CMD South Branch - Public content

Prospect CMD South

Pension One Page Advice on Retirement Savings

Up to 30 Years Guaranteed Income After Work?

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On this single page you will find an overview of choices to achieve the above that is unlikely to be achieved by a ‘do nothing approach’ during your working life.

  • Decide on how much monthly income you wish to enjoy at retirement, say between 65 and 70 based on most people’s expectations. Todays, average annual pay (December 2019) is growing towards £30,000. This can be an attractive amount if you no longer have travel and mortgage expenses plus long-term savings needs.
  • Next decide as early as you can when to start investing in your post working life world, into what is usually called a ‘pension pot’. Starting ages vary from say 18 to 65.
  • To create a regular monthly income, the following - non-magical - options are the most common in the UK and are usually a mix of these driven by lifestyle, career choices and available options.

 

  • State Pension built up by mandatory payment of National Insurance tax contributions for up to 35 working years to achieve the maximum State Pension that is index linked to the CPI (Cost Price Index) published each year in September by the Government. A personal forecast of your personal State Pension payments is available as often as requested.
  • Private Pension, the most used non-State approach for pension income in the UK, attracts regulated management fees, and on average delivers an annuity or draw down of say £333, or perhaps a higher amount, for every £10,000 saved – this assumes your total pension pot sum earns 3% per annum. A lump sum of up to 25% of the total pension pot value can be taken at retirement with zero tax.
  • Private Funds Comprise the widest imaginable form and range of pension saving building scheme. Examples often include: Shares and share savings schemes, significant valuables – such as property, bonds and ISAs etc.
  • Defined Contribution (DC) pensions comprising a pension pot built by making personal contributions made during your working life, that you have invested in areas of your own choice, or by taking independent financial advice, often without significant financial input from your employer.
  • Collective Defined Contribution (CDC) Usually monthly contributions made into a joint fund that is invested by a trusted team to provide a regular pension on retirement. The Royal Mail (160,000 employees) and the CWU has agreed to pursue this approach – widely used in Australia – with support from the Government.
  • Defined Benefits (DB) Generally accepted as the best available scheme where employers match employee contributions to their pension pot and provide index linking – usually based on CPI annual increases.
  • Wealth Creation Where the pensioner relies on returns from personal investments such as: sale of business, inheritance funds, downsizing, equity release, Buy to Let property income, dividends, interest bearing savings.
  • Emergency Subsistence support such as from: Council/Government, Family funding, charity donations probably coupled with the use of food banks.