Just started my own business... what contributions do I make

darrenratcliffe

Hi all

I am looking for a bit of advice - I currently have a NU pension that I got around 3 years ago and I currently pay around £20 a month out of my take-home pay into it. I think the fund value is a whopping £1600 - wow! (I'm 30).

It looks from my (2007) annual review that I have a Series 2 With Profits3 S2 fund.

Firstly I am one year into running my own company and would now like to get the company contributing to the pension, and was thinking maybe £50 a month but I wanted to know if anyone had an advice on how much I should be paying into my pension year by year - obviously come 55 I want to be comfortable so know I need to up my contributions!!

Secondly, have I got a good plan - from memory I went for medium risk - should I get a second high-risk pension, or just pay into the one I've got now... or totally change it?

Thanks in advance for your help

Best regards

Darren

P.S. The company is a web development agency - www.redstarcreative.co.uk :rolleyes:

dunstonh

I think the fund value is a whopping £1600 - wow! (I'm 30).

Ok, you have some catching up to do then

Firstly I am one year into running my own company

Is this limited company, partnership or sole trader? This is very important because the answer will impact on your retirement planning.

and was thinking maybe £50 a month

oh dear. I think you need to be more realistic than that.

obviously come 55 I want to be comfortable so know I need to up my contributions!!

To get around £25k a year at age 55 you will need to be paying £630 a month and the payments would need to increase each year to keep the figure at that in real terms.

Secondly, have I got a good plan - from memory I went for medium risk

Don't mix up the pension and provider with the investments. The pension has no level of risk. It is just a tax wrapper. A container you put your investments in. The NU personal pension has over 100 funds ranging from cash funds to high risk natural resources and emerging market funds.

My remarks on your retirement planning are that you are not being realistic and with a £50pm contribution you are not going to be able to retire at 55. Indeed, you would have to go through to your state retirement age of 67. At £50pm and increasing that each year to maintain its real terms value you would end up with a pension around the £5000 a year mark at age 67. State pension if you are self employed is £4700 so you would be earning just under £10k a year in todays terms in retirement.

Early retirement is not going to happen for you unless you fund it. You have 25 years to get to age 55. You cannot expect 25 years of £50pm to pay you much. Remember you are likely to live around 35 years after that.

Sorry to have given you the bad news.

darrenratcliffe

Hi Dunston

I know that my retiement savings aren't the best in the world, but unfortunately I haven't really been in a position to save - and now I can start at £70pcm (including the £20 I currently do) and it's a lot better than I was before!

Hopefully as my business grows (which is a limited company) then so can the contributions I can make. I think a sensible target for me is to increase my contrbutions every six months by £50 providing the company will allow for this and then I can catch up gradually!

My other task is to get debt free so I want to balance the two and hope that doing both of these, added to the growth of my business, and some sensible investments will pay off!

Thanks for your comments

Darren