Saving for pension - any regrets?

[Protagoras]

To begin with, you can currently take 25% tax free. The rest you can take annually until it runs out, earning/extending it by whatever your investments make along the way.

I recall that taking the 25% does mean that you need to start accessing the remaining 75% within 6 months.

I also believe that the 25% doesn't need to be taken as a single payment, but can be spread over time, if desired.

[Peoplesoft bloke]

To those mentioning 55+ for taking your Private Pension funds keep in mind for you yutes it will be 57+ (from April 2028).

[jamesbrown]

Are you sure? I've been shown performance comparisons demonstrating consistent better performance. However a simple tracker would seem a good bet if you don't really want to get involved.

Which comparisons (and over what periods)? To beat the returns of a diversified index, your active fund manager needs to have some special insight that exceeds the costs they levy on their investors and, over the very long term, that is well-established to be false. Obviously, an active fund manager can beat an index over the short-term, even over the medium-term, purely by chance. It becomes much harder over the long-term and there is no particular methodology for choosing the right manager, because they have insufficient skill (in the statistical, index-beating sense). One thing you can be certain about: actively managed funds are more expensive and costs accrue over decades and dramatically reduce your returns.

[malvolio]

Clearly, this is numerically false, depending on your definition of "about". To begin with, you can currently take 25% tax free. The rest you can take annually until it runs out, earning/extending it by whatever your investments make along the way. If you're stupid enough to buy an annuity then, yes, your annual income from a £300k pot will be very low. Otherwise, £300k is not a bad pot outside of contractor world.

Not that false, tbh but I won't argue the details. If you take out national average wage of £28k, £300k will last about 10 years. Make that £21k with the balance from the state pension and it stretches to 15 years. It will last about 5 years if you are in a care home. So yes, you need to make it grow somehow to be secure.

I will agree that annuities are not a reasonable option.

[jamesbrown]

Not that false, tbh but I won't argue the details. If you take out national average wage of £28k, £300k will last about 10 years. Make that £21k with the balance from the state pension and it stretches to 15 years. It will last about 5 years if you are in a care home. So yes, you need to make it grow somehow to be secure.

I will agree that annuities are not a reasonable option.

Arithmetically, £300k at £12k drawdown per year will last 25 years, assuming no returns whatsoever (and no costs, of course). In other words, £300k will last a lot longer than 20 years at £12k annual drawdown, even with very conservative assumptions.

[ChimpMaster]

As I approach my late 40s my thoughts are that I should have always put something into a pension from the moment I started working at 21. The amount might have only been £2k/year at the beginning but easily would have been £30k/year during my contracting years. With growth in international (not UK of course) stock markets, the pot would easily have been £1m+ by time of retirement.

It is key to be diversified, so a pension pot alone isn't sufficient. Go for ISAs and other hands-off investments. If you have it in you, invest directly in some property either residential or commercial. Do this early enough so that the value of the property inflates over time and try to pay down some of the mortgages so that they are manageable amounts.

Have a figure in mind as to how much income you want each month when you stop working. For example £5k/month to cover all expenses, socialising, holidays, wants & needs. Then work out a long term approximate plan of how you will get to that figure through investment income, i.e. not having to work for the majority of it.

[GitMaster69]

I have about 5k in pension pot from past employment. I'm 38 Done the numbers if I was saving full 40k a year and they look ridiculously low at 55yo.

Got 3 property giving me about 3.5k rental income (about 80% of that goes towards repayment) . That portfolio I'm planning to expand and turn the remaining debt into interest only on retirement (if anything is left to repay). I can't see retirement scheme that will net that much and thats when I'm 38 , market in 15 years will be in much different place and should have much more properties by then partially repaid
Planning to refinance good equity in property to fund additional BTL purchases whilst I'm young

So as it stands , providing property market will continue to be good, I will continue investing in property, it seems, and ignore pension pot completely.

[PCTNN]

Friend of mine took almost all the right decisions: got a well paying job, stashed a lot into stocks and share isa and gia, generously increased his pension contributions.

Almost everything he did was right. Only thing he screwed up was marrying the wrong person. Now they're splitting and his soon to be ex-wife is taking 50% of everything (savings, pension, house, everything). She contributed 0% to the household.

[northernladuk]

So as it stands , providing property market will continue to be good, I will continue investing in property, it seems, and ignore pension pot completely.

I also have a few rentals but I do think you are missing a trick. You've got all your eggs in one basket for a start. To be fair I agree it's a pretty safe basket but still. Your rental income is kind of free money. I don't think that is reason enough to not save from your income, particularly with the tax options of a pension. I still think a mix of both is the wise choice, even if the pension isn't a major part of your retirement. I am fully prepared for a downturn in property at some point some time and crap happens so spreading the risk whilst gaining a tax advantage isn't to be sniffed at. But that's IMO and I'm no pro in this area.

[GitMaster69]

I also have a few rentals but I do think you are missing a trick. You've got all your eggs in one basket for a start. To be fair I agree it's a pretty safe basket but still. Your rental income is kind of free money. I don't think that is reason enough to not save from your income, particularly with the tax options of a pension. I still think a mix of both is the wise choice, even if the pension isn't a major part of your retirement. I am fully prepared for a downturn in property at some point some time and crap happens so spreading the risk whilst gaining a tax advantage isn't to be sniffed at. But that's IMO and I'm no pro in this area.

My friend gave me idea: buy property in SPV and pay all income into pension, saving loads on tax. That might be the way

But assuming you need 3330£ per month net that would require SIGNIFICANT deposit to achieve that

Assuming rich 6% yield and 2.5% interest

You need about 250k deposit and tuliploads of stampduty ... but you get to have cake and eat it