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  • FIRST POST
    • cs90
    • By cs90 30th Nov 17, 7:30 PM
    • 30Posts
    • 3Thanks
    cs90
    Am I on track?
    • #1
    • 30th Nov 17, 7:30 PM
    Am I on track? 30th Nov 17 at 7:30 PM
    Hi all

    I'm just looking for some advice as to whether I am on track or still quite a way off in terms of my pension.

    I'm 27 and the only pension I have is a stakeholder pension (BC&E / people's pension). It's currently worth 8.5k. Employer pays in max of 6% and I pay about £150 a month by direct debit from my pay. It says the projected total at 60 years old would be 127k. £150 a month from me is roughly 12.5% of my monthly pay after tax.

    From what I've seen on the forum this isn't really anywhere near enough for a comfortable 20 odd years of retirement. What else should so be doing if anything? I'd love to take on some advice from you all now whilst I still have time to sort out financial planning for the future.

    Married, own a house with 20 years on the mortgage and planning on having children in the near future. Wife is a teacher on 27k roughly if that makes any difference to any reply.

    Thank you all
Page 1
    • tibbles209
    • By tibbles209 30th Nov 17, 8:22 PM
    • 68 Posts
    • 139 Thanks
    tibbles209
    • #2
    • 30th Nov 17, 8:22 PM
    • #2
    • 30th Nov 17, 8:22 PM
    Whether you are on track depends on what you are aiming for. What age do you want to retire at? How much (in today's money) do you feel you would need as an annual income to have your idea of a comfortable retirement?
    • Prism
    • By Prism 30th Nov 17, 8:26 PM
    • 53 Posts
    • 29 Thanks
    Prism
    • #3
    • 30th Nov 17, 8:26 PM
    • #3
    • 30th Nov 17, 8:26 PM
    So with your employer contribution how much is going in? £225?

    Which calculation are you using to work out 127K and what rate of increase does that assume? I would suggest finding out what fund you are invested in and ensuring it is right for you.
    • Sarastro
    • By Sarastro 30th Nov 17, 8:34 PM
    • 339 Posts
    • 264 Thanks
    Sarastro
    • #4
    • 30th Nov 17, 8:34 PM
    • #4
    • 30th Nov 17, 8:34 PM
    All depends on what you think you will need when you retire assuming state pension / mortgage free and children not living at home. That said, If you could afford to increase your pension contributions you probably should - you can always pay in less later. And as you are quite young you could probably afford to have a more aggressive investment approach: your employer pension is probably quite safe, so perhaps consider a private pension alongside it which is more focused on growth. At first glance, I'd say your a bit behind the curve, but all depends.
    • justme111
    • By justme111 30th Nov 17, 10:26 PM
    • 2,878 Posts
    • 2,764 Thanks
    justme111
    • #5
    • 30th Nov 17, 10:26 PM
    • #5
    • 30th Nov 17, 10:26 PM
    I am not sure it is right if you pay it yourself by direct debit frombyour post tax pay - can you check or some cleverer people than me clarify it for you. Usually work pension deductions go before tax and your salary is paid after pension deductions were made.
    Another observation - your net per yer is then £14400. If you pay rent or have other payments that are not going to be present in retirement you could reduce this number by that amount and see how much you would need in retirement . Even if you needed the whole amount because you have no expenses now that are not going to be present when retired t does not look like a big number so with a pot of 127 k and a state pension it does not look that far off.
    As others mentiond you may consider a separate investment in either ISA, private pension (SIPP) or LISA. I would mae it low enougj that I am not tempted to cancell it due to other pressures - mirtgage , deposit savings , wife on maternity etc etc and firget about it and reassess inn10 years
    Last edited by justme111; 30-11-2017 at 10:31 PM.
    • cs90
    • By cs90 1st Dec 17, 6:20 PM
    • 30 Posts
    • 3 Thanks
    cs90
    • #6
    • 1st Dec 17, 6:20 PM
    • #6
    • 1st Dec 17, 6:20 PM
    Thanks for the replies.

    Justme111 - I spoke to the HR lady today. I asked if it would be worth taking my contributions out of my pre tax pay but she argued that it is neither here or there as I pay by direct debit and get tax relief by doing so. I think she means that it doesn't make a difference as I'd pay tax on it when I withdraw it in future so does it make any difference? She also said as I pay by direct debit I can stop/start/reduce/increase as I wish as life gets in the way (Not that I see that as an advantage as I'd never reduce/stop).

    Does any know if there is an advantage to paying my part of the pension contributions pre tax salary vs by direct debit after salary?

    Sarastro - Appreciate that. I did leave out in OP that I have a very small S&S ISA worth 4.5k invested 100% into VLS LS 80%. I add £75 a month to this. I will try to up contributions to both S&S ISA and pension though but am stretching at the moment.

    Prism - My maths didn't quite add up there. Average monthly contributions 282.50. Work put in 127.5 and I put in 156.25 (that includes tax relief). The 127k is just a projection on the pension website that my fund will be worth that at 60 years old.

    They only have a selection of adventurous, balanced and cautious portfolios to invest in and I'm currently set up at adventurous which is "0.5% BC&E GI Up to 100% shares".

    Do you think I should also open a LISA or SIPP? Or just try to pump some money into what I have already?
    • bigadaj
    • By bigadaj 2nd Dec 17, 7:50 AM
    • 10,803 Posts
    • 7,100 Thanks
    bigadaj
    • #7
    • 2nd Dec 17, 7:50 AM
    • #7
    • 2nd Dec 17, 7:50 AM
    Most employer pension schemes require you to contribute from your salary to get their contribution, your situation makes it sound like they contribute whether you do or don't?

    If you're paying out of net then check that your tax code is correct and you are getting teh tax relief, probably the case but would be a problem if you weren't. Personal pension are automatically increased by 25% by the pension provider to factor in the 20% tax relief.

    If you don't have to oay in to get the employer contribution then it gives you more flexibility, find out what you're investing in and how much they are charging. Employer schemes are normally cheap in terms of charges because they have larger numbers if staff and can negotiate a discount with the provider, but your company doesn't sound too clued up. If charges are abive around 0.5% then it can be cheaper and guve you more choice to pat separately into a personal pension or sipp.

    There are benefits in the comoany setting up a salary sacrifice or smart pension system, I'd raise this with HR if I were you. You automatically save the employee NI, so 12% of what you pay in, the employer would save their NI, which is nearly 14%, and may split some of this with you. It's a bit more administration for them but should be well worthwhile.
    • mark5
    • By mark5 2nd Dec 17, 8:04 PM
    • 1,203 Posts
    • 817 Thanks
    mark5
    • #8
    • 2nd Dec 17, 8:04 PM
    • #8
    • 2nd Dec 17, 8:04 PM
    I am not sure it is right if you pay it yourself by direct debit frombyour post tax pay - can you check or some cleverer people than me clarify it for you. Usually work pension deductions go before tax and your salary is paid after pension deductions were made.
    Another observation - your net per yer is then £14400. If you pay rent or have other payments that are not going to be present in retirement you could reduce this number by that amount and see how much you would need in retirement . Even if you needed the whole amount because you have no expenses now that are not going to be present when retired t does not look like a big number so with a pot of 127 k and a state pension it does not look that far off.
    As others mentiond you may consider a separate investment in either ISA, private pension (SIPP) or LISA. I would mae it low enougj that I am not tempted to cancell it due to other pressures - mirtgage , deposit savings , wife on maternity etc etc and firget about it and reassess inn10 years
    Originally posted by justme111

    Mine doesn’t, employer deducts NI and tax then pays my contribution to Aviva, who apply the tax rebate back to the pension fund.
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