What age should you start a pension??

LilacPixie

Thank you to everyone who has contributed so far.

Dunstonh - thank you for the link to the database of UK IFA's.

Can I just check is the % of income you should ideally be throwing into a pesion pot from your gross income?

I am quite keen for him to get something started ASAP. He was a student until May this year so we have always been used to just my income and now he is has a job with a reasonable wage of 23k a year I think we should consider a pension provision over and about the debt and mortgage we have because they are small and very managable.

dunstonh

Can I just check is the % of income you should ideally be throwing into a pesion pot from your gross income?

Like any savings/investment, the more you pay the more you get back at the end. So, it really depends on what you want back at the end. However, a very rough guide if you have no existing pensions is to take your age and half it. So, if you are 30, then you should pay 15% gross into the pension.

mitchaa

MrMicawber wrote: »

Start as early as possible. I'd start your partner off with a pension now and make any additional payments you can off your mortgage after the full whack has been put into a pension.

In regard to the debate above between dunstonh and Ed, I fall into the pension first camp. You might be tempted to spend ISA's but with pensions you just aren't allowed to. Yes with ISA's you have capital but you could end up elderly with all your capital eroded away and no income left - it could very easily happen.

So pension first then ISA's and mortgage payments for me. If you can do all 3 you are in a great position.

Lokolo - I don't think your statement is quite right - "The guideline is, half your age and thats the % of income that should be going into the pot".

I think it should be more like - The guideline is, half your age WHEN YOU START CONTRIBUTING TO YOUR PENSION and thats the % of YOUR income THROUGHOUT THE REST OF YOUR WORKING LIFE that should be going into the pot IF YOU WANT TO RETIRE AT AGE 65 ON A PENSION OF 2/3 YOUR FINAL SALARY.

The Society of Consulting Actuaries suggest the following (on the basis of the slightly amended definition):

Age
Percent of Salary to Save
25
10 – 15%
30
12 – 17%
35
15 – 20%
40
17 – 24%
45
23 – 30%
50
32 – 45%
55
50 – 70%

That is a horrendous table, who on earth pays anywhere near these amounts into pensions? What on earth do they live off of?

The above is complete rubbish.

My company has a FSP scheme which consists of a max 40yrs, with a requirement of 8% of Gross salary paid into it per month. 40yrs service equates to 40/60th of your final salary.

So considering pension age is 68, to gain from the full 40yrs, this allows me to start as late as 28.

Not a hope in hell i would pay anywhere near those figures.

Andy_L

mitchaa wrote: »

That is a horrendous table, who on earth pays anywhere near these amounts into pensions?

You're employer will be making contributions of ca12-20% of your salary (depending on age & career path & other scheme benefits) to the pension scheme in addition to your contribution.

dunstonh

That is a horrendous table, who on earth pays anywhere near these amounts into pensions? What on earth do they live off of?

They are only for those that havent made any previous contributions. It just highlights the problems of leaving your retirement provision too late.

The figures in the 20s and 30s are very reasonable. 40s is when it starts to get harder.

My company has a FSP scheme which consists of a max 40yrs, with a requirement of 8% of Gross salary paid into it per month. 40yrs service equates to 40/60th of your final salary.

Which is why final salary schemes are viewed as being valuable benefits.

Not a hope in hell i would pay anywhere near those figures.

For those not lucky enough to have a final salary scheme, its not all as bad as it looks. Remember there is tax relief and many get employer contributions. Those that dont will get it from 2012 when employer contributions become mandatory, albeit 3%.

MrMicawber_2

Hi Mitchaa - Yes the table is horrendous but unfortunately it is not rubbish as I hope you realise from the other replies.

I am also on a final salary pension which I am very grateful for.

Lots of people who aren't on final salary and whose employers make little contribution do have a real problem if they leave it late. Lots of othr people just leave it late anyway. It's basically just the effect of compound growth over time.

Only 20% of people are making sufficient provision for their retirement - an economic timebomb ticking away.

EdInvestor

IF YOU WANT TO RETIRE AT AGE 65 ON A PENSION OF 2/3 YOUR FINAL SALARY.

A target of 2/3 of final salary - an idea which goes back at least a generation - is probably rather out of date these days.

Thirty or 40 years ago there were no additional state pensions (S2P SERPS)..Now, many people are retiring on double the basic state pension level.In a two person household, we are talking already of a net income close to the basic wage, before we even look at private or company pensions.

In those days, most men would have to provide out of their pension fund for a dependant wife who would have no pension of her own at all.Going forward, spouses are likely to contribute equally to the household retirement income pot, reducing the burden on both.

mitchaa

MrMicawber wrote: »

Hi Mitchaa - Yes the table is horrendous but unfortunately it is not rubbish as I hope you realise from the other replies.

I am also on a final salary pension which I am very grateful for.

Lots of people who aren't on final salary and whose employers make little contribution do have a real problem if they leave it late. Lots of othr people just leave it late anyway. It's basically just the effect of compound growth over time.

Only 20% of people are making sufficient provision for their retirement - an economic timebomb ticking away.

Apologies, i did not mean for my post to sound as if you were talking rubbish. You obviously understand pensions far better than i do. I suppose i looked at the table, compared it to my own, and then thought that it was unrealistic.

I dont have any problems with making 8% contributions, although i shudder at the thought of making 20/30% + contributions even in my later years. My employer is currently putting 23% into the pot against my 8% to give me a FSP of max 40/60th.

Only 1 year in though, long way to go yet before i reach my 40/60th.

MrMicawber_2

EdInvestor wrote: »

A target of 2/3 of final salary - an idea which goes back at least a generation - is probably rather out of date these days.

Agreed it probably is. It does help focus the mind quite a lot though. It is probably better to work out, being very realistic, what retirement income you (both you and your partner where relevant) need and work back from there.

The key thing is to be realistic and not to underestimate which it is really easy to do. (No doubt some people will overestimate but I'd guess the problem lies with underestimating in the greater number of cases).

dunstonh

I dont have any problems with making 8% contributions, although i shudder at the thought of making 20/30% + contributions even in my later years. My employer is currently putting 23% into the pot against my 8% to give me a FSP of max 40/60th.

You dont need to. That is only for those that havent already started any retirement provision.

What the employer pays into a final salary scheme doesnt matter. You have a defined benefit.