Have I got 'Enough'?
A Simplified Money Case Study
You've got various old workplace pensions, perhaps even the odd ISA
It seems like a decent sum - but the numbers on your statements suggest otherwise
If it's not 'enough', though, what is?
And where can you find the money you need to fill in any gaps?
They say only bad news sells newspapers. (And pictures of the Royal Family of course.) You would, therefore, be forgiven for thinking that everyone in this country is done for. At least where retirement is concerned.
Because otherwise sensible, ex-ministers of our country like to suggest that a £1 million pension fund is not 'enough'. And commentators on all sides use the subject of pension poverty to support all manner of political agendas.
Before we go on, true pension poverty is nothing to be laughed at. It's a cruel, terrible end to life - and a life that has often already involved hard work and sacrifice. We should do all we can to stop it happening.
However, please relax. That does not apply to every UK citizen who has the 'misfortune' (?) not to own a pension pot worth at least £1 million.
Jodie worked for a small business we were working with to support their workplace pension scheme. Along with the other staff, Jodie had been offered a financial consultation as part of the joining process, so she could understand what it was - and how to make the most of it.
Settling into her career after some early job moves, Jodie already had three existing pension funds. But, despite knowing exactly what each was now worth, she couldn't work out what it all meant. And no idea whether it were anywhere close to 'enough'.
When Jodie handed over 2 boxes and a set of lever arch files, I will admit, we were a little worried. But we shouldn't have been. It all confirmed her estimates of valuations. And gave us the original policy details - which meant we could also check for otherwise hidden surprises.
You can understand, though, why Jodie was confused. Pension statements are kind of fine - as far as they go. They give you a value - the best bit. They even try to give some indications of what that value might be worth later. IF this current scenario they've been given stays the same forever.
But the assumptions made are difficult to understand, the explanations contain lots of jargon. And the numbers are generated using rules that bear little resemblance to your own situation. Given they have no idea what your ultimate objectives are, you could expect little else.
So, for Jodie, we started crunching some numbers. First we asked her what she wanted and how she saw her future. We then took what she had and projected those details forwards in a way that reflected her plans. Then we overlaid a number of different potential scenarios to find out how vulnerable - or otherwise - her plan was to the unexpected.
For Jodie, the calculations suggested she was actually in decent shape. Based on her situation, her money could last past the age of 90. Longer if she were to inherit as she hoped.
However, we were also able to show her where the vulnerabilities were. What would happen if she lost her job or couldn't work. What might happen if the market crashed on her. What might happen if she took more income. Or retired early. But in each example, we also outlined what she might do to alleviate the threats.
What this actually means
This is why I believe our Retirement MOTs are so valuable. Jodie had been dreading what we might say, yet she came away more relaxed about the future than she had been in ages. We didn't suggest that everything was perfect, not by any means. But at least she knew what she was up against. And what she could now start to do about it.
Which is the point. We have more choices at retirement now than our parents ever had. More options how to save and how to spend. It's great to have flexibility over our plans for the future. It opens up so many opportunities.
But it also opens us up to more risks.
By playing out a few different scenarios, however, you can begin to see the real impact of all those options. Start to make informed decisions what to do about them. To decide which options you really want to take. And to understand what that balance between sacrifice now and reward later really means for you.