Mr Pickles is back and this time he has £300,000 in his Personal Pension. Thanks as always for watching and do let me know if you have any questions or queries. All the very best!🙏
You have that a lot of that will dissappear in tax, retire with nothing and claim for everything we pay enough into the system get back out what you can.
Thank you. I don't look at annuity rates or tax free lumpsum but in my head I always think of a rough rule of thumb as 5k pa for every 100k in the pension pot. So a 250k pot gets you something just around the personal allowance, around 12.5k pa. Very useful and informative and for my pov supremely timely as always. Its like your video drops at exactly the right moment when I am contemplating a similar question.
Thanks and using percentages is a nice and simple way to call it in relation to sustainability dependent on the long term objectives. And thanks as always for watching, it’s very much appreciated. 👍
Synchronicity here as I have about £300,000 in pension pots and planning to retire soon as I just reached 66 years of age. I am aiming for as close as possible to £20,000 pa from my pension pots plus the State Pension on top. From what you were presenting, am I right in saying that a reasonable strategy is to transfer the pension pot money to a globally diversified investment fund that can be adjusted for risk tolerance over time? What is the correct name for such an investment fund? Any examples? Then, with that fund in place, draw down my required pension income from that fund on a monthly basis? Also, as I understood it, at some point into retirement we might consider switching into an Annuity or Fixed Income fund to minimise volatility? As an aside, I also have about £300,000 in Bitcoin. I was thinking of cashing 50% of it out to put into a retirement investment fund. However, I am now thinking that I should just continue to hold the Bitcoin as a Hedge against future unknown economic events. Also, I can use it occasionally to cash out a little money for one-off expenses. Eg. New car, holidays, house maintenance, etc. Of course, all bets may be off if Keir Stalin has his way!
Thanks for the comment. That is the consensus view but I’ve not seen much proof of this when using the open market. And with all consensus views it demands to be challenged.
I don't think annuities are a poor mathematical decision. I believe they are statistically designed to offer a fair return and there are a myriad of competing providers to assure this. What IS a potential risk with annuities is (and this might be your point) that once taken they are inflexible and subsequently one might feel that it would have been better leaving the pot untapped in that manner. As I understand it.
I did that and obsessed about it I retired at 57 and should have gone earlier. I was way too conservative. It’s amazing how little you can spend if you want to on normal things and also how much of your spending you did because you were at work. We spend most of our money on holidays and fun. Do it is my advice.
@alanbrooks4718 My wife and I are very fortunate (although we work hard in stressful jobs) in that we earn very good money. I keep watching this type of stuff worring if £3k net income pm will be enough? That's a huge loss of income.....We are looking to downsize as we won't need the 5 bed house were in and do lots more travelling. We will be mortgage free. All our boys are adults and sorted. We have grand kids but plan on spending as much time travelling and relaxing whilst we can. We have very healthy savings and investments as backup. I had a TIA recently it was a big wake-up call.......
Keep it up, more knowledge more chance you will end up with an easier retirement overall. i finished at 61 a couple of years ago and apart from the odd bigger expense i havnt regretted any decision that i made earlier. i invest my own in a sipp and feel completely in control. 48 months til government pension kicks in, so we are getting closer to that and another big moment where my personal finances get a major lift.
@rogergriffiths207 we will be dropping from net 7k pm to 3k which is a bit nerve wracking but we will be mortgage free and down sizing as we won't need our 5 bed house and all the expense it brings. Our friends retired on similar monthly pensions and have spent 11 of the last 14 months in different countries on the beach. Our plan is to join them/ travel as much as possible with no need to work. 55 weeks 4 days to go 👍
@@GiveItaGoas you downsize you you get spare money so you may end up with more than 3k monthly. 7k to 3k is more than 50% drop and it is recommended you have minimum 50% or more to maintain lifestyle
But real life suggests, and I have seen this with my parents and in-laws, is that your spending reduces as you age. In early retirement, they travelled, spent money on the house, but this gets less. My advisor told me of this. So you don’t need the same income every year. All depends on health etc. would be interesting to see a tapered example.
@@davidpearson243 luckily for me, I am a natural minimalist; it's my nature to live a rather monk like life. I even sleep on the floor (though, at the moment I do have the extravagance of running an old, not really necessary, car). I will start to get my state pension in Sept.
I think its about being flexible in retirement, keep your higher growth conviction stocks but if they have a bad year or 2 cut back on spending to preserve the pot until it recovers as it always does given a few years
Great Video. I have about 5 years until retirement, so absolutely maximizing my pension allowances. I suspect that the 25% tax free is gonna be reduced or scrapped all together in future by Labour should they get in. Pensions for the better off, will be targeted for sure.
Thanks for the kind words and comment! Pensions make up almost half of the net worth of the UK so absolutely government will certainly have an eye on them for additional charges/taxation.
Tories had already decided to freeze the 25% allowance limit at £268k, this will just continue under Labour. They won't get rid of it, they don't need to.
Pensions for the better off were already targeted by the Tories when they dropped the LTA from £1.8m to £1m. Sure, they scrapped it very recently, but for a long time there was a punitive tax rate for people who had saved over £1m in pensions, possibly by sacrificing earlier in their life. I expect the 25% tax free amount will be frozen for a long time, or even reduced to 20% or 15% (in which case I wouldn't take a tax free lump sum if I could avoid it, hoping it would rise again one day).
I am thinking state pension only after aged 80 is fine surely. How many folk in 80s do a lot. I don’t want to miss out on travel etc in early retirement when fitter.
No, they are saying the state pension at age 80 should be sufficient. Not sure, but a little more would help. Agree with the idea of front loading your expenditure. You do need less as you get older. Seen it first hand
Money is great to have in retirement but the problem is your health won't be great for 80% of people, then it's no good to you also that's if you live that long .
Yes he could outlive his draw down pension, but his state will continue. One way to look at that is spending your draw down whilst you are young and can enjoy it, you never know what tomorrow brings.
The PLSA figures are scaring people so unnecessarily. People take them as gospel and don';t seem to smell a rat when their recommendations are higher than some are currently earning ! If you survive without that amount of salary, why would you not be able to when retired ?! I heard on a finance radio programme that the PLSA figures are calculated by simply asking people who are no where near that age, what they would like to be able to do when they retire - essentially asking people for their hopes and dreams and not their realistic aspirations. It's no wonder the figures are so high !
I think you need to £2000 per month (net) to live as a couple (no mortgage or rent) to live a basic lifestyle if you want “ experiences” then add about another £1000 per month to the budget
imagine paying into a pension that u get taxed on and already taxed when u put money into the pension lol open up a stocks and shares isa and do it yourself tax free, the money the government put in when u retire gets taken back when u retire
@@AzzieTheGamerr You only get taxed once. As long as you are not paying in more than around £60k per year (UK) into your pension then you do not get taxed on it. If I get a £1000 bonus at work (in my salary) and take it as money then I will see roughly £600 as I am a higher rate tax payer (40%). If that bonus goes into my pension then the full £1000 will go in. Then when I come to retire I will get 25% back tax free (if Labour don't mess that up) and then I will be taxed at 20% on the rest as I will not be earning enough to push me into the higher tax bracket.
Really helpful video. I think I am correct in saying fixed term annuity providers will not offer enhanced annuity rates for applications with existing health conditions
Any pension drawn from investing is an assumption of what could happen based on the past, as no one can predict the future. I think the important point is the lump sum? and what you do with it, if you spend it all, then you are giving away your security. I think at least 1 year pension money should be ring fenced in a separate interest bearing bank account in case the brown stuff hits the fan and some or all of your investments fail to pay out. Who could have foreseen the pandemic, and the reaction of the government preventing financial institutions from paying a dividend. Then the choice is yours either to cut back or take out of your ring fenced bank account to take you through. Remember It is not the income you have coming in, it is what you spend is the problem that many find themselves in the inability to moderate their expenditure.
Certainly having sufficient in reserve of cash and liquidity will be hugely important and dependent on the individuals asset position, risk and their capacity for loss. The cash allocation will vary whether 1-3 years of expenses plus an emergency/buffer is typical.
Seems like you forgot to mention that if the company that supports the annuity goes out of business then the annuity goes to zero. AGI almost bit the dust.
Thanks for the comment. An appropriate annuity is a contract of long term insurance and is covered by the FSCS for 100% with no upper limit. Not sure what AGI is… sorry.
This is an excellent presentation, which I came across quite by chance. It is explained extremely well. I really like the charts, how the presenter used and explained the various scenarios. I certainly learned a lot and, clearly, the presenter knows this area very well. Thank you.
Could you please discuss the inheritance perspective of personal pensions? For example passing on the pension pot to next of kind, either in its entirety or partially upon death. Thank you.
What’s to explain, just put there name on it for when you die and it gets transferred to them. The provider deducts the income tax at source. Who ever deals with your estate will then hand it over. Case closed
Why try to preserve a pot till you are 90, most people don’t make it, you need to enjoy retirement through better health th 65-85, instead of saving for a retirement home, sad attitude. £225,000 example at 5% interest would give you £12,000 drawdown on interest only, maintaining your pot, take a bit more for a few luxuries and your pot will still last. Don’t be fooled into an annuity where the finance companies just give you your interest made, and keep the pot when you die. And you still have the 25% Tax free (75,000) in your pocket.
Thanks for the comment. Interestingly most individuals underestimate how long they will live for. If aged 66 now, there is a 1 in 4 chance of living to 92 and 1 in 10 chance of living to 96. The example you give is fine if you are comfortable with c £22.7k pa gross and not adjusting for inflation.
Another example, you are diagnosed with a terminal illness, you can increase your drawdown ( pot dependent) to pay for private care at home, and compensate any family who help. With annuity you are stuck in a contract at a fixed amount, even if it rises by a paltry amount with inflation built in.
I agree - assuming a fixed level of expenditure (adjusted for inflation) in retirement is a huge mistake. People should be aiming to spend the majority of their money while they are still most likely to have their health - it makes zero sense to allocate huge amounts of money to later years when there is likely very little benefit to be had and this over cautious approach just serves to unnecessarily delay retirement for many. A realistic model would likely have three phases - go go, go slow then no go.
@@daveharruk Yea, i couldnt agree more, also these days, retirement isnt the cliff edge is used to be. No reason why you cannot be doing something part to bring in 'pocket money' to cover the shortfall between now and when you get the state pension for example
@@EdmundBaileyUK I don’t know many 86 - 92 year olds that need as much money as when they were 60 - 75. No overseas holidays or buying fads, so less income needed. I certainly plan to go big for the first 15 years of retirement. Then sit back and watch my vegetables grow.
Could you do a video touching on Strathclyde pension scheme combined with AVCs additional voluntary contributions for those unaware my AVCs are with prudential but there no videos out there see lot pension wise AVCs stuff which I guess work similar at 19 year pension stage think pension worth about £11.000 per year at the moment but normally goes up £1000 per year or least my projection retirement pension pot does.
Edmund I’m trying to understand if the annual ufpls would better than drawdown if you plan to use up all the pot, since any growth in crystallised funds is taxable right?……. Is this significant?? Thank you David
Hi. UFPLS will be the same net outcome as DD in terms of tax if the same is taken out of the pension over the course of the tax year. £10k as an UFPLS will be the same as £10k as drawdown in regards to tax.
@@EdmundBaileyUK Thank you Edmund what about over 20 or 30 years ? Say if Mr Pickles has 300k. Assuming all tax allowances used by state pension for simplicity. He wants 10k per year so he could take 10k each year as drawdown (Crystalising 30k per year, until 25% tax free used up). Would he pay the same tax over 30 years as if he took an annual ufpls of 2.5k plus 7.5k (paying 1,500 in tax). ? Sorry rough figures but you can see where I’m going.
I agree that the Which figures are way more realistic than the PLSA figures. The Which figures are more in tune with average wages if you factor in that once retired your not paying a mortgage and smaller / none pension payments. My preferred route is Annuity over Drawdown particularly as i had a Gauranteed Annuity Rate. For a pot of just over half your £300,000 i am getting a comparable annuity pension to the one you have given though i did not take the tax free cash. With more people ending up in care homes the cost of which is staggeringly high i wonder if there is a way of doing a calculation of the average care home costs and how long your pension will last. There are horror tales of many people paying £1000+ a week and once all assets are sold and the cash is exhausted they have to move out into lesser accommodation. The figures used in this video would see Mr Pickles burning through his funds a lot quicker if he were in a care home.
@@AgileSnowWeasel its probably single life flat rate (does not increase each year) and no minimum Gauranteed term and no cash lump sum. On those terms with a 120,000 pot i could have had just over a 10k pension however i took an escalating pension with a 5 year guarantee. As its got a GAR its nigh on two thirds more than without a GAR.
Good video, I like to see how the models work. Also I like to read comments from people who are actually retired, stating how much income you really need. Personally it gives me comfort that at 53 I am completely sorted financially for retirement (between my wife and I we have £1.6m in DC pensions and investments) and can retire at 55 if I choose. I will wait until I am 56 as our son will still be in sixth form until then and I really can’t see the point in retiring until he finishes school and is old enough to be independent. Being retired while still needing to do school runs during term time seems a bit pointless when for us retirement is about freedom to travel.
Really?! Inflation used is 2.5% and mid rate growth is 5% net (real return of 2.5%) along with a low rate at 2% and high of 6%. Should all be pretty clear in the video.
Also have you got any videos on ISAs reading bank information just make simple things sound confusing so if I put 20k in 2022 and in 2023 can I stick that 20k into 2023 pot so that keeps gettin new interest rate
Sounds like to wish to action an ISA *transfer*. Perfectly possible but you must do it by asking the provider you want to move them money to make the arrangements. They will then ensure the money is moved over but it retains the 0% tax status of the funds and doesn't count towards the £20k limit of the current tax year. It's not the fastest process in my experience but it's pretty trouble free. What you absolutely must *not* do is try and move the money yourself by withdrawing it and then paying it into your new ISA yourself.
@@dabe1971 but can you do with same provider and get interest on full pot for following year or do you just get the decent interest rate on the new 20k you save every year then once years up ur matured 20k joins yer other 20k in a lower isa pot no one or no bank explains that properly why so confusing.
@@TROZJANsome banks have an introductory bonus rate for a year, is that what you mean? It should be applied to the account, not dependent on it having to be "new ISA money" to be eligible for the rate. So yes, if you open a new ISA account which now has the 1 year introductory bonus on it, you should then be able to transfer your old ISAs into it to get the new rate. You should check with your own bank, but this is what I've done in the past with Barclays, in fact they suggested it to me! It wasn't just applied to the money I put in that year. Ensure you request a formal ISA transfer of your old ISA to ensure it keeps its tax free status.
@@papiyarussell5630 no I mean if I save 20k in a year at 4% where does that cash pot go to if there 4% interest the following year on the new yearly rates does the 20k I’ve already saved go into a crappy pot with lower interest rates or can I put that 20k into next years 4% and eventually add another 20k for the new year taking me up to 40k on the new interest rates for the year. Or do I have 2 separate pots one for previous saving gaining lower interest and a pot for new years interest rates no bank properly explains it, they do mention after it matures it goes into different isa at lower rate but doesn’t say if I can do anything else with it. If it is stuck in crappy interest pot can I not just transfer to different bank every year with full pot full allowance hopefully free of charge.
I'm 60 still working as a higher rate tax payer, and would expect to not retire until at least 65. I'm looking to max out the annual allowance of upto £60k salary sacrifice. As I understand I can continue to take 25% of the growing pension (different pots) upto a max of £268k through periodic tax free draw downs. In that time I would subsist on the draw down money, i know there are recycling rules if you put the draw down straight back in the pension, but thats not my intention and I would keep these sums separate ie the salary sacrifice is direct form earnings. is this viable?
Oh wow that is an entire subject and area of planning in its own right and incredibly difficult but not impossible to quantify. A primary issue can be allocating significant capital and resources to it in advance they may never be required.
I kind of see the point of all this deep analysis, but surely you just live to your means using common sense. I know its not so common though. If you have a 300k pot, youre not gonna be taking 50k a year. Or Mr Pickle will be in a pickle.
You say that, but some people go a bit bezerk when given access to a drawdown pot, and they end up in a situation most would not relish. IIRC drawdown pot rates were averaging 8%? That means some are taking a lot more.
@@AgileSnowWeasel That doesn't surprise me in the least. Humans never cease to amaze me in the crazy things they do. I know someone who is the exact opposite. He actually won the one million pound UK guaranteed part of Euro millions, he's 62 years old and will not spend a single penny of it. Jeez, the man has even bought a bus pass as taxis are too expensive. He will die with that in the bank , 100%.
But it is difficult to know how much you need. At the start, with better health, you will do and spend more. It then reduces as you age. No one knows how healthy or how long they will live. You want to maximise what you have. On your death bed you ain’t going to think how happy you are that you didn’t spend and now have a big pension pot left!
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Next time can you do a video on Mr Pickles and his husband , Mr Pickles. I find your videos very binary and out of touch with today's society. :)))). Great info as always.
Thanks for the comment. Unfortunately the annuity has a number of downsides that flexi access drawdown does not, death benefits and flexibility. Annuity will not be appropriate for everyone. But interesting to read a comment that is pro annuity... that is rare!
@@EdmundBaileyUK I get what you're saying, but annuity rates have improved recently and many people will have enhanced rates due to health issues. Also the 'death benefit' tax loophole will most likely be closed by the new government from 5 July. In all fairness I think it's a loophole that should be closed - the whole point of a personal pension is to provide a benefit for the 'person' who owns it, not his entire family! The clue is in the name: PERSONAL PENSION.
@@tancreddehauteville764 Its an interesting point of view. Agreed that pensions will be reviewed, as to the outcome its just a complete guessing game of which I have never seen anyone predict accurately. I would say possibly yours is the first comment I have seen that is positive on using an annuity.
@@tancreddehauteville764 Yes you are right, it's a "personal" pension not a government pension. I'll decide how I spend MY money and not allow some third party to divvy it up as they see fit.
Thanks for the kind feedback. The numbers do also require explanation or you could watch it at a faster speed if it makes it easier for you. I tend to find 1.5x is watchable but 2x is probably too much.
Mr Pickles is back and this time he has £300,000 in his Personal Pension.
Thanks as always for watching and do let me know if you have any questions or queries. All the very best!🙏
You have that a lot of that will dissappear in tax, retire with nothing and claim for everything we pay enough into the system get back out what you can.
Thank you. I don't look at annuity rates or tax free lumpsum but in my head I always think of a rough rule of thumb as 5k pa for every 100k in the pension pot. So a 250k pot gets you something just around the personal allowance, around 12.5k pa. Very useful and informative and for my pov supremely timely as always. Its like your video drops at exactly the right moment when I am contemplating a similar question.
Thanks and using percentages is a nice and simple way to call it in relation to sustainability dependent on the long term objectives. And thanks as always for watching, it’s very much appreciated. 👍
200k will give just over £12.5k pa with a single life annuity.
@@iannoble4854 depends on annuity rates I suppose but yes its a good rough estimate to have.
Synchronicity here as I have about £300,000 in pension pots and planning to retire soon as I just reached 66 years of age. I am aiming for as close as possible to £20,000 pa from my pension pots plus the State Pension on top. From what you were presenting, am I right in saying that a reasonable strategy is to transfer the pension pot money to a globally diversified investment fund that can be adjusted for risk tolerance over time? What is the correct name for such an investment fund? Any examples? Then, with that fund in place, draw down my required pension income from that fund on a monthly basis?
Also, as I understood it, at some point into retirement we might consider switching into an Annuity or Fixed Income fund to minimise volatility?
As an aside, I also have about £300,000 in Bitcoin. I was thinking of cashing 50% of it out to put into a retirement investment fund. However, I am now thinking that I should just continue to hold the Bitcoin as a Hedge against future unknown economic events. Also, I can use it occasionally to cash out a little money for one-off expenses. Eg. New car, holidays, house maintenance, etc.
Of course, all bets may be off if Keir Stalin has his way!
Annuities are nearly always a poor decision.
Thanks for the comment. That is the consensus view but I’ve not seen much proof of this when using the open market. And with all consensus views it demands to be challenged.
I don't think annuities are a poor mathematical decision. I believe they are statistically designed to offer a fair return and there are a myriad of competing providers to assure this. What IS a potential risk with annuities is (and this might be your point) that once taken they are inflexible and subsequently one might feel that it would have been better leaving the pot untapped in that manner. As I understand it.
I put my £70K tax free lump sum into premium bonds and an ISA to boost my tax free income.
Im retiring in 67 weeks time at 55 and feel like im watching more videos like this than i am working 😂😂
I did that and obsessed about it I retired at 57 and should have gone earlier. I was way too conservative. It’s amazing how little you can spend if you want to on normal things and also how much of your spending you did because you were at work. We spend most of our money on holidays and fun. Do it is my advice.
@alanbrooks4718 My wife and I are very fortunate (although we work hard in stressful jobs) in that we earn very good money. I keep watching this type of stuff worring if £3k net income pm will be enough? That's a huge loss of income.....We are looking to downsize as we won't need the 5 bed house were in and do lots more travelling. We will be mortgage free. All our boys are adults and sorted. We have grand kids but plan on spending as much time travelling and relaxing whilst we can. We have very healthy savings and investments as backup. I had a TIA recently it was a big wake-up call.......
Keep it up, more knowledge more chance you will end up with an easier retirement overall. i finished at 61 a couple of years ago and apart from the odd bigger expense i havnt regretted any decision that i made earlier. i invest my own in a sipp and feel completely in control. 48 months til government pension kicks in, so we are getting closer to that and another big moment where my personal finances get a major lift.
@rogergriffiths207 we will be dropping from net 7k pm to 3k which is a bit nerve wracking but we will be mortgage free and down sizing as we won't need our 5 bed house and all the expense it brings. Our friends retired on similar monthly pensions and have spent 11 of the last 14 months in different countries on the beach. Our plan is to join them/ travel as much as possible with no need to work. 55 weeks 4 days to go 👍
@@GiveItaGoas you downsize you you get spare money so you may end up with more than 3k monthly. 7k to 3k is more than 50% drop and it is recommended you have minimum 50% or more to maintain lifestyle
But real life suggests, and I have seen this with my parents and in-laws, is that your spending reduces as you age. In early retirement, they travelled, spent money on the house, but this gets less. My advisor told me of this. So you don’t need the same income every year. All depends on health etc. would be interesting to see a tapered example.
I do think the Which retirement spending numbers are realistic if there is no mortgage or rent to pay
Agreed! 👍
I lived on £18.5k last year and I pay rent (for a studio flat in Manchester).
@@adm58 your doing well my Daughter is living in a shared flat in Manchester paying £600 per month each
@@davidpearson243 luckily for me, I am a natural minimalist; it's my nature to live a rather monk like life. I even sleep on the floor (though, at the moment I do have the extravagance of
running an old, not really necessary, car). I will start to get my state pension in Sept.
I think its about being flexible in retirement, keep your higher growth conviction stocks but if they have a bad year or 2 cut back on spending to preserve the pot until it recovers as it always does given a few years
Thank you so much. That was a really valuable video. It's refreshing to see achievable figures.
You're very welcome! 👍👍
Great Video. I have about 5 years until retirement, so absolutely maximizing my pension allowances. I suspect that the 25% tax free is gonna be reduced or scrapped all together in future by Labour should they get in. Pensions for the better off, will be targeted for sure.
Thanks for the kind words and comment! Pensions make up almost half of the net worth of the UK so absolutely government will certainly have an eye on them for additional charges/taxation.
Just like Gordon Brown did.
Tories had already decided to freeze the 25% allowance limit at £268k, this will just continue under Labour. They won't get rid of it, they don't need to.
Pensions for the better off were already targeted by the Tories when they dropped the LTA from £1.8m to £1m. Sure, they scrapped it very recently, but for a long time there was a punitive tax rate for people who had saved over £1m in pensions, possibly by sacrificing earlier in their life. I expect the 25% tax free amount will be frozen for a long time, or even reduced to 20% or 15% (in which case I wouldn't take a tax free lump sum if I could avoid it, hoping it would rise again one day).
@@AgileSnowWeasel Given the state of the national finances there will be belt tightening, that's only to be expected, whoever wins the election.
Wow, thanks Ed
So much useful info in a shortish video
Really really helpful, great practical , realistic examples
Thank you very much 👏🏽
Glad it was helpful! 👍
I am thinking state pension only after aged 80 is fine surely. How many folk in 80s do a lot. I don’t want to miss out on travel etc in early retirement when fitter.
Thanks. Do you mean deferring your State Pension until age 80?
No, they are saying the state pension at age 80 should be sufficient. Not sure, but a little more would help. Agree with the idea of front loading your expenditure. You do need less as you get older. Seen it first hand
Money is great to have in retirement but the problem is your health won't be great for 80% of people, then it's no good to you also that's if you live that long .
… unless you have to pay for care.
Yes he could outlive his draw down pension, but his state will continue. One way to look at that is spending your draw down whilst you are young and can enjoy it, you never know what tomorrow brings.
The PLSA figures are scaring people so unnecessarily. People take them as gospel and don';t seem to smell a rat when their recommendations are higher than some are currently earning ! If you survive without that amount of salary, why would you not be able to when retired ?! I heard on a finance radio programme that the PLSA figures are calculated by simply asking people who are no where near that age, what they would like to be able to do when they retire - essentially asking people for their hopes and dreams and not their realistic aspirations. It's no wonder the figures are so high !
Thanks and agreed! 👍
I think you need to £2000 per month (net) to live as a couple (no mortgage or rent) to live a basic lifestyle if you want “ experiences” then add about another £1000 per month to the budget
Thaanks Edmund
Thank you! 🙏
imagine paying into a pension that u get taxed on and already taxed when u put money into the pension lol open up a stocks and shares isa and do it yourself tax free, the money the government put in when u retire gets taken back when u retire
you dont pay tax on you pension payments only when you take it out
@nigelstone2565 that's what I said but a different way and you do get taxed before though your wages so u get taxed twice
@@AzzieTheGamerr You only get taxed once. As long as you are not paying in more than around £60k per year (UK) into your pension then you do not get taxed on it. If I get a £1000 bonus at work (in my salary) and take it as money then I will see roughly £600 as I am a higher rate tax payer (40%). If that bonus goes into my pension then the full £1000 will go in. Then when I come to retire I will get 25% back tax free (if Labour don't mess that up) and then I will be taxed at 20% on the rest as I will not be earning enough to push me into the higher tax bracket.
@@davesemmens9496 Accurate.
Really helpful video. I think I am correct in saying fixed term annuity providers will not offer enhanced annuity rates for applications with existing health conditions
Thanks a fixed term annuity is not really a true annuity and health or lifestyle factors don’t impact on the available income or the maturity value.
Any pension drawn from investing is an assumption of what could happen based on the past, as no one can predict the future. I think the important point is the lump sum? and what you do with it, if you spend it all, then you are giving away your security. I think at least 1 year pension money should be ring fenced in a separate interest bearing bank account in case the brown stuff hits the fan and some or all of your investments fail to pay out. Who could have foreseen the pandemic, and the reaction of the government preventing financial institutions from paying a dividend. Then the choice is yours either to cut back or take out of your ring fenced bank account to take you through.
Remember It is not the income you have coming in, it is what you spend is the problem that many find themselves in the inability to moderate their expenditure.
Certainly having sufficient in reserve of cash and liquidity will be hugely important and dependent on the individuals asset position, risk and their capacity for loss. The cash allocation will vary whether 1-3 years of expenses plus an emergency/buffer is typical.
i know pensions are very important but its only in my first 2 years of retirement i can see the real power of the Isa i am now trying to build up !
16p for every pound invested in Sipp at the moment.
Excellent and informative video….thanks
Seems like you forgot to mention that if the company that supports the annuity goes out of business then the annuity goes to zero. AGI almost bit the dust.
Thanks for the comment. An appropriate annuity is a contract of long term insurance and is covered by the FSCS for 100% with no upper limit. Not sure what AGI is… sorry.
@@EdmundBaileyUKAIG
“Mr Pickles will be in retirement for 20-25yrs…” haha what a nice way of putting it 😅
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This is an excellent presentation, which I came across quite by chance. It is explained extremely well. I really like the charts, how the presenter used and explained the various scenarios. I certainly learned a lot and, clearly, the presenter knows this area very well. Thank you.
What a very kind comment!! Thanks so much.
Could you please discuss the inheritance perspective of personal pensions? For example passing on the pension pot to next of kind, either in its entirety or partially upon death. Thank you.
What’s to explain, just put there name on it for when you die and it gets transferred to them. The provider deducts the income tax at source. Who ever deals with your estate will then hand it over. Case closed
@@leonhenry4861 Edmund, does this person speak with authority? Would be good if you covered this topic and provided sources to corroborate viewpoints.
Thanks Edmund great video as always
Thanks as always Stephen!! 👍👍
Why try to preserve a pot till you are 90, most people don’t make it, you need to enjoy retirement through better health th 65-85, instead of saving for a retirement home, sad attitude. £225,000 example at 5% interest would give you £12,000 drawdown on interest only, maintaining your pot, take a bit more for a few luxuries and your pot will still last. Don’t be fooled into an annuity where the finance companies just give you your interest made, and keep the pot when you die. And you still have the 25% Tax free (75,000) in your pocket.
Thanks for the comment. Interestingly most individuals underestimate how long they will live for. If aged 66 now, there is a 1 in 4 chance of living to 92 and 1 in 10 chance of living to 96. The example you give is fine if you are comfortable with c £22.7k pa gross and not adjusting for inflation.
Another example, you are diagnosed with a terminal illness, you can increase your drawdown ( pot dependent) to pay for private care at home, and compensate any family who help. With annuity you are stuck in a contract at a fixed amount, even if it rises by a paltry amount with inflation built in.
I agree - assuming a fixed level of expenditure (adjusted for inflation) in retirement is a huge mistake. People should be aiming to spend the majority of their money while they are still most likely to have their health - it makes zero sense to allocate huge amounts of money to later years when there is likely very little benefit to be had and this over cautious approach just serves to unnecessarily delay retirement for many. A realistic model would likely have three phases - go go, go slow then no go.
@@daveharruk Yea, i couldnt agree more, also these days, retirement isnt the cliff edge is used to be. No reason why you cannot be doing something part to bring in 'pocket money' to cover the shortfall between now and when you get the state pension for example
@@EdmundBaileyUK I don’t know many 86 - 92 year olds that need as much money as when they were 60 - 75. No overseas holidays or buying fads, so less income needed. I certainly plan to go big for the first 15 years of retirement. Then sit back and watch my vegetables grow.
Could you do a video touching on Strathclyde pension scheme combined with AVCs additional voluntary contributions for those unaware my AVCs are with prudential but there no videos out there see lot pension wise AVCs stuff which I guess work similar at 19 year pension stage think pension worth about £11.000 per year at the moment but normally goes up £1000 per year or least my projection retirement pension pot does.
66 ? .... bloody get it , spend it !
Edmund I’m trying to understand if the annual ufpls would better than drawdown if you plan to use up all the pot, since any growth in crystallised funds is taxable right?……. Is this significant?? Thank you David
Hi. UFPLS will be the same net outcome as DD in terms of tax if the same is taken out of the pension over the course of the tax year. £10k as an UFPLS will be the same as £10k as drawdown in regards to tax.
@@EdmundBaileyUK Thank you Edmund what about over 20 or 30 years ? Say if Mr Pickles has 300k. Assuming all tax allowances used by state pension for simplicity. He wants 10k per year so he could take 10k each year as drawdown (Crystalising 30k per year, until 25% tax free used up). Would he pay the same tax over 30 years as if he took an annual ufpls of 2.5k plus 7.5k (paying 1,500 in tax). ? Sorry rough figures but you can see where I’m going.
I agree that the Which figures are way more realistic than the PLSA figures. The Which figures are more in tune with average wages if you factor in that once retired your not paying a mortgage and smaller / none pension payments.
My preferred route is Annuity over Drawdown particularly as i had a Gauranteed Annuity Rate. For a pot of just over half your £300,000 i am getting a comparable annuity pension to the one you have given though i did not take the tax free cash.
With more people ending up in care homes the cost of which is staggeringly high i wonder if there is a way of doing a calculation of the average care home costs and how long your pension will last.
There are horror tales of many people paying £1000+ a week and once all assets are sold and the cash is exhausted they have to move out into lesser accommodation.
The figures used in this video would see Mr Pickles burning through his funds a lot quicker if he were in a care home.
Thanks for the comment and agreed. 👍 Yes cost of care is a real issue to plan for especially when we really don’t know if it will even be required.
I have a historic pension with Scottish widows, I have 70k that will payout 7.5k a year, 3 and a half years to go so it might be worth more
@@johnjones7410 7.5k pa from 70k is astounding!
@@AgileSnowWeasel its probably single life flat rate (does not increase each year) and no minimum Gauranteed term and no cash lump sum.
On those terms with a 120,000 pot i could have had just over a 10k pension however i took an escalating pension with a 5 year guarantee. As its got a GAR its nigh on two thirds more than without a GAR.
Could you please do a video showing the amounts youd need to retire at 50 please.
Great idea! 💡
55 as well - given this is a key milestone for many - thanks
Good video, I like to see how the models work. Also I like to read comments from people who are actually retired, stating how much income you really need. Personally it gives me comfort that at 53 I am completely sorted financially for retirement (between my wife and I we have £1.6m in DC pensions and investments) and can retire at 55 if I choose. I will wait until I am 56 as our son will still be in sixth form until then and I really can’t see the point in retiring until he finishes school and is old enough to be independent. Being retired while still needing to do school runs during term time seems a bit pointless when for us retirement is about freedom to travel.
We are similar - but with 2 likely at Uni with some support from us for the first 3-4 years of early retirement - we are factoring that in too....
Great Video.
Just take the OAP and 4% of the rest each year.
Which company is quoting these annuity values they are better than ones offered to me recently
Hi. It’s whole of market and therefore all of the main insurers that you would expect.
What happens if Pickles drops down dead after, say, 6 months? What happens to the pot?
Named beneficiary receives the remaining pot
Better to have the 300 grand yourself. What magic do you think a pension manager will do, other than charge you, and gaurentee nothing!
I work in the industry and I agree with you, charges are high in what is a gamble
Yes load of robbing bastards ,click a few buttons thats all they do❤
Not clear on growth rates and inflation. Life strategy 40 averaged 5.6% in 10years. Is this how you’re roughly getting 2-3% above inflation growth ?
Really?! Inflation used is 2.5% and mid rate growth is 5% net (real return of 2.5%) along with a low rate at 2% and high of 6%. Should all be pretty clear in the video.
Also have you got any videos on ISAs reading bank information just make simple things sound confusing so if I put 20k in 2022 and in 2023 can I stick that 20k into 2023 pot so that keeps gettin new interest rate
Sounds like to wish to action an ISA *transfer*. Perfectly possible but you must do it by asking the provider you want to move them money to make the arrangements. They will then ensure the money is moved over but it retains the 0% tax status of the funds and doesn't count towards the £20k limit of the current tax year. It's not the fastest process in my experience but it's pretty trouble free. What you absolutely must *not* do is try and move the money yourself by withdrawing it and then paying it into your new ISA yourself.
@@dabe1971 but can you do with same provider and get interest on full pot for following year or do you just get the decent interest rate on the new 20k you save every year then once years up ur matured 20k joins yer other 20k in a lower isa pot no one or no bank explains that properly why so confusing.
@@TROZJANsome banks have an introductory bonus rate for a year, is that what you mean? It should be applied to the account, not dependent on it having to be "new ISA money" to be eligible for the rate. So yes, if you open a new ISA account which now has the 1 year introductory bonus on it, you should then be able to transfer your old ISAs into it to get the new rate. You should check with your own bank, but this is what I've done in the past with Barclays, in fact they suggested it to me! It wasn't just applied to the money I put in that year. Ensure you request a formal ISA transfer of your old ISA to ensure it keeps its tax free status.
@@papiyarussell5630 no I mean if I save 20k in a year at 4% where does that cash pot go to if there 4% interest the following year on the new yearly rates does the 20k I’ve already saved go into a crappy pot with lower interest rates or can I put that 20k into next years 4% and eventually add another 20k for the new year taking me up to 40k on the new interest rates for the year. Or do I have 2 separate pots one for previous saving gaining lower interest and a pot for new years interest rates no bank properly explains it, they do mention after it matures it goes into different isa at lower rate but doesn’t say if I can do anything else with it. If it is stuck in crappy interest pot can I not just transfer to different bank every year with full pot full allowance hopefully free of charge.
ONS Stats on inflation - pfft...
I'm 60 still working as a higher rate tax payer, and would expect to not retire until at least 65. I'm looking to max out the annual allowance of upto £60k salary sacrifice. As I understand I can continue to take 25% of the growing pension (different pots) upto a max of £268k through periodic tax free draw downs. In that time I would subsist on the draw down money, i know there are recycling rules if you put the draw down straight back in the pension, but thats not my intention and I would keep these sums separate ie the salary sacrifice is direct form earnings. is this viable?
What modelling software do you use
Thanks FE Cashcalc.
Another Mr Pickles Home Run 😊
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Depressing! Work like a dog and have £300K and it barely brings in a decent living as I race towards death.Again,depressing.
Remember to have enough put away for your care home fees !
Oh wow that is an entire subject and area of planning in its own right and incredibly difficult but not impossible to quantify. A primary issue can be allocating significant capital and resources to it in advance they may never be required.
Or plan better so you don’t have to pay them
I was about to listen to this until you said 2 1/2 cpi. Behave yourself.
Interesting, what CPI figure would you use? RPI? CPIH?
Could not understand a word you was saying.
Oh no. As in the sound? Or the actual words you didn’t understand?
I kind of see the point of all this deep analysis, but surely you just live to your means using common sense.
I know its not so common though.
If you have a 300k pot, youre not gonna be taking 50k a year. Or Mr Pickle will be in a pickle.
Sure, it’s just as a guide to make as good a judgement call as possible to attempt to avoid that pickle of a situation.
@@EdmundBaileyUK Yea for sure. PS Great video again, love your content. Keep doing what you're doing.
You say that, but some people go a bit bezerk when given access to a drawdown pot, and they end up in a situation most would not relish. IIRC drawdown pot rates were averaging 8%? That means some are taking a lot more.
@@AgileSnowWeasel That doesn't surprise me in the least. Humans never cease to amaze me in the crazy things they do.
I know someone who is the exact opposite. He actually won the one million pound UK guaranteed part of Euro millions, he's 62 years old and will not spend a single penny of it. Jeez, the man has even bought a bus pass as taxis are too expensive.
He will die with that in the bank , 100%.
But it is difficult to know how much you need. At the start, with better health, you will do and spend more. It then reduces as you age. No one knows how healthy or how long they will live. You want to maximise what you have. On your death bed you ain’t going to think how happy you are that you didn’t spend and now have a big pension pot left!
As a real life 61 year old Mr pickles, this video was a bit freaky.........
Really?! That’s amazing! And my apologies,I now need a caveat to state that any references to real persons is purely coincidence. 😀
@@EdmundBaileyUK Mrs Pickles found it very pertinent also, however I'm now worried about what will happen to me when I reach 74!!
@gbr562 😂 we have wondered if we might see a statistical spike in deaths just before the 75th birthday!!
Awesome. Brilliant content. Thanks. Congratulations on Liberal Democrats win 72 MP's United Kingdom England London Britain general election in July 4. Art Bezrukavenko did excellent job Thomas he excellent friend.
Rick Pickles has built up a nice pot.
Or "Rich" Pickles.
Inflation is going to kick Mr Pickles in the backside.
That’s absolutely a possibility for all of us and depends on which strategy Mr Pickles implements to protect himself as much as he can.
You keep saying 'tax free cash'. I guarantee it won't be cash.
Next time can you do a video on Mr Pickles and his husband , Mr Pickles. I find your videos very binary and out of touch with today's society. :)))). Great info as always.
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Are there any stats of life expectancy for the LGBTQ+ community?
@@gp2670 Depends on which country they live in. I wouldn't fancy my chances in North Korea.
Reality depressing ey
Overcomplex. Just buy an annuity for goodness sake!
Thanks for the comment. Unfortunately the annuity has a number of downsides that flexi access drawdown does not, death benefits and flexibility. Annuity will not be appropriate for everyone. But interesting to read a comment that is pro annuity... that is rare!
@@EdmundBaileyUK I get what you're saying, but annuity rates have improved recently and many people will have enhanced rates due to health issues. Also the 'death benefit' tax loophole will most likely be closed by the new government from 5 July. In all fairness I think it's a loophole that should be closed - the whole point of a personal pension is to provide a benefit for the 'person' who owns it, not his entire family! The clue is in the name: PERSONAL PENSION.
@@tancreddehauteville764 Its an interesting point of view. Agreed that pensions will be reviewed, as to the outcome its just a complete guessing game of which I have never seen anyone predict accurately. I would say possibly yours is the first comment I have seen that is positive on using an annuity.
I have zero interest in annuities. Drawdown is king!
@@tancreddehauteville764 Yes you are right, it's a "personal" pension not a government pension. I'll decide how I spend MY money and not allow some third party to divvy it up as they see fit.
What a load of crap just get to the numbers. Definitely won't be watching again.
Thanks for the kind feedback. The numbers do also require explanation or you could watch it at a faster speed if it makes it easier for you. I tend to find 1.5x is watchable but 2x is probably too much.