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  • FIRST POST
    • matty2767
    • By matty2767 11th Nov 17, 7:23 PM
    • 429Posts
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    matty2767
    size of final pension pot
    • #1
    • 11th Nov 17, 7:23 PM
    size of final pension pot 11th Nov 17 at 7:23 PM
    I'm not sure what my exact question is to be honest, but I was reviewing my pension and wondered if my final aim of pension pot was realistic and actually the right way to look at things.

    I earn about £55k a year. I am 42. My pension contributions are to my workplace pension and in total I pay in £800 per month. My pot sits at £113k ish. I always thought I would retire at 60 but it isn't fixed. So have been assuming 30 years in retirement.

    I am not on track to meet 2/3 of my current salary in retirement because then I would need a pot £1.1m (36*30) obviously SP kicks in at 68 reducing my pot size requirement by 183k over 22 years but I am still well short.

    At 18 years to go to retirement, assuming I don't pay in any more and 0% growth i can only pay in 173k taking my pot to 286k and giving me 9k a year until SP kicks in. If I split it equally over the 30yrs.

    There isn't a lot I can do about it I suppose. But get concerned that the number is so much less than my salary and yet feel I put quite a lot away.

    Matt
Page 1
    • greatkingrat
    • By greatkingrat 11th Nov 17, 8:03 PM
    • 66 Posts
    • 72 Thanks
    greatkingrat
    • #2
    • 11th Nov 17, 8:03 PM
    • #2
    • 11th Nov 17, 8:03 PM
    Is that £800 per month including any employers contributions?

    Assuming 0% growth is unduly pessimistic. Even with a relatively low growth assumption of 3% per annum on average, that would give you a pot of more like £410k at 60.

    Depending on your situation, you may not need 2/3 of your salary anyway. For example you may have already paid off the mortgage, kids may have left home etc.
    • Sarastro
    • By Sarastro 11th Nov 17, 10:30 PM
    • 223 Posts
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    Sarastro
    • #3
    • 11th Nov 17, 10:30 PM
    • #3
    • 11th Nov 17, 10:30 PM
    Comparing to your current salary and lifestyle isn't reasonable though...you will almost certainly need a lot less when you're older. And, why would you work on the assumption that you're not going to contribute anything else? You won't know how you feel about retiring at 60 until you're 59 so I wouldn't be so hard and fast about it now.
    • kidmugsy
    • By kidmugsy 11th Nov 17, 11:52 PM
    • 9,828 Posts
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    kidmugsy
    • #4
    • 11th Nov 17, 11:52 PM
    • #4
    • 11th Nov 17, 11:52 PM
    Contribute enough so that you (i) maximise employer contribution, and (ii) avoid higher rate income tax. You'll then be in a good position. Don't worry about your sums: they are rubbish.
    Free the dunston one next time too.
    • Tom99
    • By Tom99 12th Nov 17, 6:52 AM
    • 542 Posts
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    Tom99
    • #5
    • 12th Nov 17, 6:52 AM
    • #5
    • 12th Nov 17, 6:52 AM
    If £800pm is the gross pension payment out of £55k pa then you are very nearly using all your 40% tax relief so much of an increase will only get you 20% relief.
    • Alexland
    • By Alexland 12th Nov 17, 8:58 AM
    • 647 Posts
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    Alexland
    • #6
    • 12th Nov 17, 8:58 AM
    • #6
    • 12th Nov 17, 8:58 AM
    Echo the comments about factoring in modest growth say 2% above inflation and fees. But yes your private pension will still be a low proportion of your current salary. The good thing is that you have realised it now before it is too late.

    Have you done a plan of your routine and exceptional spending in retirement. Don't forget to include replacing cars, carpets, kitchens, bathrooms, drives, boilers, etc.

    We are younger with bigger pots (on average) and still contributing a lot more (on average) each month. Our employer does salary sacrifice so we also save the NI.

    30 years retirement is 360 missing paydays!

    How annoying would it be to miss just 3 paydays?

    Alex.
    Last edited by Alexland; 12-11-2017 at 9:27 AM.
    • matty2767
    • By matty2767 12th Nov 17, 10:46 AM
    • 429 Posts
    • 552 Thanks
    matty2767
    • #7
    • 12th Nov 17, 10:46 AM
    • #7
    • 12th Nov 17, 10:46 AM
    thanks all for the advice. yes i guess i was being overly cautious with my sums. whether this is because of all the negativity surrounding saving for retirement i don't know. your posts are certainly much more positive and i will re-look at my sums and what my plan of outgoings might be in the future.

    yes the £800 includes my employer contributions and taken out before i get paid.
    • crv1963
    • By crv1963 12th Nov 17, 11:40 AM
    • 151 Posts
    • 409 Thanks
    crv1963
    • #8
    • 12th Nov 17, 11:40 AM
    • #8
    • 12th Nov 17, 11:40 AM
    thanks all for the advice. yes i guess i was being overly cautious with my sums. whether this is because of all the negativity surrounding saving for retirement i don't know. your posts are certainly much more positive and i will re-look at my sums and what my plan of outgoings might be in the future.

    yes the £800 includes my employer contributions and taken out before i get paid.
    Originally posted by matty2767



    At least you're looking at it now so can then do something about it now. If you need half to two thirds of your salary as a retirement income (and everyone is different in their spending) then if possible try to save a bit more.


    I put 2% of my salary additionally away for a few years in an avc, then had to stop contributing but even so it's grown! Have a look at your options- i) if you pay extra to your pension will your employer match these? ii) can you buy additional pension in your scheme? iii) is an avc worthwhile? iv) is a SIPP or PP worth thinking about? v) are ISAs an option. In our circumstances pension contributions are our option because of the govt. tax rebate into them but everyone has different ideas of what is best for them.


    Have a look at the thread "What's the Number" I found it a good starting point in our planning and we took an hour or so working ours out, although we have discussed our ideas/ wants and dreams for a long time about our retirement.


    Think of a few ideas/ options and post into this forum for some advice- I did and the very knowledgeable and helpful contributors here helped me formulate our plans a few months ago and we're 12 years older than you!


    Good Luck
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • Alexland
    • By Alexland 12th Nov 17, 1:01 PM
    • 647 Posts
    • 405 Thanks
    Alexland
    • #9
    • 12th Nov 17, 1:01 PM
    • #9
    • 12th Nov 17, 1:01 PM
    I agree £800 combined contribution sounds a lot but it's only 17.5% of your salary and possibly an even lower proportion if you get a bonus, car, overtime, etc. Even after your employee deduction you are still on around double the national average wage so surely it must be possible to contribute more?

    This year between the two of us we are contributing around £60k into our pensions, £8k into our long term LISAs, £4,128 into our son's JISA and leftovers into our ISAs.

    My basic is not much higher than yours, my wife works part time at a lower rate, we somehow cover 24x7 childcare ourselves (really not easy, not started school yet) and are repaying a mortgage so it is possible if you really want the outcome and are willing to work very hard for it.

    Alex
    Last edited by Alexland; 12-11-2017 at 1:18 PM.
    • LAPORTS1
    • By LAPORTS1 14th Nov 17, 4:58 PM
    • 8 Posts
    • 3 Thanks
    LAPORTS1
    Matty2767

    I think we are in a similar boat savings-wise.

    I earn £42K per year. I'm 43, contributing a total of £750 a month into a pension pot which has a value of around £137000.

    My plan is to retire at 60 at the latest on around £20,000 a year in today's money

    I know this is a stretch but I'm hoping I will be able to increase my saving rate once I have the mortgage paid off in 5/6 years.

    Just to echo what other posters are saying:

    - I'm hoping for a growth rate of 2% - 3% above inflation on my pension fund.
    - I'm expecting my expenses to drop dramatically one the mortgage is paid off and the kids start to move out.
    - Do look in the 'Whats your number' and Early Retirement threads. There are some great thought provoking posts in there.
    • MallyGirl
    • By MallyGirl 14th Nov 17, 5:18 PM
    • 2,016 Posts
    • 6,830 Thanks
    MallyGirl
    I know this is a stretch but I'm hoping I will be able to increase my saving rate once I have the mortgage paid off in 5/6 years.

    Just to echo what other posters are saying:

    - I'm hoping for a growth rate of 2% - 3% above inflation on my pension fund.
    - I'm expecting my expenses to drop dramatically one the mortgage is paid off and the kids start to move out.
    .
    by LAPORTS1
    If you are overpaying the mortgage to pay it off early you would be better off pausing that, paying extra into the pension for a while and letting its growth benefit from compounding, and then resume paying off the mortgage.
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    • Nitram29
    • By Nitram29 14th Nov 17, 5:54 PM
    • 13 Posts
    • 23 Thanks
    Nitram29
    I'm 46 with 43K base salary per year, current pension pot is 175K and total going in is £650 per month.

    I think it is important not to pour every penny into pensions until you are in the right place to do it. I have other investments in shares, ISA’s and have a decent cash buffer of six months worth of wages along with spare cash for day to day spending. Things can change fast and without warning, a balanced yet diverse savings plan alongside a healthy outlook to life (with the odd treat) is how I am going about it.
    • BLB53
    • By BLB53 14th Nov 17, 7:08 PM
    • 1,151 Posts
    • 930 Thanks
    BLB53
    Don't forget to factor in tax credits which take the gross figure to £1K p.m.

    If you continue at this rate and assuming a modest 5% growth, I calculate your pot shoud be well over 500K in 18 yrs time and this should give you a pension of £20K using drawdown at 4% plus state pension of a further £10K.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • somethingcorporate
    • By somethingcorporate 14th Nov 17, 7:42 PM
    • 8,839 Posts
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    somethingcorporate
    I agree £800 combined contribution sounds a lot but it's only 17.5% of your salary and possibly an even lower proportion if you get a bonus, car, overtime, etc. Even after your employee deduction you are still on around double the national average wage so surely it must be possible to contribute more?

    This year between the two of us we are contributing around £60k into our pensions, £8k into our long term LISAs, £4,128 into our son's JISA and leftovers into our ISAs.

    My basic is not much higher than yours, my wife works part time at a lower rate, we somehow cover 24x7 childcare ourselves (really not easy, not started school yet) and are repaying a mortgage so it is possible if you really want the outcome and are willing to work very hard for it.

    Alex
    Originally posted by Alexland
    I guess the question is what do you want to achieve. My wife and I put around £30k-35k pa into our pensions each year and it's a huge sacrifice to the standard of living! No point being the richest skelly in the graveyard and all that - enjoy your young family, it won't last long!
    Thinking critically since 1996....
    • Audaxer
    • By Audaxer 14th Nov 17, 8:09 PM
    • 558 Posts
    • 244 Thanks
    Audaxer
    This year between the two of us we are contributing around £60k into our pensions, £8k into our long term LISAs, £4,128 into our son's JISA and leftovers into our ISAs.
    Originally posted by Alexland
    Wow, I knew from some of your previous posts that you were pretty much sorted financially, but I am amazed at the amount you are managing to contribute to your pensions. I would think you are very well placed to retire early if you want to.
    • martinsurrey
    • By martinsurrey 15th Nov 17, 9:28 AM
    • 3,173 Posts
    • 3,857 Thanks
    martinsurrey
    This year between the two of us we are contributing around £60k into our pensions, £8k into our long term LISAs, £4,128 into our son's JISA and leftovers into our ISAs.

    My basic is not much higher than yours, my wife works part time at a lower rate, we somehow cover 24x7 childcare ourselves (really not easy, not started school yet) and are repaying a mortgage so it is possible if you really want the outcome and are willing to work very hard for it.

    Alex
    Originally posted by Alexland
    Wow, I knew from some of your previous posts that you were pretty much sorted financially, but I am amazed at the amount you are managing to contribute to your pensions. I would think you are very well placed to retire early if you want to.
    Originally posted by Audaxer
    but how does it add up?

    Alex, you are saving £72k + what you pay into ISA's, plus funding a mortgage, plus living expenses for 3 people, so while your basic may not be much higher I am assuming you get huge bonuses, while I agree with the sentiment of your post, you have missed out a few numbers!
    • swindiff
    • By swindiff 15th Nov 17, 11:02 AM
    • 267 Posts
    • 96 Thanks
    swindiff
    I am in a pretty similar position to many of you. I'm 47, earning £40k a year. I got a CETV valuation of my DB pension earlier this year which was just over £250k. I'm in the USS pension scheme and last year they also opened a DC fund that we could pay into.

    The 1st 1% my employer matches so I took that up straight away, but I have only just decided to increase my contributions further into the DC scheme. I am now paying in an additional 14%, so 15% in total to the DC scheme and 8% into the DB scheme. My total contribution is now 42% of my salary. 19% by my employer and 23% by me, nearly £1400/month with salary sacrifice. I still have a mortgage of £113k and this is still over 25 years to keep the monthly payments down which leaves me the freedom to invest more into my pension.

    In my view paying into my pension now will be far more valuable in the long run than overpaying my mortgage. The DC fund which has only been running for just over a year now has grown by 21.5%, so more than happy with that
    Last edited by swindiff; 15-11-2017 at 11:08 AM.
    • somethingcorporate
    • By somethingcorporate 17th Nov 17, 8:40 AM
    • 8,839 Posts
    • 8,533 Thanks
    somethingcorporate
    but how does it add up?

    Alex, you are saving £72k + what you pay into ISA's, plus funding a mortgage, plus living expenses for 3 people, so while your basic may not be much higher I am assuming you get huge bonuses, while I agree with the sentiment of your post, you have missed out a few numbers!
    Originally posted by martinsurrey
    That was pretty obvious to me too - the post does seem a bit misleading!
    Thinking critically since 1996....
    • Alexland
    • By Alexland 17th Nov 17, 10:55 PM
    • 647 Posts
    • 405 Thanks
    Alexland
    Yes we both get a car allowance and occasional bonuses but never massive and no overtime. The mortgage is affordable due to historic good decisions. Our living costs are very low and haven't increased much since we were students (both student loans repaid). We have company mobiles, no pay TV, use a lot of vouchers, gain a few thousand a year from cashback and surveys, buy basic unprocessed food, switch energy and broadband regularly, use nectar/clubcard points, etc. Some of my son's favourite toys are from our own childhood and I am not sure they were even new when we had them!

    I guess we have mostly resisted the temptation to expand our lifestyle to match our income. I don't think spending more would make us happier.

    Still we don't grow our own veg or darn socks (I have a big supply after switching a bank account to M&S) and we go on holiday (paid for by HSBC switching this year) and the water company tells us that my son's bedtime baths are wasteful so we are a bit extravagant.
    Last edited by Alexland; Yesterday at 11:54 PM.
    • Thrugelmir
    • By Thrugelmir 18th Nov 17, 12:31 AM
    • 55,815 Posts
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    Thrugelmir
    If you are overpaying the mortgage to pay it off early you would be better off pausing that, paying extra into the pension for a while and letting its growth benefit from compounding, and then resume paying off the mortgage.
    Originally posted by MallyGirl
    A few decades ago endowment policies promised something similar. Ultimately investment returns failed to deliver. Despite a progressive fall in interest rates. Reducing the mortgage while not always the best return. At least provides flexibility and security. Money locked up in a pension. Offers no protection against life's unexpected turn of events.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
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