Worried about pension and possible redundancy...

Big_Butts

I'm 41 (birthday in January) and probably about to be made redundant.

My pension, I think, looks fairly healthy.

I'm in a company scheme, where they pay 7.5% initially and then match the first 2.5% contribution that I pay- so 12.5% of salary goes into pension fund.

I'm contracted out, although I'm still awaiting 2004/5 payment as Inland Revenue are having problems calculating amount due.

I'm expecting about £1200 for 2004/5 and about the same for 2005/6 - so thats about and additional £2500 to go into my pension pot.

I've currenlty got a Scottish Widows pension that has about £112,000, plus as I say another £2500 due to be paid in, in the next few months.

If I was to be made redundant and unable to make any further payments into my pension, then I was wondering what it might be worth if I left it till I was 55.

I was once told that as a rough rule of thumb that your pension pot "roughly doubles in amount every 7 years"

If this is the case then as a rough estimate that would mean about £450,000.

Does this sound reasonable, as this would allow me to take 25% tax free lumps sum of around £112,000.

If I was to have about £450,000 in my fund when I reached 55 would that be enough to live off, assuming no debts/mortgage to pay.

What yearly pension could I expect from £450,000, or £340,000 if I took the 25% tax free.

I suppose what I'm asking is do I need to worry about making further contributions to the pension if I'm made redundant ?

dunstonh

I was once told that as a rough rule of thumb that your pension pot "roughly doubles in amount every 7 years"

Whilst a decent portfolio will manage that historically (future unknown), I would certainly not want to assume that on an old fashioned or basic pension plan.

What yearly pension could I expect from £450,000, or £340,000 if I took the 25% tax free.

at 55 and with those figures, around £11900 p.a. income index linked.

I suppose what I'm asking is do I need to worry about making further contributions to the pension if I'm made redundant ?

I would be more concerned on your portfolio. After all, its where the money is invested which is the most important thing. Yet it's the one thing you havent mentioned. That would also go a long way in deciding what future contributions may or may not be required.

Big_Butts

Thanks for such a quick reply.

Fund details are as follows :

Newton Managed Pension Series 2 - 39,743 Units @ 141.1 = £56,077
Shroeder Managed Pension Series 2 - 46,195 Units @ 121.5 = £56,126

My monthly contributions are currently split 50/50 between these two funds.

I am allowed three changes per year to my fund without charge, although I have never exercised this option.

Hope this helps to formulate any advice.

EdInvestor

If I was to be made redundant and unable to make any further payments into my pension, then I was wondering what it might be worth if I left it till I was 55.

If this pot of 114,500 was left to grow @7% p.a net ( the standard rate for risk projections),.after 14 years at aged 55 it would be worth 295,242.

If you wanted it to get to 450,000, you would need to add 550 pounds a month ( assuming basic rate tax relief is more or less cancelled out by charges).

After taking tax free cash, the 450k pot would provide an income of 12,736, index linked at 3% using today's rates.

If you do get made redundant, be sure to make voluntary contributions into the basic state pension, which is a bargain these days - it would cost you nearly 100k to buy this c. 5k index-linked income stream on the open market.