From: Norman Wells 
Newsgroups: uk.finance
Subject: Re: Pensions - I know nothing
Date: Sun, 17 Jun 2007 21:48:31 +0100
Bytes: 3209

In message , Tyno Gendo 
 writes
>Hi all,
>
>Firstly, I am completely dumb when it comes to most finances so excuse 
>my complete lack of knowledge.
>
>I have a pension fund in which I have about 15,000pounds currently and
>I'm 33.  I understand you buy an annuity at the end of your pension 
>fund term, but I'm wanting to know, what's the average sort of funds 
>you should aim to have to live comfortably at retirement???
>
>I obviously have a long time to save yet (hopefully) but at the moment 
>I'm on a low income so can't put anything into my pension.
>
>What exactly _is_ a normal average 'comfortable' retiring fund size?
>
>Maybe look to bring in at least 18,000per annum in today's world.

It's not a bad starting point to think how many years you'll expect your 
pension to be paid, then multiply it by the amount you would like to 
receive.  That of course depends on when you want to retire, and what 
your life expectancy is when (if) you get there.  To receive £18K net, 
you'd need to be paid a pension of nearly £22K gross.  If you retire at 
65 and the pension fund actuaries expect you to die at about 85 years 
old, you'd therefore require a pension pot, in today's money, of 20 x 
£22K = £440K.

One assumption in this is that your pension pot is invested at just the 
rate of inflation so that it maintains its real purchasing power year on 
year.  That's not too difficult to achieve, and it may be that it can 
actually be invested to give an extra real rate of return of, say, 2% a 
year, though it does of course rather depend on the skill or luck of the 
person investing it.

That to some extent reduces the amount you need in your pot, perhaps to 
£350-400K, at today's value.  But to get to that over the next 32 years 
(till you're 65), simple mathematics says you and/or your employer will 
need to put in at least £10K a year.

Comfortable retirement is very expensive.  If you think about the size 
of your pot at present, it would pay for less than 9 months of 
retirement at the level you want to live after tax.

-- 
Norman Wells

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