Retirement income

[Tit For Tat]

drainbrain said:

Yes there certainly are. And yes www.mrmoneymustache.com can show you just how much of a difference a bit of discipline can make. And yes pensions offer decent tax incentives (even if it's theoretical till you're 55).

But they require you to have the money to invest in the first place which, as I'm trying to explain to you, doesn't exist for many. And the paltry sum they CAN invest (and I don't mean a couple of months a year I mean EVERY month for decades, which is another story) regardless of the %age uplifts and earnings doesn't amount to anything meaningful. Which doesn't stop some people, but definitely puts off others.

In your theory 5% of wages is tucked away. So take the example of someone on £24k a year. (millions, btw, don't come anywhere near that). So £80+ a month. + uplift to £100. For 40 years. At 4%.compounding. = £118k pot. = what? £5kpa if you're lucky? Maybe considerably less if it comes with a bell or whistle or two. Not saying it's not something, because it very is. But (see op) if the average retirement income is £18k inc state pension, your theory is probably already being enacted by those hardy individuals on lower wages who're disciplining themselves to save a bit.

Now you tell me what monthly contribution it takes at 4% growth to reach £20k pa. Which with £8k state pension on top is the figure where comfy retirement begins. Then tell me if you think that's a realistic monthly ask from an average or below wage earner with the average expenditure on basics/essentials/contingencies/TINY luxuries that people have these days.

If the return was only 4% a year, then you would have a point. But 4% is extremely pessimistic. Sure returns will go up and down, but over 40 years, you could probably achieve a 4% return just investing in cash.

My SIPP fund for example achieved growth of 19.8% over the last 12 months. Some others will have achieved more. You are badly underestimating pension fund growth rates.

[TooMany2cvs]

Tit For Tat said:

If the return was only 4% a year, then you would have a point. But 4% is extremely pessimistic. Sure returns will go up and down, but over 40 years, you could probably achieve a 4% return just investing in cash.

My SIPP fund for example achieved growth of 19.8% over the last 12 months. Some others will have achieved more. You are badly underestimating pension fund growth rates.

And that, of course, is the big elephant in the "pension or not" room.

A "pension" is just a tax wrapper around an investment. Sure, it's a really good tax wrapper, but that's all it is. If that investment is a poor one, then you're not going to get much growth - or even a loss.

[drainbrain]

CoolHands said:

28k is far more than 'comfy'

Ok. Won't disagree.

So what do you think of the £18kpa for retirement income as per the op ?

Would you say that was, say, 'reasonable'?

And if £18k is 'reasonable' and £28k is, say, 'good' then would, say, £40k or £50k be considered as 'excellent' retirement income?

Remember these are gross figures and aren't necessarily from pensions only, although are assuming a state pension income of £8kpa.

[Ginge R]

Trexthedinosaur said:

And for those who can only just manage to scrape by on minimum wage?

Where will this 5% come from? A pay rise? Who will fund that? The cost of the service / product goes up and then we all have to find the extra 5% ...

People need to be taught, in school, the importance of financial responsibility and not go out and finance a Tag, white Audi and 55'' TV over 7 years.

Fascinating stuff. Gut instinct about teaching financial capability in schools? A waste of time. Financial behaviour is probably more in our genes, and our life experiences. Life expectancy was always short compared to now, and more recently, last century, we had two world wars. It's understandable that a certain hedonism has always played a part - we simply do not conceive living to old age.

We are conflicted too, by the purpose of the 'pension'. Initially, it was a bribe to leave work, and only fifty years or so ago, it became the means to golf in linen shirts at 50. Now, though, we're in the third age - and the message being sent out is not conducive to saving. Constant meddling, huge boosts in the consumerist message, political uncertainty.. 'why bother'?

So, 'eat, drink and be merry, for tomorrow we may die' is an appealing ideology. Ask any Spitfire pilot. But we are also slaves to our minds. Max Power magazine had a Max Driver training programme, something aimed at younger males who died, pro rata, in far greater numbers than any other demographic. What causes it?

Referred to as temporal myopia or hyperbolic discounting, we're slaves to evolution. Instead of inspiring caution (as you might think) in the event we cannot see too far ahead, our brain's response to uncertainty is to sharply reduce the importance of the far future in decision-making and, consequently, increase risk taking in the near term.

Gordon Brown rebranding debt as credit and making it sexy didn't help, either.

https://en.m.wikipedia.org/wiki/Hyperbolic_discoun...

[red_slr]

Tit For Tat said:

If the return was only 4% a year, then you would have a point. But 4% is extremely pessimistic. Sure returns will go up and down, but over 40 years, you could probably achieve a 4% return just investing in cash.

My SIPP fund for example achieved growth of 19.8% over the last 12 months. Some others will have achieved more. You are badly underestimating pension fund growth rates.

Not really there have been many studies that have shown historical returns somewhere around 8-9% and inflation is historically around 4%.

If you really want to dig into the numbers look at firecalc

[DonkeyApple]

Ginge R said:

Fascinating stuff. Gut instinct about teaching financial capability in schools? A waste of time. Financial behaviour is probably more in our genes, and our life experiences. Life expectancy was always short compared to now, and more recently, last century, we had two world wars. It's understandable that a certain hedonism has always played a part - we simply do not conceive living to old age.

We are conflicted too, by the purpose of the 'pension'. Initially, it was a bribe to leave work, and only fifty years or so ago, it became the means to golf in linen shirts at 50. Now, though, we're in the third age - and the message being sent out is not conducive to saving. Constant meddling, huge boosts in the consumerist message, political uncertainty.. 'why bother'?

So, 'eat, drink and be merry, for tomorrow we may die' is an appealing ideology. Ask any Spitfire pilot. But we are also slaves to our minds. Max Power magazine had a Max Driver training programme, something aimed at younger males who died, pro rata, in far greater numbers than any other demographic. What causes it?

Referred to as temporal myopia or hyperbolic discounting, we're slaves to evolution. Instead of inspiring caution (as you might think) in the event we cannot see too far ahead, our brain's response to uncertainty is to sharply reduce the importance of the far future in decision-making and, consequently, increase risk taking in the near term.

Gordon Brown rebranding debt as credit and making it sexy didn't help, either.

https://en.m.wikipedia.org/wiki/Hyperbolic_discoun...

I tend to disagree re the teaching of finance.

All the prudent people I know come from prudent backgrounds, the excess consumers all seem to stem from backgrounds that either never saved or never had anything to save or never needed to save.

I agree that we have had 20 years of government rebranding debt as being something that people deserve and can just use however they wish without any negative implications and this has entrapped millions who were not educated otherwise by their families or schooling.

[Tit For Tat]

TooMany2cvs said:

And that, of course, is the big elephant in the "pension or not" room.

A "pension" is just a tax wrapper around an investment. Sure, it's a really good tax wrapper, but that's all it is. If that investment is a poor one, then you're not going to get much growth - or even a loss.

Do you have a degree in stating the bleedin' obvious?

[Tit For Tat]

red_slr said:

Not really there have been many studies that have shown historical returns somewhere around 8-9% and inflation is historically around 4%.

If you really want to dig into the numbers look at firecalc

Meaningless. Many choose cautious risk Pension funds . Nothing wrong with that, except that for a long term investment, you need to be a bit braver. Higher risk funds will over the long term give you a much better return.

[drainbrain]

Tit For Tat said:

Meaningless. Many choose cautious risk Pension funds . Nothing wrong with that, except that for a long term investment, you need to be a bit braver. Higher risk funds will over the long term give you a much better return.

Problem for many is that a long term higher risk investment in a pension tax wrapper creates great growth that doesn't crystallise for a long time. Or, put another way, it doesn't buy you very much at the shops. No white Audis or big TVs for you, then....not till you're a bit old to bother with them.

Many people are more attracted to an investment that generates spendable income (and continues to do so in retirement). Bit like having your cake and eating it.

IMO the future of retirement income will (and probably already does, especially for more 'ordinary' people) go far beyond dependance on the pension wrapper and/or optional financial instrument.

Edited by drainbrain on Sunday 9th July 11:15

[Prolex-UK]

Thats another way I suppose.

The other thing is to think about seeing a expert.

I am lucky in that my brother has a wealth management company and he is looking after my portfolio.

Went through it last week and am quite pleased as to the potential results.

With the obiligatory 3267 caveats of course

[sidicks]

Tit For Tat said:

TooMany2cvs said:

And that, of course, is the big elephant in the "pension or not" room.

A "pension" is just a tax wrapper around an investment. Sure, it's a really good tax wrapper, but that's all it is. If that investment is a poor one, then you're not going to get much growth - or even a loss.

Do you have a degree in stating the bleedin' obvious?

Unfortunately it needs to be stated repeatedly as there are numerous threads on here with people confusing the wrapper and the underlying investment!

[drainbrain]

Rather than have the thread derailed on a sour and patronising note, can I just say that it's about "retirement income". As such, the exactitude of anyone's knowledge of the terminology of pensions is irrelevant and unimportant.

Even if you haven't the first clue about pensions (and even if it's evident you don't understand the first thing about retirement income either) your comments are welcome. Hell, they may even be amusing!

[Tit For Tat]

drainbrain said:

Rather than have the thread derailed on a sour and patronising note, can I just say that it's about "retirement income". As such, the exactitude of anyone's knowledge of the terminology of pensions is irrelevant and unimportant.

Even if you haven't the first clue about pensions (and even if it's evident you don't understand the first thing about retirement income either) your comments are welcome. Hell, they may even be amusing!

Except that some of your own ill informed posts on the subject have exposed the danger of the uneducated pontificating on what is actually quite a technical subject.

[drainbrain]

Perhaps you could enlarge on that "danger"....

[Tit For Tat]

drainbrain said:

Perhaps you could enlarge on that "danger"....

Well in your case, you just make yourself sound like a complete tt.

[drainbrain]

((lol...'twit for tt' I believe was the phrase used on the other forum....(ouch)))

And how is me making a twit-for-tt of myself even remotely dangerous?

And really other than a bit of discussion about income in retirement and an attempt to steer the thread away from the usual unpleasant
direction it takes when an Ugly Sister appears, what have I said in the thread that merits the description of 'dangerous' or 'ill informed'?

[Tit For Tat]

drainbrain said:

((lol...'twit for tt' I believe was the phrase used on the other forum....(ouch)))

And how is me making a twit-for-tt of myself even remotely dangerous?

And really other than a bit of discussion about income in retirement and an attempt to steer the thread away from the usual unpleasant
direction it takes when an Ugly Sister appears, what have I said in the thread that merits the description of 'dangerous' or 'ill informed'?

Oh, not much. Only the fact that every post you make on the subject of pensions proves that you know naff all about pensions.

As for "dangerous", I was going to say because there is a danger someone might read some of the colossal pile of dog turd that you post, believe it to be true, and make a bad decision as a result.

But to be fair, you are right, that is actually pretty unlikely. They would need to be even more uneducated than you are.

[drainbrain]

Tit For Tat said:

Oh, not much. Only the fact that every post you make on the subject of pensions proves that you know naff all about pensions.

As for "dangerous", I was going to say because there is a danger someone might read some of the colossal pile of dog turd that you post, believe it to be true, and make a bad decision as a result.

But to be fair, you are right, that is actually pretty unlikely. They would need to be even more uneducated than you are.

Well, this might be tricky to grasp, but the thread isn't actually about pensions. It's about retirement income. The hint's in the title. And whilst pensions may be pertinent to the thread I was hoping you might have a wider reach on the subject of retirement income. Kinda getting the feeling that you're a pension fanboy. Am I wrong? Pensions or nothing?

And the 5% thing. Naaa. It's not a 'colossal pile of dog turd'. More a kind of tiny sheep pellet really. Made of the same material mind you...

And you STILL can't seem to shake off the tendency to ad homenism which really really won't do.

Come on. You know you can do better.

[DonkeyApple]

To be fair the thread is about retirement income of which pensions play an integral part for most but not all. In an ideal world you'd want to max your wrapper contributions but have alternate incomes in addition. For the majority of people in the U.K. the tax benefits of the wrapper do still make it by far the best way to save and generate the income though.

The problem with the pension industry though is that it has been littered with many lacklustre schemes where the supposed managers have sat back and relied on the tax benefits to synthesise the returns while extracting as much of the actual performance as fees. It is a market where consumers should have been far more attentive than they have been as should their trustees.

[Tit For Tat]

DonkeyApple said:

To be fair the thread is about retirement income of which pensions play an integral part for most but not all. In an ideal world you'd want to max your wrapper contributions but have alternate incomes in addition. For the majority of people in the U.K. the tax benefits of the wrapper do still make it by far the best way to save and generate the income though.

The problem with the pension industry though is that it has been littered with many lacklustre schemes where the supposed managers have sat back and relied on the tax benefits to synthesise the returns while extracting as much of the actual performance as fees. It is a market where consumers should have been far more attentive than they have been as should their trustees.

All true. Welcome to someone else who actually knows what they are talking about.