Pension of £100k a year?

[ChimpMaster]

Seems hard to achieve this target. According to basic calculators, with a number of assumptions of course, you'd need something like a £2m pension pot to get a £100k/year pension income by age 65. Sounds ridiculous to me, but then I only have £50k in my pension and its forecast to give me an income of £3k/year

I suppose to get to £2m one would need to have invested in equity fund pensions at the 'right time' and enjoyed the past 8 year boom.

[jamesbrown]

Seems hard to achieve this target. According to basic calculators, with a number of assumptions of course, you'd need something like a £2m pension pot to get a £100k/year pension income by age 65. Sounds ridiculous to me, but then I only have £50k in my pension and its forecast to give me an income of £3k/year

I suppose to get to £2m one would need to have invested in equity fund pensions at the 'right time' and enjoyed the past 8 year boom.

Yes, probably. OTOH, I'm not sure why you'd aim for this, other than it being a nice round number. Presumably, by the time you reach pensionable age as a contractor, you'll have a decent stash for holidays etc., some assets, and the pension is mainly for living costs. I've never been a huge fan of pensions TBH, because gov't policy can change on a whim, and you're pretty hemmed in with a pension. I would've thought 50k was a more reasonable target (on the upper end), and that's nicely aligned with the current lifetime allowance (for now ). I'm probably a little short-sighted on this, but sometimes a tax deferred isn't a tax saved.

[adubya]

With the £1m lifetime pension allowance then with a £2m pension pot you'd be shelling out a lot of tax (assuming the pot was 100% in pension products).

[jamesbrown]

With the £1m lifetime pension allowance then with a £2m pension pot you'd be shelling out a lot of tax (assuming the pot was 100% in pension products).

'zackly. I mean, there's nothing wrong with a 100k income as a pensioner , but I'm not sure why you'd target this, given that the main motivation for pension saving is deferred taxation.

[SueEllen]

I suppose to get to £2m one would need to have invested in equity fund pensions at the 'right time' and enjoyed the past 8 year boom.

You would need to have a final salary pension to get the maximum pension pot.

[ChimpMaster]

I'm also not a fan of pensions (as a contractor), not in the slightest - hence why only £50k in the pot.

I was just throwing some numbers out there because I used the State pension calculator and it told me I would get £125/week when I'm 65

So I thought I'd come up with a nice big number £100k and see how one might get to that kind of annual pension income.

£100k was the number for me and wife combined, which to be fair is still more than a couple would need to live off in their 60s if they had planned well beforehand. I guess to have a good life, £5k/month would suffice for living expenses and some luxuries, considering income tax will take a chunk too.

Yes indeed Government policy can change on anything, such as recently property investments being hit hard by taxes. Still prefer property to pensions though and hopefully it'll provide more income at an earlier age.

[Lance]

Your calculations are based on buying an annuity. I think.
They are very poor value these days. Unless you've got a terminal illness. Think of it like a bookie who offers odds on when you die. They've oversold the bets for decades and now if you buy one you are getting very poor odds as the industry plays catch up with improving ageing.
The tax benefit of a pension is still valid though. But should be considered as part of a wider financial future.

[ChimpMaster]

Your calculations are based on buying an annuity. I think.
They are very poor value these days. Unless you've got a terminal illness. Think of it like a bookie who offers odds on when you die. They've oversold the bets for decades and now if you buy one you are getting very poor odds as the industry plays catch up with improving ageing.
The tax benefit of a pension is still valid though. But should be considered as part of a wider financial future.

£2m to get £100k , or £1m to get £50k / year, equates to 5% yield, which you ain't gonna get with an annuity!

I wish I did have a pension pot because I'd buy commercial property with it.

[handyandy]

One key to any kind of saving and investment is to diversify - not just in terms of the investments but also the vehicles you use.

Another is to start as early as possible and contribute regularly. If the OP is in his late 40's or 50's then he either needs to have some other savings/investments or hope you suddenly come into some moneys less than 20 years is probably not going to be long enough to make that kind of income.

So - you can save up to £1m in a pension and invest it in anything you like (within reason but even property is held in funds and you can invest in cash funds aka building society account). Thats £40k a year over 25 years out of pre-tax income so thats ££24k a year if you are an higher rate tax payer or simply £40k if you pay it straight from an LTD.

You can invest 20k per year in an ISA so £500k after 25 years but that is post tax income. When you cash it in the returns are tax free.

You can invest what you like in a BTL property and you'd need to work out for yourself what you'll get back and what risk you are taking. The tax situation has changed significantly over the last few years (CGT plus not being able to offset the mortgage costs against rent)

And finally you can invest other money in stocks, share, gold, etc or just keep it under the mattress.

However, I suspect the real problem with getting a £100k a year income in retirement is having enough income before you retire for long enough so that you can build that kind of pot up.

[WordIsBond]

However, I suspect the real problem with getting a £100k a year income in retirement is having enough income before you retire for long enough so that you can build that kind of pot up.

Either that, or be permie with the same company for more than 30 years and get a really nice final salary pension, and transfer it at the right time. I didn't have the biggest salary but I did well enough to be mortgage free in 15 years, save my mortgage payment for 20 years after that, and had a great pension.

When I left permiedom, I could have just retired, but I'm still having fun.