything outside of our long ago paid for house) are tied up in safe places.
The current split is investments exposed to the 'markets' at 21% vs that which is not at 79%.
The bulk of the 21% are two private pension pots which we can access as and when we like (subject to HMRC tax liabilities) and a couple of S&S ISA'S from Vanguard and A J Bell. The latter are in turmoil at the moment due to interest rate rise fears and the Ukraine situation.
The 79% not exposed to stock market vagaries are made up primarily of Fixed Rate ISA'S and Fixed Rate Bonds. Plus junk Premium Bonds for some rapid access cash although we do have a stash of cash available in a Safe Deposit Box as well as a couple of CC's with zero balance if we were ever in a real fix.
ebikeerwidnes
Guru
- Location
- Z’ha’dum
Many years ago I was talking to my Dad about investments for retirement - they had retired several years before
His pension pot had been taken out and invested via a IFA that specialises in retirement funds - he had just had a letter from them explaining that the value had just dropped significantly - but was expected to climb back up over the next few months
Which it did - but the OFA was worried about people panicking and cashing it in when the market was low
You have to remember that when you invest in shares etc then you only loose or gain if you sell - until then it is just a thing - like a painting on a wall - it has a value now - and it will have a value in a year's time - and in 10 years time. The value is only relevant when you buy or sell
If you look at the value of investments when the pandemic started then dropped dramatically. I had 2 pots of money - one was already invested and its value dropped
The other had been in a high interest account which was now rubbish so I invested it in a Vanguard ISA which then gained over 20% in 6 months - which was nice!
But the one that dropped in value is now pretty much exactly where it would have been if it had never dropped
So - the point at last - you have to take a long view and not worry about short term changes.
I noticed today that my investment thing has dropped a fair bit over the last month - but over the last 12 months it has gained - and it'll rise again!
His pension pot had been taken out and invested via a IFA that specialises in retirement funds - he had just had a letter from them explaining that the value had just dropped significantly - but was expected to climb back up over the next few months
Which it did - but the OFA was worried about people panicking and cashing it in when the market was low
You have to remember that when you invest in shares etc then you only loose or gain if you sell - until then it is just a thing - like a painting on a wall - it has a value now - and it will have a value in a year's time - and in 10 years time. The value is only relevant when you buy or sell
If you look at the value of investments when the pandemic started then dropped dramatically. I had 2 pots of money - one was already invested and its value dropped
The other had been in a high interest account which was now rubbish so I invested it in a Vanguard ISA which then gained over 20% in 6 months - which was nice!
But the one that dropped in value is now pretty much exactly where it would have been if it had never dropped
So - the point at last - you have to take a long view and not worry about short term changes.
I noticed today that my investment thing has dropped a fair bit over the last month - but over the last 12 months it has gained - and it'll rise again!
DCLane
Found in the Yorkshire hills ...
- Location
- Dewsbury, West Yorkshire
Lots of public sector pensions are doing this; SWMBO is NHS and I'm in the Teacher's Pension
Basically, following a ruling due to the Firefighters union challenging career average pensions, you get two options of final salary / career average. It also depends on your age and when you joined. The choice is made at retirement.
midlife
Guru
Thanks, never knew about the firefighter thing. re read it and it does seem to give you a choice but the choice changes after October 2023. I have a colleague at work who is very pension savvy so will have a chat. Much cheaper than involving the BMA!
Yes, we're being moved to the 2015 scheme but the service to the transfer date as I understand is protected?
midlife
Guru
Hope so, I've got 38.5 years accrued in the old scheme....
