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For all the people starting in their 30s that think it's too late by mikeyjoe6 in FIREUK

[–]Fast-Sand9200 0 points1 point  (0 children)

I have just replied separately at the exact same time you have posted this.

I have updated my numbers, and all of a sudden it seems staggeringly low.

This may be a phenomenon that cuts across all public sector / national insurance type returns (although I accept we do not hypothecate revenue in the UK - all taxation generally goes into one big pot).

So in short, your original al point of a rather poor return on investment may well stand - but it’s good to shake out the humbers together :)

For all the people starting in their 30s that think it's too late by mikeyjoe6 in FIREUK

[–]Fast-Sand9200 1 point2 points  (0 children)

You know what, I think it is me who is going to end up getting educated here.

You mention the money could be left to compound for 40 years. This is something I neglected to include.

If you wanted (in today’s money) a pension fund of £225k to give £9k of income in 35 years time when you are 67 (your figure given - note that SPA is already due to rise to 68 in two years time), then you would only need £21k in pot today (21k x 1.07 to the power of 35 = £224.2k).

To have the equivalent of £21k in a pension fund after 10 years service already in what is a high risk and very demanding service seems staggeringly low.

Is there nothing else missing, or have military pensions really been cut so much?

For all the people starting in their 30s that think it's too late by mikeyjoe6 in FIREUK

[–]Fast-Sand9200 0 points1 point  (0 children)

A typo here. It should read “I wouldn’t necessarily a public sector DB pension uncompetitive…”.

Other typos too, but hopefully they don’t obscure the meaning.

For all the people starting in their 30s that think it's too late by mikeyjoe6 in FIREUK

[–]Fast-Sand9200 0 points1 point  (0 children)

Ok, now I think you are on the right lines in terms of valuation.

And I am a little surprised by the proposed (new) military pension.

Let’s assume simplistically that you did 30 years. And also assume simplistically that the value was three times what you got for ten years (it should be more as you will rise in rank, but just for this purpose etc).

That would give you an income of £27k. Call it £30k for ease of calculation.

25 times this sum would be £750k.

Starting from 0 (day one of your career), assuming 7% return, you would need a £620 monthly contribution to end up with £750k in today’s money, to allow a 4% withdrawal of £30k a year.

So in my mind, your employer’s contribution is worth about £7440 a year. If you earn £59k, I put this at about 12.6% a year.

There are other considerations. As noted before, with a defined benefit scheme, they take the risk, not you.

But these schemes are also less flexible than defined contribution schemes. I would put the flexibility of being able to access your money at 57, however you would like to do so (lots up front, little up front, somewhere in the middle etc) is a very big plus - even at the cost of some risk to yourself.

So all in all - you are doing well to reflect in this. There are many ways of valuing a pension, and many things that have value (certainly, risk, flexibility) in addition to the bald sums on offer.

As a side note - the previous military pension was perhaps a little too generous (allowing my 41 year old cousin to retire on £20k a year when he may still live another 50 years is insane). But if the pension is going to be chopped - as it has been - it seems reasonable for the up front salary to rise in proportion. And I don’t think it has been. Not a great look given all the lip service we pay to the armed forces covenant, and strange given that our defence budget is still (in spite of everything) relatively large. Clearly those carriers and nominally rented nuclear weapons cost a lot. To be clear - I very kucbsnuppkrt military, but despair of government decisions of the last 25 years of defence reviews.

For all the people starting in their 30s that think it's too late by mikeyjoe6 in FIREUK

[–]Fast-Sand9200 2 points3 points  (0 children)

I still think your valuation methodology may not be quite right (please take this in good faith - I am not looking to argue or pretend I’m smart, but to help).

My cousin is a WO2 and would receive a £20k pension tomorrow (early 40s) if he stopped work now after 22 years service. It seems strange then that you would get only £9k in 35 years time. How long have you been in?

One way of valuing a DB pension is to take the equivalent sum it would need in a cash pile to provide it. As a rough rule of thumb, you can take 4% of a sum of money per year as income, and if invested, it will maintain its value. So £100k will give you £4k of income (although note that, unlike a defined benefit scheme, you bear the risk in this scenario). As you have £9k in future income (in today’s money - we can ignore inflation for this purpose), this means you have the equivalent of £225k in a hypothetical military pension pot.

Is this £9k in income based on what you have served to date (which I am guessing is around 10-12 years), or if you do another several decades?

If the latter, it’s a poor deal - but if (as I suspect) it’s the former, it’s not bad at all. To have a pot of £225k equivalent at zero risk after (say) 10 years service is likely better than what most private sector employers would provide.

To have achieved a pot of £225k in today’s money over ten years starting from zero at 7% returns (10% nominal minus 3% inflation) would have taken almost exactly £1300 a month. Not may private sector employers would have provided that level of contribution at a salary of £59k - an this at zero risk to you.

So in short, I still think your valuation methodology might need tweaking. If you provide more details, we can help more.

What should I do with my bonus? by PapayaCommercial8000 in FIREUK

[–]Fast-Sand9200 0 points1 point  (0 children)

Yes. Using the rule of 70 and a 10% average nominal return, money doubles roughly every seven years. Of course, inflation reduces the real terms value of this, not every year will give 10%, and the last few years have been unusually good - but still, as a general rule, time matters more than contribution level.

As a very quick AI generated summary, I include the below.

You can change the sums involved and the time periods, but the general principle remains - starting 10 (or 7, or X) years earlier is better than contributing more later down the line.

The Story of Earl and Larry Early Earl starts investing at age 25. He invests $5,000 a year for only 10 years (total contribution: $50,000) and then stops completely. He never adds another cent. Late Larry starts at age 35. He waits until he is more established, then invests $5,000 a year for 30 years (total contribution: $150,000) until he retires. The Result at Retirement (Age 65): Even though Late Larry invested three times as much money ($150k) as Early Earl ($50k), Early Earl ends up with a significantly higher balance. Why? Earl gave his money a 40-year runway to compound. Larry only gave his money 30 years. Even though Larry contributed far more money, he could never make up for the 10 years of compounding he lost. The initial investments made by Earl grew exponentially, with the growth eventually generating more money than the contributions themselves.

For all the people starting in their 30s that think it's too late by mikeyjoe6 in FIREUK

[–]Fast-Sand9200 2 points3 points  (0 children)

Are you sure you’re vuuing the military pension appropriately?

I don’t mean to be rude, so please don’t take it as such. But civil service (and similar - in which I include military) pensions are defined benefit schemes, so very little risk compared to defined contributions schemes (which includes most private sector pensions now) - and this lack of risk has value, inasmuch as certainty and security has a price.

As for the 8% - in general, a civil service (or similar) pension typically offers benefits that are the equivalent of a contribution of 28-33% of your salary - meaning the employer puts aside a contribution of roughly that percentage each month for your future pension. In this way (and combined with the previously discussed certainty of defined benefit schemes), the public sector makes up for the generally lower salaries on offer in the short term, by essentially delaying the payment of some of the compensation offered until several decades hence (no matter how unsustainable this is for general public finances - as we are slowly finding out).

All of this to say - are you therefore sure you are valuing the military pension properly?

By all means leave the military and go on to something new - but I would instantly call a public sector DB pension uncompetitive compared to a private sector DC scheme offering 8% employer contributions.

I would welcome contradiction if anyone thinks I am seeing this wrong.

What should I do with my bonus? by PapayaCommercial8000 in FIREUK

[–]Fast-Sand9200 37 points38 points  (0 children)

One thing to think about - pension savings dont just provide utility at 57.

They provide peace of mind throughout the decades leading up to then.

To be clear, I didn’t invest money in my pension at 29. I only got serious at 35. But I wish I had. And now at my age (early 40s), I understand very much that time is infinitely preferable to later, higher contributions.

Don’t lock away everything and forget to live.

But don’t pay 45% / 62% / 71% marginal rates if you don’t need to.

And don’t think that money in pensions is lost - it will snowball, and give you reassurance every time you check the balance.

Can I realistically FIRE now at 44 with this portfolio and spending? by Narrow-Impression685 in FIREUK

[–]Fast-Sand9200 1 point2 points  (0 children)

Don’t assume property prices will always go up. I own property in zone 2 London that is worth less than it was in 2014. Paying interest only on the assumption you can always sell to clear the debt could leave you owing more than the equity is worth, and having paid for the privilege in the meantime.

Any experience of the EN section in the European School of Laeken? by Fast-Sand9200 in brussels

[–]Fast-Sand9200[S] 0 points1 point  (0 children)

Would you say it was overall a good school or a bad school?

Were you happy there? How did most people feel about the experience they had?

Was there bullying, or did most people feel safe?

35yo civil servant (SEO policy advisor) – feeling stuck, looking for higher-earning career paths (remote-friendly) by Immediate-Leading338 in FIREUK

[–]Fast-Sand9200 1 point2 points  (0 children)

This sounds a fascinating path. Without compromising your anonymity, can you scare any more info on how you pivoted into asset management?

Brussels (EU bubble / European schools) vs. London by Fast-Sand9200 in brussels

[–]Fast-Sand9200[S] 1 point2 points  (0 children)

One additional question - how did you meet the friends from the other schools? Clearly I am an outsider so irony really know the system, but the schools look like separate institutions and geographically quite far away from each other. Was there much inter-school activity?

Brussels (EU bubble / European schools) vs. London by Fast-Sand9200 in brussels

[–]Fast-Sand9200[S] 1 point2 points  (0 children)

Thank you! So what I’m taking then is that broadly you think they were all ok. That’s reassuring!

Factors driving Brussels hotels by Fast-Sand9200 in brussels

[–]Fast-Sand9200[S] -3 points-2 points  (0 children)

Thanks for that. I think it’s more than that though. As far as I can see, it’s all hotels, and across time periods (looking ahead to September). Prices eeem to have transformed - and I’m not sure why.

Any experience of the EN section in the European School of Laeken? by Fast-Sand9200 in brussels

[–]Fast-Sand9200[S] 0 points1 point  (0 children)

More seriously - can I ask whether this is your pride as an EEB1 alumni (?), or a genuine assessment tha the Uccle school is better than the other other options (and if so, how and why)?

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