The 'comfortable' £43k net for a single person is simply insane - most people don't even get this as full time employees! The figures for married people are bit more realistic, but still very ambitious. I think the definitions should be reclassified as: moderate, comfortable and luxurious.
I believe the retirement living "standards" are before tax - or am I wrong? Either way a bit on the high side (they shot up far more than 11% inflation in 2023...).
@@BeeblebroxTheThird Yea the 'standards' don't take tax into account - so the implication is that these figures are net of tax (so after tax). No the biggest fan of the standards either but they are a frequently used reference point so thought it was important to include. I tend to prefer using the average UK workers income net of tax, housing/mortgage payments etc. Hope you found it helpful nonetheless!
The numbers are probably inflated as the pension companies want you to think you are behind so that you then invest more in your pension, thereby increasing their management fees.
And that's mean average, so it will be skewed upwards by a few people who have large retirement incomes. The median will be lower than those averages stated.
It will be interesting to see if the recent budget changes (bringing pensions into IHT) will mean people spending more and saving less of their private pensions. Many people seem to be happy to spend now and let the state care for them later, but there is state pension time bomb in UK, with people living longer and a shrinking proportion of workers to fund state pensions.
Really good point and I'd certainly agree that bringing pensions in scope for IHT will encourage more spending. Will be interesting to see the downstream impacts of this once people/advisors have time to process the change and pivot estate planning approaches etc...
The contents of the mythical basket needs changing, i believe it still includes a dvd. Aside from does anyone buy a brand new dvd these days it’s not essential to maintain a standard of living whereas food is. The MMC needs changing as well to a graduated chart, jumping from £14,400 to £31,300 is just ridiculous, only around 33% of the working population earn over £30k a year.
Quoting annual figures is meaningless to most people as we are all accustomed to monthly income and outgoings and gross or net income is another big anomaly as it is what we ‘take home’ that counts. The biggest factors, however, are housing costs and whether you live alone or as a couple. To live alone on the basic state pension in today’s economic environment is very difficult to say the least. If you are a tenant, it is nigh on impossible without benefits. If you are a mortgage-free homeowner, that makes a huge difference to living standards and to have two (or more) income sources is the game-changer…………….but this all changes when the income is only or primarily UK state pensions, and this income is decimated on the death of the first partner. The whole approach covered here is too simplistic by far to assess what represents a comfortable retirement.
Sorry you didn't find it helpful, hopefully my future videos where I dig in with a little more nuance might be a little more helpful! Main goal with this video was to outline the average income per the study (which i think is the best study we have to date) I agree regarding the 'living standards' study comments, it's very simplistic but I think it's still worth throwing out there alongside the comparison I did with average workers income. Thanks for discussing though, hope to see you in the comments in future videos! 😃
@@ProperMoneyUK Thank you for responding and please do not take my comments as a personal criticism - it was aimed at the people who publish the ‘average’ figures, not you. Truth is, every person/couple is in different financial circumstances and whoever comes up with these numbers (usually with a link to pension providers), are not acknowledging the massive diversity of the financial position of individuals across the UK. I am a retired ‘old school’ bank manager and these analysts cannot generalise in this way.
I can’t believe the average income numbers. Average (I assume mean rather than median?) pensioner couples have an annual income of £29,172, after income tax, council tax, rent, mortgage payments etc. That sounds very high, unless it’s skewed by the top of the distribution? What’s the equivalent number for working couples, I doubt it’s higher.
Median is used for the retiree average income study. Bear in mind you're (in most cases) getting 2 state pensions which puts you at 23k right away. A decent percentage of these will then likely have a paid off or largely paid down morgage meaning the housing costs that are netting off here are minimal. Doesn't leave a huge amount that private pensions/other sources of income needs to make up to hit that 29k.
@@ProperMoneyUKI assumed a relatively large number of people still had significant housing costs after retirement. Maybe the current cohort are lower than I imagined but going forward with extended mortgages and many more unable to buy at all, housing costs will surely play a bigger role. This will be a big issue in the future.
You mention "as they get older their private pension will be depleted to the extent that they will be more heavily reliant on the state pension" without any backup - why - my DB private pensions are index linked... and my DC is growing quite a bit faster than inflation - almost as fast as I can spend it
Sounds like you're in a great spot but certainly not the norm from my experience - especially when we're talking about those on the average to lower average side of the income and asset spectrum. In these cases, the private pension simply isn't large enough for returns to consistently cover the drawn down amounts and so it will slowly deplete throughout the years of retirement (thereby also creating a smaller base for returns etc)
The 'comfortable' £43k net for a single person is simply insane - most people don't even get this as full time employees! The figures for married people are bit more realistic, but still very ambitious. I think the definitions should be reclassified as: moderate, comfortable and luxurious.
I'm with you - certainly prefer using the comparison to an average working persons income
I believe the retirement living "standards" are before tax - or am I wrong? Either way a bit on the high side (they shot up far more than 11% inflation in 2023...).
After tax
@@BeeblebroxTheThird Yea the 'standards' don't take tax into account - so the implication is that these figures are net of tax (so after tax). No the biggest fan of the standards either but they are a frequently used reference point so thought it was important to include. I tend to prefer using the average UK workers income net of tax, housing/mortgage payments etc. Hope you found it helpful nonetheless!
The numbers are probably inflated as the pension companies want you to think you are behind so that you then invest more in your pension, thereby increasing their management fees.
Median income data , in fact, median everything is better than average. Those figures would be of greater interest.
And that's mean average, so it will be skewed upwards by a few people who have large retirement incomes. The median will be lower than those averages stated.
Median is used for the average retiree income study. I've left a link in the description
Good honest video. This is the first time I've seen you. Well done with this one. It was reasonabley clear as well. Thanks.
Appreciate the kind words - hope to see you in the comments in future videos!
I think the whole thing is futile. Everybody is different, everybody lives differently and everybody's needs and wants are different
What do these amounts translate to, taking into account state pension, in terms of total pot sizes required?
You may want to watch my £100k and £250k pension pot videos that give a bit more detail over pot sizes and what level of income to expect!
5:30 for couples the average is just above the minimum rather than "just shy of moderate"
Ah misspoke there - thanks for catching that!
It will be interesting to see if the recent budget changes (bringing pensions into IHT) will mean people spending more and saving less of their private pensions. Many people seem to be happy to spend now and let the state care for them later, but there is state pension time bomb in UK, with people living longer and a shrinking proportion of workers to fund state pensions.
Really good point and I'd certainly agree that bringing pensions in scope for IHT will encourage more spending. Will be interesting to see the downstream impacts of this once people/advisors have time to process the change and pivot estate planning approaches etc...
Why are you using Mean (Average) and not Median (the midpoint)?
Provide vastly different results.
//
Median is used for the retiree average income study.
The contents of the mythical basket needs changing, i believe it still includes a dvd. Aside from does anyone buy a brand new dvd these days it’s not essential to maintain a standard of living whereas food is.
The MMC needs changing as well to a graduated chart, jumping from £14,400 to £31,300 is just ridiculous, only around 33% of the working population earn over £30k a year.
Quoting annual figures is meaningless to most people as we are all accustomed to monthly income and outgoings and gross or net income is another big anomaly as it is what we ‘take home’ that counts. The biggest factors, however, are housing costs and whether you live alone or as a couple. To live alone on the basic state pension in today’s economic environment is very difficult to say the least. If you are a tenant, it is nigh on impossible without benefits. If you are a mortgage-free homeowner, that makes a huge difference to living standards and to have two (or more) income sources is the game-changer…………….but this all changes when the income is only or primarily UK state pensions, and this income is decimated on the death of the first partner. The whole approach covered here is too simplistic by far to assess what represents a comfortable retirement.
Sorry you didn't find it helpful, hopefully my future videos where I dig in with a little more nuance might be a little more helpful! Main goal with this video was to outline the average income per the study (which i think is the best study we have to date) I agree regarding the 'living standards' study comments, it's very simplistic but I think it's still worth throwing out there alongside the comparison I did with average workers income.
Thanks for discussing though, hope to see you in the comments in future videos! 😃
@@ProperMoneyUK Thank you for responding and please do not take my comments as a personal criticism - it was aimed at the people who publish the ‘average’ figures, not you. Truth is, every person/couple is in different financial circumstances and whoever comes up with these numbers (usually with a link to pension providers), are not acknowledging the massive diversity of the financial position of individuals across the UK. I am a retired ‘old school’ bank manager and these analysts cannot generalise in this way.
It seems that most of your comments are already mentioned and explained with in the video. Maybe watch the video again, but now from start to end.
I can’t believe the average income numbers. Average (I assume mean rather than median?) pensioner couples have an annual income of £29,172, after income tax, council tax, rent, mortgage payments etc. That sounds very high, unless it’s skewed by the top of the distribution? What’s the equivalent number for working couples, I doubt it’s higher.
Median is used for the retiree average income study. Bear in mind you're (in most cases) getting 2 state pensions which puts you at 23k right away. A decent percentage of these will then likely have a paid off or largely paid down morgage meaning the housing costs that are netting off here are minimal. Doesn't leave a huge amount that private pensions/other sources of income needs to make up to hit that 29k.
@@ProperMoneyUKI assumed a relatively large number of people still had significant housing costs after retirement. Maybe the current cohort are lower than I imagined but going forward with extended mortgages and many more unable to buy at all, housing costs will surely play a bigger role. This will be a big issue in the future.
You mention "as they get older their private pension will be depleted to the extent that they will be more heavily reliant on the state pension" without any backup - why - my DB private pensions are index linked... and my DC is growing quite a bit faster than inflation - almost as fast as I can spend it
Sounds like you're in a great spot but certainly not the norm from my experience - especially when we're talking about those on the average to lower average side of the income and asset spectrum. In these cases, the private pension simply isn't large enough for returns to consistently cover the drawn down amounts and so it will slowly deplete throughout the years of retirement (thereby also creating a smaller base for returns etc)