Need advice on my pension plase..

ferry

Hi all
I'm currently paying around £35 per month (and have been doing so for about the last 10 years) with the Prudential.
It's now time to take a look at my pension payments and to increase it to a reasonable level to give a comfortable retirement.
Can anyone offer a 35 year old looking to retire at 60 advice on how much I should realistically be investing each month to meet the planned retiremant date..?


Thanks

Terry

simonhgreen

Erm, you need to save as much as you can afford!

People seem to lose all sense of reality and drastically underestimate how much they need to save.

Logically, if you're saving £35 per month, £420pa, even with the miracle of tax relief and compound interest you're not looking at a whole load of money.

With investment returns not producing much more than 7%p.a. it's clear you need to up your cons as much as possible.

A rough rule of thumb is that you should aim to save half your age e.g. if you're 35 look to save 17.5% of your salary, 40 would mean saving 20%, etc.

To get an idea of what your savings could grow to click on the link below...

http://channels.aolsvc.co.uk/money/pensions/?n=navbar&p=money&c=money

EdInvestor

If Ferry does not earn much, he probably shoudn't be saving in a personal pension at all, in that he would be depriving himself of state benefits when he retires.

Ferry, are you contracted in or out of SERPS (S2P) the state second pension, do you know?

ferry

Thanks guys.
I think I am contracted out of SERPS,but I dont have the benefit of the paperwork in front of me to confirm that.
I will check as soon as I can for sure and post back to get some more advice if thats OK.

thanks for the help so far..

dunstonh

£35pm isnt going to let you retire at 60. Indeed, it isnt going to get you much at 65 either. If you take an annuity rate of say, 4.5% at age 60, then a fund of £100k at retirement will give you £4500 p.a. in retirement.

(£35x12)x25=£10,500 in contributions. You would be looking at a final found value of £35,000 (estimate because no-one knows what future growth could be). £35,000 x 4.5%= £1575p.a. income at 60.

If you want £15,000 p.a. income at 60, then you are looking at needing a fund around £333,000. To get that, you would be looking at contributions of around £700 per month (at 5% growth) or £500pm (@7% growth).

EdInvestor

A good starting point when reviewing pensions is to get a forecast of your state pension entitlement. Request one online:

http://www.thepensionservice.gov.uk/atoz/atozdetailed/rpforecast.asp

THe Pru should also be able to give you a forecast of your personal pension ( indeed there might be one on your last statement)?

ferry

Thanks guys..
I was wondering if I am unable to up the ante on my payments for some time,would I be better off transferring any accumalated pension funds so far into a long term ISA..?

Thanks again...

MrChips

No can do ferry. Once you have picked up the tax relief on your contributions going in, you can't withdraw the funds until you claim your pension, which you won't be able to do until you are beyond 55, and then only 25% as a lump sum.

dunstonh

pension funds and ISA funds are generally much the same. Indeed, they can be exactly the same with the right pension/provider. So there is absolutely no difference on performance potential.

The only difference is in the tax wrapper which has pros and cons depending on your personal circumstances.

EdInvestor

You could of course put all your new contributions into an ISA, which would give you flexibility.

As of next year, you'll be able to switch big lump sums into pensions near retirement to take advantage of the tax relief.You can't do that now, if you don't use the tax relief year by year, you lose it.

When the new rules come in, IMHO ISAs will be the way to go if there is no pension with a contribution from your company available.

dunstonh

When the new rules come in, IMHO ISAs will be the way to go if there is no pension with a contribution from your company available.

Unless you are a higher rate tax payer, in receipt of childrens/working tax credits, need the discipline of the tie in with a pension or can access funds cheaper on personal pension and prefer to do it that way. There are also inheritance tax advantages when using a pension which are not present on ISAs.