How much do you pay into you pension?

Paul_Herring

davidcampbell wrote:

i was reading today that most "experts" suggest you should be paying in approx half your age as a percentage of your salary? is this right? i should in theory then be paying in around 12% of ym salary which is around twice what i can afford.

where do they get this figure? it doesnt appear to specify what sort of pension that would accrue??

http://www.cavendishonline.co.uk/COL/Media/articles/seoct02.htm

2 thirds final salary according to that page.

Bear in mind that (I believe) the figure is what has to enter your pension, including the governments rebate and any employer contributions. i.e. if it's just you contributing, that's 9.36% (12% x 78%) of your gross salary.

dunstonh

It is a guidance figure for what someone should contribute assuming they have no pension provision already. The half age rule doesnt apply if you already have pension provision.

There are a few other "sayings" too:

For example, as a rough guide, an 18 year old could pay £30pm net (increasing annually with inflation) for the rest of their life and end up with around £10k pa pension income.

Every 5 years you delay your pension provision, you need to double your contributions when you start. i.e. £50pm at 20 then £100pm at 25 to end up with the same pot.

These types of sayings are rough guides only but they are more designed as sales phrases to encourage people to save early and save as much as they can. As they are a guide, they don't take into account type of annuity you will get at the end and usually assume you dont take a tax free lump sum.

If you cannot afford 12% (gross) then you should start with something but increase it annually in steps until you get there. Taking the hit in one go is a lot harder than getting there over a number of years.

windiest

deemy2004 wrote:

My crystal ball can't see how the economy can finance a vastly growing elderly population, even if some work a little beyond retirement, its already visible in whats happening to final salary schemes. The markets will also reflect this in ever lower annuity rates and in the valuation criteria of assets such as stocks, property and shares.

Though I hope I'm wrong !!!, in this case it would be nice to think I was wrong :-/

My first time today on this site .This makes good sense to me ,going on from your point what happens to UK Ltd when China matures and wants what we have.

DiggingOut

Discussion a while back on this thread about marginal tax rates being lower when retired.

This is not necessarily a one-way bet, although it is a pretty good one if you are a higher rate taxpayer. But if you are a basic rate taxpayer, it is entirely possible (in fact, I think likely) that you will still be a basic rate taxpayer in retirement, if you have taken retirement provision seriously. And I think it is almost certain that we are going to see a higher basic rate in the future -- I think within five years, but certainly within 10-15 as the population ages, and fewer taxpayers have to support more pensioners.

deemy2004

windiest wrote:

My first time today on this site .This makes good sense to me ,going on from your point what happens to UK Ltd when China matures and wants what we have.

Everywhere I look I see big problems all the way from the private pension funds pulling £50 billion out of stocks every year... To the exploding hole in the public sector pensions liability which appears to be doubling as we speak from about £350 billion to £700 billion.. Now the national debt is only £375 billion.

I just cannot see how UK Ltd will be able to finance its growing pensions liabilities..

Not forgetting the pension liabilities to local authorities which are partly but significantly responsible for the lage increases in council tax bills to date and to come.

The burden on the tax payer and the pension funds / companies to meet these liabilities will be too great to bare, and the net result will be the value of assets will be marked down upon which payment of these pensions rely, thats stocks, properties and bonds as liquidity dries up.

Paul_Herring

deemy2004 wrote:

Not forgetting the pension liabilities to local authorities which are partly but significantly responsible for the lage increases in council tax bills to date and to come.

Might this have some relation to the proposal for people in the public sector to vote today on whether to strike because they are being forced to have their retirement age raised from <shock> 60 to <horror> 65?

If only I had the luxury of a state funded final salary pension...

deemy2004

Yeh somethings got to give..... UK can't fund a public pensions pot which is twice the size of the national debt. Forget Brown dancing around a budget deficit of £35billion .... this ones over £300 billion extra defict on 2 years !

davidcampbell

thanks for the advice peeps

have just upped my contributions and will increase it steadily over the next few years.

thanks again

DC