uk.finance

Bitstring <8113f3tqh1a023tkkl039gt2bisn19hbmb@ >, from the
wonderful person Terry Harper < @ > said
>On Wed, 19 Sep 2007 18:25:01 +0100, "Norman Wells"
> wrote:
>
>>
>> wrote in message
>>news: @ ...
>>> Here is a swerve ball. I am 38 if I wanted to get a 25k a year
>>> personal pension at 60 how much should I be saving a month? Roughly.
>>> I know these things are hard to tell with any degree of accuracy.
>>>
>>On the assumption that you want £25K in today's money, and that any
>>investments merely keep pace with inflation, you can make a rough
>>calculation by saying you're likely to live, and thus receive your pension
>>for about 20 years, ie until you're 80. That means your pension pot will
>>have to pay out, and therefore be, 20 x £25K or £500K in total.
>>
>>It's 22 years, or 264 months, until you retire, so you need to be putting
>>away £500K divided by 264 or £1890 per month.
>
>That is nonsense.

Ah, the politeness lessons didn't take then. 8>.

>What you need is a fund that will pay out £25,000 a
>year. If you look at current annuity rates at
> /AF_CMS/Resources/Annuity%20bureau/rates_
>
>you will see that a 60-year old can get about £4,200/£100k if single,
>and about £3,700/£100k for a joint pension with a spouse of the same
>age.
>
>That means that, in today's money, you need between £600k and £700k to
>fund an annuity paying £25k, which will increase with inflation and
>provide for a spouse's pension.
>
>You have 22 years to amass that sum, and if you invest in equities,
>and assume a growth rate of 7% per year, that will call for about
>£12,000 a year, or £1,000 a month. It is worth pointing out that, if
>the overall yield from the portfolio is 4%, then the income will be
>about what you need, so that there is no need to give the money away
>to an annuity provider.

That is bigger nonsense, unless you are assuming your 7% is 7% MORE THAN
INFLATION. You need a fund of £600k, as you say, in =today's= money.
Given RPI is running at 4%, that'll be quite a bit more in 22 years
time.

You're also assuming the mortality tables in 22 years time are the same
as now. Personally I'd rather go with the £1500-1600 a month than your
£1k figure.

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