How big should my pension pot be?

[Missingbadly]

It will pay for a decent Indian takeaway a month. If I stuck the money in the bank it would pay for the same for 25 years so only after 90 will I be gaining from the pension. In the meantime though I can't use the pension or leave it to anybody or choose what I do.
By 90 I'll need it puréed anyway

[Sheepshanks]

nct001 said:

All that for £70 a week rent, I'm being kind as in 2002 we were talking £55 a week.

Where, and what sort of property, rents for £70/wk? Surely rents all gravitate to the local housing allowance levels?

[Sheepshanks]

andrewh said:

I'd buy in a reasonable student area and rent 3/4 rooms out, maybe cheap conversion into multiple rooms, although these property's tend to start around the £120k mark, reasonable owner occupier demand also from city workers/couples.

Have you looked at doing that?

I did when my kids went to uni, and friends went ahead and bought places primarily for their own kids, with mixed results. I found (I looked at Nottingham and Birmingham) that the rental potential was fully priced in, even on unconverted property, so they looked very expensive. The other thing is that uni's were starting to talk about expanding their own halls, and that does seem to be happening.

[DSLiverpool]

SkinnyPete said:

I wouldn't be the first to ask this, but increase pension payments or overpay the mortgage?

I overpaid the mortgage and at 50 no mortgage in my final house (may go smaller not bigger) - I intend to take my opens ion in cash as tax effectively as possible and blow it.

[Sheepshanks]

Stevemr said:

I am talking about 90K houses in reasonable areas in west yorkshire, which rent out at around 450 - 475.

I'm amazed they're still available. Near me in the north-west 3 bed terrace will rent for £750/mth and for the last few years that's put a floor under the price of £150K - the once private estate my daughter lives on seems to be mainly rentals now.

Stevemr said:

Everyone I know with small property portfolios is happy with them.

Some of the people I know doing it don't seem to care about money as they're doing deals which don't make an awful lot of sense. Odd really - they say things like they're in it for the long term etc. Who knows - perhaps in 20 or 30 years they'll be in great shape?

[Welshbeef]

Very interested in this as I participate in both B2L and pensions.

The thing is If you are in 20's or heck mid 30's you could B2L then you retire @65 B2L totally paid off (unless you take the cash early in which case they will not be debt free).


From my naive understanding the avaerage UK pension pot is £30k that's £600-£1.2k pa from 65.... Fucjk all.
Let's at you want an average UK "salary" as pension £26k that's what a pension pot of what £860k.
Now let's say you work for 40 years and lets naively assume zero growth that means you need to invest £21,500per year aand you'd have to live until 98 just to get all the cash out/be ahead.


Is it sensible? I'd say many pensions are 50% funded by employer so that £21.5k is now £10.5k or £895pcm. Growth? How much is that worth? Even its its worth a further half the you need to chip in !£5+k pa for life. How many people can afford to do that? Hardly any.

So on state pension should be £7.5-8k so you "only" need£18k lets cl it £4k pa contribution for 40years....


Or Buy to let? The thing with buy to let even if it doesn't work out for you you can gift it to your kids so they can have a good start in life even if you didn't have that benefit.

[ringram]

Rule of thumb is 30x your required income

(eg) £25k you need £750k dont forget you can eat into capital as the aim is to hit zero the instant you die

If you dont want all your cash then add more on top to give to lazy offspring etc.

[Welshbeef]

ringram said:

Rule of thumb is 30x your required income

(eg) £25k you need £750k dont forget you can eat into capital as the aim is to hit zero the instant you die

If you dont want all your cash then add more on top to give to lazy offspring etc.

Isn't the pension pot cap in the order of £1.5m if so the max pension you could ever achieve is £50k - however I have relatives who do take home in the order of £80-100k (guess must be before the limits were brought down).

[Ultraviolet]

Welshbeef said:

Isn't the pension pot cap in the order of £1.5m if so the max pension you could ever achieve is £50k - however I have relatives who do take home in the order of £80-100k (guess must be before the limits were brought down).

The pension cap is £1.25m.. I'm not sure where this 5% return has come from though? The pension can remain invested in pretty much anything (including commercial, but not residential property). So the return is anything you can make it. You could invest in private equity and get 10x money (I have seen this happen on a couple of occasions with people who are willing to invest a small percentage in high risk areas as part of a balanced portfolio). You could leave it in funds or equities and and take an income.

B2l certainly has it's place, but as others have said, 1. it's just another asset 2. It doesn't have the significant tax benefits of a pension 3. It is not risk free...

Uv

[Riff Raff]

Ultraviolet said:

Welshbeef said:

Isn't the pension pot cap in the order of £1.5m if so the max pension you could ever achieve is £50k - however I have relatives who do take home in the order of £80-100k (guess must be before the limits were brought down).

The pension cap is £1.25m.. I'm not sure where this 5% return has come from though? The pension can remain invested in pretty much anything (including commercial, but not residential property). So the return is anything you can make it. You could invest in private equity and get 10x money (I have seen this happen on a couple of occasions with people who are willing to invest a small percentage in high risk areas as part of a balanced portfolio). You could leave it in funds or equities and and take an income.

B2l certainly has it's place, but as others have said, 1. it's just another asset 2. It doesn't have the significant tax benefits of a pension 3. It is not risk free...

Uv

The Lifetime Allowance is £1.25m - that doesn't mean to say you can't have a bigger pot than that - you just have to pay tax on the excess.

Edited to add a link to the Gubbinment webpage....

https://www.gov.uk/tax-on-your-private-pension/lif...

Edited by Riff Raff on Sunday 1st February 10:35

[Welshbeef]

Riff Raff said:

The Lifetime Allowance is £1.25m - that doesn't mean to say you can't have a bigger pot than that - you just have to pay tax on the excess.

Edited to add a link to the Gubbinment webpage....

https://www.gov.uk/tax-on-your-private-pension/lif...

Edited by Riff Raff on Sunday 1st February 10:35

If you have final salary pensions then want to pay in £1.25m into a pot is that permitted or do they calculate what the FS funds are worth and restrict the limit

[nct001]

Sheepshanks said:

nct001 said:

All that for £70 a week rent, I'm being kind as in 2002 we were talking £55 a week.

Where, and what sort of property, rents for £70/wk? Surely rents all gravitate to the local housing allowance levels?

http://www.rightmove.co.uk/property-to-rent/property-33295974.html

http://www.rightmove.co.uk/property-to-rent/proper...

This one has just been refurbished...

http://www.rightmove.co.uk/property-to-rent/proper...

House is worth over £10k less today than 13 years ago, not including necessary renovation.

Not all property goes up in value.

[Ultraviolet]

Riff Raff said:

The Lifetime Allowance is £1.25m - that doesn't mean to say you can't have a bigger pot than that - you just have to pay tax on the excess.

Edited to add a link to the Gubbinment webpage....

https://www.gov.uk/tax-on-your-private-pension/lif...

Edited by Riff Raff on Sunday 1st February 10:35

And the tax is due only where there is a 'crystallisation event' (ie you start to draw down or take the tax free amount). Up until that point, you can keep reinvesting the tax money and take, in essence, 50% of the return on that also...

[Welshbeef]

nct001 said:

http://www.rightmove.co.uk/property-to-rent/proper...

http://www.rightmove.co.uk/property-to-rent/proper...

This one has just been refurbished...

http://www.rightmove.co.uk/property-to-rent/proper...

House is worth over £10k less today than 13 years ago, not including necessary renovation.

Not all property goes up in value.

However 13 years on and likely 50% through paying off the mortgage paid for by the tennants. Often overlooked when doing the above review.
Of course if you've been just spending the cash so be it (you should be paying off you're residential mortgage with the tenants rent

[Riff Raff]

Welshbeef said:

If you have final salary pensions then want to pay in £1.25m into a pot is that permitted or do they calculate what the FS funds are worth and restrict the limit

They aggregate all your funds, if that was the question. As UV said though, the tax issues start to bite once you start to drawdown.

If you have multiple pensions, it's probably worth talking to a good pensions advisor.

One other thing to bear in mind, although it's obvious, if you are married, your spouse can build up a pot equal to yours. And transfers between husband and wife don't have nasty tax consequences in the main. So, in our case the objective we had was to end up with two funds roughly equal in size, and two pensions paid taking full advantage of personal allowances and CGT exemptions.

[Welshbeef]

Riff Raff said:

They aggregate all your funds, if that was the question. As UV said though, the tax issues start to bite once you start to drawdown.

If you have multiple pensions, it's probably worth talking to a good pensions advisor.

One other thing to bear in mind, although it's obvious, if you are married, your spouse can build up a pot equal to yours. And transfers between husband and wife don't have nasty tax consequences in the main. So, in our case the objective we had was to end up with two funds roughly equal in size, and two pensions paid taking full advantage of personal allowances and CGT exemptions.

Good advice (though I'm about 30 years away). My Inlaws might find this info of use to maximise the tax efficiency

[Ultraviolet]

Riff Raff said:

And transfers between husband and wife don't have nasty tax consequences in the main.

Any thoughts on how this can happen in practice? There's a possibility I might breach the LTA but was advised that the wife would have to make an equal contribution to the fund in order for half to be transferred to her.. In other words, she would have to 'buy' half my fund in order for it to be transferred without having a tax implication. Is this your understanding also?

[croyde]

That pension calculator on the first page is depressing. Even making major increases on what I currently pay monthly, and have done for 30 years, makes very little difference to my pension in 14 years time.

Basically I'm fooked.

[Salterns]

croyde said:

That pension calculator on the first page is depressing. Even making major increases on what I currently pay monthly, and have done for 30 years, makes very little difference to my pension in 14 years time.

Basically I'm fooked.

I'm in the same boat, the calculator says I need to increase my monthly payments from £450 to £2500 for a pension 40% less than I'm earning now. I could afford to do that if I wanted but I think theres a good chance I will a. die before I retire or B. find government move the goal posts possibly means testing pensions to stop anyone claiming the state pension who's saved. So I'm leaving things as they are.

[wisbech]

The way I look at it, you work for 40 years, retire for 20.

So you need to save 1/3 of your income to smooth things out. As the govt does some of the saving for you (via tax and pension benefits) you can probably drop this to 20%. Can be invested in pensions/ BTL/ whatever

Saving less than that and you risk a big drop in spending when you retire.