it could be you
Apologies in advance if you’re feeling upbeat, buoyant and full of the joys of…er, early Autumn. Sorry. A couple of days ago I read a shockingly interesting article on the most dry of dry subjects, pensions, and feel duty-bound to pass on its findings. Better the devil you know and all that. Sorry. Again.
After a lifetime of scrimping and saving, exactly £61,897 is the average amount we have sitting in our personal pension pots. Now, to my penny-pinching northern mind that sum sounds alright, until I learn that it yields an annual income of only £2,500. Or precisely forty quid a week. Ouch. OK, you can add the state pension of £168.60 but you’ll still be living below the current minimum wage and good luck surviving on that.
As it transpires, a total of 645,000 people accessed their pensions for the first time last year and many will have been unpleasantly surprised. Thankfully, the more realistic picture is probably a little brighter than the initial figures paint it. Many will have more than the one single pension and those all-but-forgotten company ones that have died and gone to pension heaven will undoubtedly have contributed to the lower average figure. Furthermore, what exactly is an average and who ever has it in any event? Truth be told, lots of people also have other investments including buy-to-lets, holiday homes, ISAs, PEPs of old, trusts, gold, cryptos (have you been drinking? – ed) and perhaps asset-class investments of wine, watches, jewellery or whatever. Others may be looking longingly at their ol’ dears’ houses and hoping neither house values fall nor age-expectancy increases. However, only one in eight pension pots were over the £250,000 the Financial Conduct Authority advise is the level most of us are going to need.
Of these 645,000 individuals, more than half did so without any financial advice whatsoever. Did they buy an annuity, implement a drawdown or take the 25% tax-free lump sum irrespective of the tax impact on the remaining 75%? Who knows, and I suspect they didn’t either. I’d bet my bottom-dollar they’d never heard of the lifetime allowance. Good, professional planning and advice is essential and proceed without it at your peril. The most common withdrawal rate was 8% and you don’t need to be Stephen Hawking to realise that, at this level, it ain’t going to last that long. With blokes living, on average, until 83 years of age and the fairer sex past 86, we need to be thinking in terms of 3%.
The good news for many of us is that this Friday’s euro lottery jackpot is a paltry £169m and I shall be buying a ticket with my lucky numbers that have continually failed me, until now. The bad news is that if, like me, you believe Greta Thunberg’s doom-laden predictions for the future of our planet are on the money, I won’t be around long enough to enjoy it!
