In this second episode of a pension income planning series we look at your options with a £100K/$100K pension pot. What retirement income will a £100K pension pot provide? Can you retire early? What are your options for topping up your pension further – watch and all is revealed.
Illustrative figures are given for people retiring in their mid-60s but state pension age increases will also affect annuity incomes when you do come to retire.
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Episode 1 – £50K pension pot:
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State Pension – do you qualify:
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Pension planning is a crucial aspect of financial management, especially when it comes to preparing for retirement. In Episode 1, we explored the factors affecting retirement income and the importance of building a substantial pension pot. Now, in Episode 2 of Pension Income Planning, we will discuss the potential retirement income that a £100,000 pension pot can provide.
While £100,000 may seem like a significant amount, it’s important to understand that it is just the starting point for a retirement nest egg. The final pension income will depend on various factors, including the retiree’s chosen retirement age, life expectancy, investment growth rate, and the type of pension arrangement they opt for.
One popular option for generating retirement income is through an annuity. Annuities guarantee a regular income for life, and the amount received is determined by the annuity rate at the time of purchase. Current annuity rates vary but have generally remained low in recent years due to low-interest rates. To illustrate the potential income, assuming an annuity rate of 4.5%, a £100,000 pension pot could provide an annual income of £4,500.
Alternatively, retirees can choose the Flexible Drawdown or the Uncrystallised Funds Pension Lump Sum (UFPLS) options. With Flexible Drawdown, the retiree can withdraw any amount from their pension pot as and when required, subject to minimum income requirements set by the provider. In this scenario, an individual with a £100,000 pension pot and a retirement age of 65 could withdraw around £4,000 annually.
On the other hand, with the UFPLS option, the retiree has more flexibility to take larger lump sums whenever they desire. While the first 25% of each withdrawal is tax-free, the remaining amount is subject to income tax. Assuming an average withdrawal rate of 4%, a £100,000 pension pot would provide an income of around £4,000 per year.
It’s worth noting that the examples provided for each pension arrangement are simplistic and for illustrative purposes only. In reality, various factors, including factors previously mentioned and others such as market performance and inflation, can significantly impact retirement income.
Nevertheless, it is crucial to consider additional sources of income alongside the pension pot. This might include the state pension, any additional workplace pension schemes, or other investments. By diversifying income streams, retirees can have more financial security and a higher chance of meeting their desired lifestyle goals during retirement.
It’s also essential to regularly review your pension arrangements and seek professional advice to ensure your retirement plans remain on track. An independent financial advisor can provide personalized guidance based on your specific circumstances and help you optimize your pension income.
In conclusion, while a £100,000 pension pot may not provide a luxurious retirement income on its own, careful planning and exploring various pension options can help maximize the available funds. Remember, everyone’s circumstances and goals are unique, so always seek expert advice to ensure you make the most suitable decisions for your retirement. Stay tuned for our next episode of Pension Income Planning, where we will delve further into strategies for optimizing retirement income.
Planning retirement has never been this confusing! First SVB, then Signature bank and now First republic, these are all the signs of yet another 2008 market crash and recession 2.0, so my question is do I still save in the United States dollar, or could this be a good time to buy stocks? So I’m left wondering what 2023 has in store for us investors, I’ve been sitting on over $745K equity from a home sale and I’m not sure where to go from here,
Annuity seems like such a waste of money as you need to be using it for well over 20 years for it to start having value.
I have just started thinking about all this (I am 52) so this is great timing and very useful.
The thought of retirement makes me cry, My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. . It’s so difficult for people who are retired.
<Big ups to everyone working effortlessly trying to earn a living while building wealth. I’m 60 and my wife 54 we are both retired with over $3 million in net worth and no debts. Currently living smart and frugal with our money.Retirement is not an end, but a new beginning.Your dedication today will pave the way for a future filled with financial security and the freedom to pursue your passions Saving and investing lifestyle made it possible for us this early even till now we earn monthly through passive income.
I’m really confused with the average pension pots… surely it must be higher than it’s shown per person??
I have just started working for the NHS as a TUPE from another company that I worked at for 7 years previosu and Joining the trust I have effectivley started my pension from scratch again my old workplace pension I have transfered into my pension bee account, this is likely to be worth 20k at retirement. The NHS pay very well on their contribution, 14.4% i am 42 now.. and am on target for a £148k pot assuming I stay within the NHS until retirerment at 65. So with that in mind, I can withdraw £38k tax free and then buy annuinty on the rest? so thats about £465 a month.. until state pension.. So if I split that 38k over 4 years.. I can then have £1255 per month until 68.. am i doing the maths right? So that plus savings and my pitance pension.. I should be alright?
Just looking at what I need either an annuity or flex drawdown income, be interested in what charges I'd incurr or are these all included – in other words will I get the annual annuity amount hargreeves langsdale website presents or is that amount minus annual fees? Hope this makes sense does to me 🙂
Is saving for retirement worth it at all? Wouldn't it be better to have nothing and get pension credits in addition to the pension?
Very clear. Very interesting. Might have saved my future!
How do you go about topping up your national insurance I left the uk about nearly 12 years ago and I am I think they said nine years short of getting a full state pension
Great video thank you! But if l had my time again every penny of my now pathetic £100,000 pot would of been a £1,00,000.00 if I’d of put the same money into property! ☹️…..but hey, there you go!
100k pension pot. Quick answer, you will get fuck all
Bravo, one of the few so called ‘retirement experts’ on line to mention natural yield. Obviously if you only take the natural yield, even if the stock market falls, your income is lest unaffected. So few people get this. Although slightly worrying mentioning Vanguard (income experts they certainly are not) and actually the fees are irrelevant if performance is quoted net of fees. Sometimes it’s worth paying more to get a higher more sustainable PPS income (not yield as yield is irrelevant bar point of entry) but overall a good video so thank you
Not being funny here but I'm in an area where a lot of people took early retirement at 16,do they get an old age pension for doing fu#k all for 40 odd years.
Really clear and helpful thank you. Do you know anything about pension providers for people who work outside the U.K. but are British citizens and plan to retire back ? There is a whole industry devoted to the other process eg. British retiring overseas but I can’t find much about the opposite. Thank you again.
if it helps you should know that annuity rates today are much higher than when this video was made. Ive just taken a 100% joint life level annuity and received circa 6% annual return. good luck
£4700 per year means you will have to live another 21.27 years after retirement to recieve your 100k.
Really informative, thank you . I own a small property in York with no mortgage and I’m on course for 100k pot plus my state pension . I don’t expect to retire early though , I’m 60 now and I’ll be working till 67 . Very useful, thank you .
I retired yesterday. The most important thing to do is focus on two things. Pay off all your debts including mortgage. Stop frivolous spending. I'm 57. 100k is nowhere near enough to retire more than about 3 years early. Delaying state pension is not a good idea. The older you are the less you need.
Become a Govt employee and get a public servant pension. No problem and you can even only work only a few years to get it. Simples!
Don’t forget you have to pay tax on it
how many are getting 25 years retirement unparticular MEN.
My pension was at £80,000 and i could get £39 pounds a week, Around £1,700 a year ish.
Thank you for this information
If there's 2 of you working with contributions to full state pension that's £19,240pa pension.
Now if your mortgage is paid off you can live ok on £1,603.
An extra £10k a year is really needed on top for spending money and holidays to be comfortable.
You can also set up an equity release as a monthly income, as opposed to a lump sum draw down.
I can't understand anyone buying an annuity. At 100k with 5k per year younger to 85 before seeing any benefit . IF u get to 85. May as well just keep the cash and spend it
I don't know but anuities don't look good value for money to me .
The discussion around the 4% / 5% growth rate is incredibly misleading, where you state that the income may actually grow. In money terms yes, in real terms no. It is only when you very, very briefly mention the natural yield that you give the actual sustainable income rate.
My goodness me.
State pension is often overlooked, when making sure you have maximum qualifying years, is priority.
I'm buying years for my wife.
It takes a little over 3 years in receipt, to get back what you put in. Then it is all profit.
Each year has so far cost around £800 and is worth £280 pension per year.
To get that from a drawdown, at 4%, you would need £7,000 invested.
So, £25k per £1k
About the same for an annuity.
Do all you can to get the maximum state pension.
Especially, if one of you have little or no other pension. Remember, both in a couple are treated individually for tax reasons. So try not to neglect one partner's finances.
How do people who rent retire?