Basic Query

mitchaa

Using this calculator...

http://www.h-l.co.uk/pensions/interactive-calculators/pension-calculator

You should have around £11.5k pa or around a 25% final salary. (Age 29, salary £45k, pension contributions £430pm, current fund value = £9k, retirement = 60) If you were to work on until 65, your pension would rise to £16.4k pa (36% final salary)

Is your employer matched at maximum just now? I am also in a GMP scheme, and employer contributions rise by 1% every 5yrs upto a maximum of 10%. I am currently at 6% and 6% so in 20yrs time, I should be at 10% and 10%. I'll be 47 at that point and plan on retirement at 65. Saying that, 1% of my employers contribution is for death in service, long term sickness benefits, so in reality, it will always be 11%, 13%, 15%, 17%, 19% going into my fund.

I think when my mortgage is paid off, I can start sticking in a hell of a lot more. At 27 though and with a £200k mortgage for me, it's a little difficult to justify putting anymore into it.

mitchaa

If you were to increase contributions now upto £845pm, you would get a £20kpa pension at 60 and be able to take out 13% of your fund tax free (£49k) This £49k would cover the shortfall for the 8yrs whilst you were awaiting state pension. £20k pension at 60 would give you £1490pm of your £2kpm target. (£510 shortfall x 12 x 8 =£48,960)

This would give you your £2k pm from 60-68.

At 68, when your tax free money has run out, your state pension kicks in to give you that £8.5k that you were missing still enabling you £2000pm.

You are putting £430pm into you pension just now. A further £415pm just now and the plan above 'should' work? Unless im missing something?

SaverT

mitchaa wrote: »

If you were to increase contributions now upto £845pm, you would get a £20kpa pension at 60 and be able to take out 13% of your fund tax free (£49k) This £49k would cover the shortfall for the 8yrs whilst you were awaiting state pension. £20k pension at 60 would give you £1490pm of your £2kpm target. (£510 shortfall x 12 x 8 =£48,960)

This would give you your £2k pm from 60-68.

At 68, when your tax free money has run out, your state pension kicks in to give you that £8.5k that you were missing still enabling you £2000pm.

You are putting £430pm into you pension just now. A further £415pm just now and the plan above 'should' work? Unless im missing something?

That looks better - a bit more optimistic again!

Just done the same thing with actual figures, I current earn £52k, both myself and employer pay 5%, employer won't rise but I can increase my bit, if I increase mine to 10% then I would (according to the calculator) at 60 would have a pension fund of £436k, 15% lump sum would be £65k, leaving pension of £15.6k. So £65k tops this up to £24k a year (8x£8k) then state pension of (hopefully) £8k at (maybe) 68. Other than that I'm there. (missing tax? - could probably do with savings of £65k or more to fund that bit and leave the lump sum alone)

I'm currently clearing the last of my debts which should be gone early next year, maybe I should increase pension contributions by what I pay to student loan every month (£277!) as soon as it ends, I've never seen that cash anyway.

Thanks for all the replies, the point about expecting 10% contributions to turn into 66% pension is a good one.
I guess to turn this into more realistic for my aims, I currently earn roughly £3k net per month and would like £2k net pension however gross that means something like £52kpa and £ £28kpa so 54%. Also assuming £8k state pension means needing to self fund £20k so down to 38% so even with huge returns on pension fund I guess I should be looking at 20%+ contributions to fund that.

I just need to get out of the mindset that good salary now equals good pension - That's only true if I contribute a significant portion of salary now.

As for mortgage...Not started that one yet!

Thanks for all the advice - my conclusion - as soon as student loan ends, throw that into pension, build up house deposit for 2-3years, buy house, pay off mortgage for 15yrs or so then have from my mid 40's to build as big a pension fund as possible before putting my feet up at 60! Sounds easy!:)

PS. Why does my conclusion suddenly make me feel like I'm wishing my life away?!

mitchaa

SaverT wrote: »

That looks better - a bit more optimistic again!

Just done the same thing with actual figures, I current earn £52k, both myself and employer pay 5%, employer won't rise but I can increase my bit, if I increase mine to 10% then I would (according to the calculator) at 60 would have a pension fund of £436k, 15% lump sum would be £65k, leaving pension of £15.6k. So £65k tops this up to £24k a year (8x£8k) then state pension of (hopefully) £8k at (maybe) 68. Other than that I'm there. (missing tax? - could probably do with savings of £65k or more to fund that bit and leave the lump sum alone)

I'm currently clearing the last of my debts which should be gone early next year, maybe I should increase pension contributions by what I pay to student loan every month (£277!) as soon as it ends, I've never seen that cash anyway.

Thanks for all the replies, the point about expecting 10% contributions to turn into 66% pension is a good one.
I guess to turn this into more realistic for my aims, I currently earn roughly £3k net per month and would like £2k net pension however gross that means something like £52kpa and £ £28kpa so 54%. Also assuming £8k state pension means needing to self fund £20k so down to 38% so even with huge returns on pension fund I guess I should be looking at 20%+ contributions to fund that.

I just need to get out of the mindset that good salary now equals good pension - That's only true if I contribute a significant portion of salary now.

As for mortgage...Not started that one yet!

Thanks for all the advice - my conclusion - as soon as student loan ends, throw that into pension, build up house deposit for 2-3years, buy house, pay off mortgage for 15yrs or so then have from my mid 40's to build as big a pension fund as possible before putting my feet up at 60! Sounds easy!:)

PS. Why does my conclusion suddenly make me feel like I'm wishing my life away?!

You have answered your own question.

Increasing your contributions upto £845pm in order to retire at 60 with a £20k pa pension seems achievable.

You need to find a further £415pm to put into your pension. Well, it looks like you have already found this as your plans of portioning off your student loan towards your pension when it ends achieves this.

£415 gross should only cost you £249 in net take home with 40% relief. Your student loan currently costs you £278 net so you will actually be up £29pm net by diverting £415 towards your pension in place of your student loan. (14.5% personal contribution, 5% company contribution = 19.5% per month)

This plan will give you £2000pm from your 60th birthday (Taking out a £49k lump sum to fund the defecit for the 8yrs)