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Save half your age as a percent...
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Paul_Herring
Posts: 7,484 Forumite
The calculation I've seen numerous times about the (minimum) amount to save for a pension is invariably given as half your age as a percent (e.g. 15% at age 30, 20% at 40)
Two question on this:
1) Is this figure for if you've just started a pension, i.e if you start at 30 then you should save 15% until 65, or should it be increased every year up to 32% at age 64?
2) Is this figure for the end amount that ends up in your pot (after tax rebate from the government) or as a percentage of gross wage (before the rebate)
TIA.
Two question on this:
1) Is this figure for if you've just started a pension, i.e if you start at 30 then you should save 15% until 65, or should it be increased every year up to 32% at age 64?
2) Is this figure for the end amount that ends up in your pot (after tax rebate from the government) or as a percentage of gross wage (before the rebate)
TIA.
Conjugating the verb 'to be":
-o I am humble -o You are attention seeking -o She is Nadine Dorries
-o I am humble -o You are attention seeking -o She is Nadine Dorries
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Comments
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1 - they are flat rate, but they assume that you start early (i.e. aged 20). If you are starting later than that you need to pay more (or accept being poorer when you retire)
2 - Both. Unless your pension contributions take you below a tax threshold, they should be exactly the same. I.e 10% of £10000 gross pay = £1000. 10% of £6000 net pay = £600 + £400 tax relief = £1000.0 -
Thanks for that; one final (I hope) question - how much is this supposed to equate to as a pension when one finally retires? (Presumably this is a generalisation and given as a percentage of final salary?)
Having looked on the web for these answers and not easily finding them, what search terms should I have been using, or do you happen to have a link to similar information?Conjugating the verb 'to be":
-o I am humble -o You are attention seeking -o She is Nadine Dorries0 -
Most of these "calculations" are designed to provide a pension of about half to two-thirds of your salary at retirement.
In practice no-one knowns as it depends how your salary increases and where you invest the money.0 -
People also tend to forget to increase their pensions annually or fail to take out an annually increasing pension. So, they start by paying £100pm and think that will be fine. 10 years later they are still paying £100pm and it doesnt have the same value and all those projections they obtained 10 years earlier mean nothing.
So when looking at your projections/contributions. Remember to take into account inflation.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I thought that would be taken into account with the "percentage of salary" bit (presuming, of course, one's salary is increasing year on year.)dunstonh wrote:People also tend to forget to increase their pensions annually or fail to take out an annually increasing pension. So, they start by paying £100pm and think that will be fine. 10 years later they are still paying £100pm and it doesnt have the same value and all those projections they obtained 10 years earlier mean nothing.Conjugating the verb 'to be":
-o I am humble -o You are attention seeking -o She is Nadine Dorries0 -
It does when you are paying a % of your salary and it comes from your pay. However, personal arrangements seem to be set up mostly on level basis.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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