Should You Save or Spend?
Discussion
Welshbeef said:
djc206 said:
Welshbeef said:
Where does £500k five a £30k a year pension?
It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
Don’t buy an annuity then? Just draw down and it will give you significantly more than £10kpa.It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
If you draw down £30k a year from your “pot” in just under 16 years it would be empty ie 81 years old and having to survive on State pension only.
Welshbeef said:
Where does £500k five a £30k a year pension?
It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
Nonsense!It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
A flat £30k pension with 50% spouse's benefit would cost you around £600k.
An RPI-linked pension starting at £30k, with 50% spouse's benefit, would cost you around £1m.
djc206 said:
Of course I understand that. That’s not how it works though there would be some growth on what remains in pot so draw £30k out you still have £470k left, that grows by even a modest amount say 3% and you’re back up to £484.5k. It’s not as simple as dividing £500k by £30k and getting 16 years. Purchasing an annuity of £10k with a £500k pot would be about the most stupid thing you could ever do. I’m not saying draw £30k every year from a £500k pot but it will comfortably pay more than £10k.
Sorry yes I see your point. djc206 said:
Of course I understand that. That’s not how it works though there would be some growth on what remains in pot so draw £30k out you still have £470k left, that grows by even a modest amount say 3% and you’re back up to £484.5k. It’s not as simple as dividing £500k by £30k and getting 16 years. Purchasing an annuity of £10k with a £500k pot would be about the most stupid thing you could ever do. I’m not saying draw £30k every year from a £500k pot but it will comfortably pay more than £10k.
Only if you take investment risk, which could cause you to make capital losses.CrgT16 said:
Interesting thread...
I think the term saving is used in a way that makes you feel better but may not be the best option. I prefer to replace saving with investing.
So I “invest” in my pension pot. As someone said even with government tax relief annuity rates are not what they were years ago so perhaps it is useful to see if that saving or contributing more to your pension is actually the best in the long term.
I haven’t done the maths recently but using numbers provided here if £500000 pension pot can only buy an annuity of £30k then I can do better with my money and can make those £500k bring in at least £70k a year pre tax... so for me that kind of pension saving is not actually very clued at all!
Appreciate it is easier and safer but there are other ways. Saying that I should say everyone should save for a rainy day and have pension provision. For most the annuity route is the safe easier way but you are not getting best value for pound invested. But suits most people, others are happier to take more risks and perhaps make their pound go further. No right or wrong it’s what fits your personality and attitude towards risk.
For me makes no sense saving for the sake of it. Have 6-12 months for rainy day. After that “invest” your money... investing in a savings account today is quite poor, investing in your pension fund may be ok, then there are other more riskier ways. With cheap money as we have it now it is almost rude not to take advantage and reap the capital gains in 20 years time
I'm intrigued to know what you're investing the 500k in to at least get a 70k return onI think the term saving is used in a way that makes you feel better but may not be the best option. I prefer to replace saving with investing.
So I “invest” in my pension pot. As someone said even with government tax relief annuity rates are not what they were years ago so perhaps it is useful to see if that saving or contributing more to your pension is actually the best in the long term.
I haven’t done the maths recently but using numbers provided here if £500000 pension pot can only buy an annuity of £30k then I can do better with my money and can make those £500k bring in at least £70k a year pre tax... so for me that kind of pension saving is not actually very clued at all!
Appreciate it is easier and safer but there are other ways. Saying that I should say everyone should save for a rainy day and have pension provision. For most the annuity route is the safe easier way but you are not getting best value for pound invested. But suits most people, others are happier to take more risks and perhaps make their pound go further. No right or wrong it’s what fits your personality and attitude towards risk.
For me makes no sense saving for the sake of it. Have 6-12 months for rainy day. After that “invest” your money... investing in a savings account today is quite poor, investing in your pension fund may be ok, then there are other more riskier ways. With cheap money as we have it now it is almost rude not to take advantage and reap the capital gains in 20 years time
Pray tell
I'd be targeting about 8% and thats not without risk too
dingg said:
CrgT16 said:
Interesting thread...
I think the term saving is used in a way that makes you feel better but may not be the best option. I prefer to replace saving with investing.
So I “invest” in my pension pot. As someone said even with government tax relief annuity rates are not what they were years ago so perhaps it is useful to see if that saving or contributing more to your pension is actually the best in the long term.
I haven’t done the maths recently but using numbers provided here if £500000 pension pot can only buy an annuity of £30k then I can do better with my money and can make those £500k bring in at least £70k a year pre tax... so for me that kind of pension saving is not actually very clued at all!
Appreciate it is easier and safer but there are other ways. Saying that I should say everyone should save for a rainy day and have pension provision. For most the annuity route is the safe easier way but you are not getting best value for pound invested. But suits most people, others are happier to take more risks and perhaps make their pound go further. No right or wrong it’s what fits your personality and attitude towards risk.
For me makes no sense saving for the sake of it. Have 6-12 months for rainy day. After that “invest” your money... investing in a savings account today is quite poor, investing in your pension fund may be ok, then there are other more riskier ways. With cheap money as we have it now it is almost rude not to take advantage and reap the capital gains in 20 years time
I'm intrigued to know what you're investing the 500k in to at least get a 70k return onI think the term saving is used in a way that makes you feel better but may not be the best option. I prefer to replace saving with investing.
So I “invest” in my pension pot. As someone said even with government tax relief annuity rates are not what they were years ago so perhaps it is useful to see if that saving or contributing more to your pension is actually the best in the long term.
I haven’t done the maths recently but using numbers provided here if £500000 pension pot can only buy an annuity of £30k then I can do better with my money and can make those £500k bring in at least £70k a year pre tax... so for me that kind of pension saving is not actually very clued at all!
Appreciate it is easier and safer but there are other ways. Saying that I should say everyone should save for a rainy day and have pension provision. For most the annuity route is the safe easier way but you are not getting best value for pound invested. But suits most people, others are happier to take more risks and perhaps make their pound go further. No right or wrong it’s what fits your personality and attitude towards risk.
For me makes no sense saving for the sake of it. Have 6-12 months for rainy day. After that “invest” your money... investing in a savings account today is quite poor, investing in your pension fund may be ok, then there are other more riskier ways. With cheap money as we have it now it is almost rude not to take advantage and reap the capital gains in 20 years time
Pray tell
I'd be targeting about 8% and thats not without risk too
https://www.vanguardinvestor.co.uk/investments/van...
sidicks said:
Nonsense!
A flat £30k pension with 50% spouse's benefit would cost you around £600k.
An RPI-linked pension starting at £30k, with 50% spouse's benefit, would cost you around £1m.
Really? I’m just using the % from one of my private pensions. A flat £30k pension with 50% spouse's benefit would cost you around £600k.
An RPI-linked pension starting at £30k, with 50% spouse's benefit, would cost you around £1m.
Ie it states if xyz assumptions remain then the pension will be £XK and the pension pot would by £jk so divide that pension by the pot it gives 2% of the pension pot value.
I really do hope my pension statement is nonsense as that projected potand annual pension is just under the combined contributions I make each year.
Welshbeef said:
Really? I’m just using the % from one of my private pensions.
Ie it states if xyz assumptions remain then the pension will be £XK and the pension pot would by £jk so divide that pension by the pot it gives 2% of the pension pot value.
I really do hope my pension statement is nonsense as that projected potand annual pension is just under the combined contributions I make each year.
Don't know if your statement includes tax free cash or just poor annuity rates. Much better to look at current market annuity rates.Ie it states if xyz assumptions remain then the pension will be £XK and the pension pot would by £jk so divide that pension by the pot it gives 2% of the pension pot value.
I really do hope my pension statement is nonsense as that projected potand annual pension is just under the combined contributions I make each year.
DonkeyApple said:
This ignores the financing cost though which plays a key role and has fallen dramatically. If you take a boggo property in a boggo town and look at its price at 2006 and today there isn’t a huge difference. But the cost of funding the debt has plummeted making it more affordable. And that’s before considering thebmassive debasing of the currency it is being compared to.
The ‘need’ for two incomes is interesting as how much of that is down to wanting a larger property in a better location than maybe just one salary allows? There is definitely an element in this of people just wanting more than they are actually worth. And there is also the aspect that a lender does really like having two people on the hook for their loan.
On the flip side, lenders have reverted to the normal practice of seeking a credible deposit, having the loan repaid and pricing their debt against a customer’s actual ability to repay it. All actions that favour the saver and move the spender further away from the concept of home ownership but then that is a good thing as it makes the market more stable and safer.
I agree that beyond that property has gone up rapidly in value but that is purely a function of the increase in money supply. Increasing deposit requirements, restricting multiples and taxing BTL have all reduced that money supply markedly and for the better. This slows inflation. Enforcing AML laws on London brokers has also all but ended the flood of bent money into the premium residential market that for a long time had a hideous impact on the country as the ripple effect pushed up prices in the regions beyond what regional incomes could easily afford.
The next three big changes that will diminish purchasing power are the end to QE, the increasing of debt costs and also the dying off of the Boomers and the splitting of their estates between the taxman and siblings.
The latter is the really interesting one as you can predict quite accurately the rate of this die off and the supply of their properties into the open market. We may all be living longer but that doesn’t stop the rate of supply but just pushes it further out. Just like the massive increase in dying celebs that the media covered strongly this is a reflection of what we will see among the Boomers as a whole so we know that supply of family homes is going to begin increasing rapidly and has the potential to collapse the market at that level if there are not enough buyers to match demand with this supply. This is why we are in a sticky position with regards to building new family homes, we actually know that by the time we’ve started delivering that new supply the increase in supply of existing homes will be growing. And excess supply is what triggers crashes. And then you have the problem that incentivising the older to downsize puts pressure on the lower end of the market but that is an area where new supply is arguably needed.
^^^ This.The ‘need’ for two incomes is interesting as how much of that is down to wanting a larger property in a better location than maybe just one salary allows? There is definitely an element in this of people just wanting more than they are actually worth. And there is also the aspect that a lender does really like having two people on the hook for their loan.
On the flip side, lenders have reverted to the normal practice of seeking a credible deposit, having the loan repaid and pricing their debt against a customer’s actual ability to repay it. All actions that favour the saver and move the spender further away from the concept of home ownership but then that is a good thing as it makes the market more stable and safer.
I agree that beyond that property has gone up rapidly in value but that is purely a function of the increase in money supply. Increasing deposit requirements, restricting multiples and taxing BTL have all reduced that money supply markedly and for the better. This slows inflation. Enforcing AML laws on London brokers has also all but ended the flood of bent money into the premium residential market that for a long time had a hideous impact on the country as the ripple effect pushed up prices in the regions beyond what regional incomes could easily afford.
The next three big changes that will diminish purchasing power are the end to QE, the increasing of debt costs and also the dying off of the Boomers and the splitting of their estates between the taxman and siblings.
The latter is the really interesting one as you can predict quite accurately the rate of this die off and the supply of their properties into the open market. We may all be living longer but that doesn’t stop the rate of supply but just pushes it further out. Just like the massive increase in dying celebs that the media covered strongly this is a reflection of what we will see among the Boomers as a whole so we know that supply of family homes is going to begin increasing rapidly and has the potential to collapse the market at that level if there are not enough buyers to match demand with this supply. This is why we are in a sticky position with regards to building new family homes, we actually know that by the time we’ve started delivering that new supply the increase in supply of existing homes will be growing. And excess supply is what triggers crashes. And then you have the problem that incentivising the older to downsize puts pressure on the lower end of the market but that is an area where new supply is arguably needed.
I have two properties with mortgages still in place. Whilst I could pay both mortgages off today, it makes absolutely no financial sense right now. The interest is 20% of what I was paying a decade ago and I am making much more than this on the after tax returns of the invested cash.
So, as DonkeyApple says, there is not much difference in the price of the average property over the last 12 years but the cost of servicing the mortgage is vastly reduced. In my case property would have had to grow by 500% for the interest on a pro rata mortgage to be at the same level it was back then.
DonkeyApple said:
The next three big changes that will diminish purchasing power are the end to QE, the increasing of debt costs and also the dying off of the Boomers and the splitting of their estates between the taxman and siblings.
The latter is the really interesting one as you can predict quite accurately the rate of this die off and the supply of their properties into the open market. We may all be living longer but that doesn’t stop the rate of supply but just pushes it further out. Just like the massive increase in dying celebs that the media covered strongly this is a reflection of what we will see among the Boomers as a whole so we know that supply of family homes is going to begin increasing rapidly and has the potential to collapse the market at that level if there are not enough buyers to match demand with this supply. This is why we are in a sticky position with regards to building new family homes, we actually know that by the time we’ve started delivering that new supply the increase in supply of existing homes will be growing. And excess supply is what triggers crashes. And then you have the problem that incentivising the older to downsize puts pressure on the lower end of the market but that is an area where new supply is arguably needed.
Ok, so in the scenario above assuming we end up with a surplus of family homes perhaps it works in the favour of the younger generation to hold off buying a house (with a mortgage) - no?. The latter is the really interesting one as you can predict quite accurately the rate of this die off and the supply of their properties into the open market. We may all be living longer but that doesn’t stop the rate of supply but just pushes it further out. Just like the massive increase in dying celebs that the media covered strongly this is a reflection of what we will see among the Boomers as a whole so we know that supply of family homes is going to begin increasing rapidly and has the potential to collapse the market at that level if there are not enough buyers to match demand with this supply. This is why we are in a sticky position with regards to building new family homes, we actually know that by the time we’ve started delivering that new supply the increase in supply of existing homes will be growing. And excess supply is what triggers crashes. And then you have the problem that incentivising the older to downsize puts pressure on the lower end of the market but that is an area where new supply is arguably needed.
Wouldn't buying a house now with leverage put them at a risk of negative equity further ahead in the above scenario?
dingg said:
I'm intrigued to know what you're investing the 500k in to at least get a 70k return on
Pray tell
I'd be targeting about 8% and thats not without risk too
Well I stuck a chunk into this mob: Pray tell
I'd be targeting about 8% and thats not without risk too
https://www.dolphin-trust.com/investment/?lang=en
.....which has been producing 10-12% pa for "investors" for years and years now.
Here's a good one....it's the "experts" spouting disparaging remarks about Dolphin. Note as the years pass (and the returns continue) that the "experts" become quieter and quieter and eventually fall silent.
https://forums.moneysavingexpert.com/showthread.ph...
....and despite the bleatings from both sides, one simple boring fact remains. It produces 10% pa for investors.
Edited by joyless lobotomised parrot on Saturday 23 June 13:35
JaredVannett said:
Ok, so in the scenario above assuming we end up with a surplus of family homes perhaps it works in the favour of the younger generation to hold off buying a house (with a mortgage) - no?.
Wouldn't buying a house now with leverage put them at a risk of negative equity further ahead in the above scenario?
Might do. Might not. And that’s the joy of the dilemma. Ultimately you have to do what is right for you now as well as hopefully the future. Wouldn't buying a house now with leverage put them at a risk of negative equity further ahead in the above scenario?
But I imagine that many of the people who opt for the former won’t actually be saving for that delayed purchase but pissing everything up the wall and still have no means to buy in if the prices drop. 30% in ten years time.
The truth is that spenders will always find a justification to not save. ‘It might be cheaper tomorrow’, ‘I could get hit by a bus tomorrow’, ‘some youtube spanner claims he makes millions selling trading systems’, ‘my money is better invested renting depreciating assets’, ‘Who wants to be the richest man in the graveyard’, ‘I can get a better return in x’, ‘bamboo farms that don’t exist will make me a millionaire’ etc etc. All the calling cries of the chap who wouldn’t ever be in a position to buy if values halved anyway.
In reality life simply runs to a pretty consistent set of criteria and you can’t go far wrong from looking how economic migrants arrive with f
k all and end up with a good standard of living. It’s the one group in a society which has filtered out the spenders by leaving them behind and they all act as savers, working, saving, not spending, building deposits, buying a home, not wasting money, investing in the home, investing in the children’s education and finally having a retirement in a nice house and bhing that their kids all have too much money and don’t visit enough. 
djc206 said:
Welshbeef said:
djc206 said:
Welshbeef said:
Where does £500k five a £30k a year pension?
It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
Don’t buy an annuity then? Just draw down and it will give you significantly more than £10kpa.It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
If you draw down £30k a year from your “pot” in just under 16 years it would be empty ie 81 years old and having to survive on State pension only.
Edited for spelling and more subtlety
Edited by anonymous-user on Saturday 23 June 14:10
joyless lobotomised parrot said:
Well I stuck a chunk into this mob:
https://www.dolphin-trust.com/investment/?lang=en
.....which has been producing 10-12% pa for "investors" for years and years now.
Here's a good one....it's the "experts" spouting disparaging remarks about Dolphin. Note as the years pass (and the returns continue) that the "experts" become quieter and quieter and eventually fall silent.
https://forums.moneysavingexpert.com/showthread.ph...
....and despite the bleatings from both sides, one simple boring fact remains. It produces 10% pa for investors.
In a benign credit environment.https://www.dolphin-trust.com/investment/?lang=en
.....which has been producing 10-12% pa for "investors" for years and years now.
Here's a good one....it's the "experts" spouting disparaging remarks about Dolphin. Note as the years pass (and the returns continue) that the "experts" become quieter and quieter and eventually fall silent.
https://forums.moneysavingexpert.com/showthread.ph...
....and despite the bleatings from both sides, one simple boring fact remains. It produces 10% pa for investors.
Edited by joyless lobotomised parrot on Saturday 23 June 13:35
sidicks said:
dingg said:
I'm intrigued to know what you're investing the 500k in to at least get a 70k return on
Pray tell
I'd be targeting about 8% and thats not without risk too
Someone else confusing guaranteed income with massively risky investment!Pray tell
I'd be targeting about 8% and thats not without risk too
fwiw my s and s isa is up 40% in the past 12 months , but has been as high as 50% , but high risk seat of the pants volatility and risk involved with quite a hefty sum
Edited by dingg on Saturday 23 June 14:08
dingg said:
if you statement is about me - its wrong , if you're commenting on CrgT16's post its most likely right
fwiw my s and s isa is up 40% in the past 12 months , but has been as high as 50% , but high risk seat of the pants volatility and risk involved with quite a hefty sum
I'm agreeing with you, commenting on the post by CrgT16.fwiw my s and s isa is up 40% in the past 12 months , but has been as high as 50% , but high risk seat of the pants volatility and risk involved with quite a hefty sum
sidicks said:
Don't know if your statement includes tax free cash or just poor annuity rates. Much better to look at current market annuity rates.
I’ve just looked at this http://www.sharingpensions.co.uk/annuity_rates.htm
So basically to get £15k excl state pension and you want a partner 50% life then you need to be around the £300k territory.
Welshbeef said:
I’ve just looked at this
http://www.sharingpensions.co.uk/annuity_rates.htm
So basically to get £15k excl state pension and you want a partner 50% life then you need to be around the £300k territory.
Exactly the same as what I posted above...http://www.sharingpensions.co.uk/annuity_rates.htm
So basically to get £15k excl state pension and you want a partner 50% life then you need to be around the £300k territory.
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