Is there a % of current salary to aim for?

gazza975526570

I know there are so many if's/but's - is there a % of my current salary i should be aiming for?

My employers currently pay 11% of my current income, however projections currently show my projected pension being only approx 20% of my current salary.

Im currently 35.

Last two years ive managed to stay under 40% tax but 40% of this has been through overtime and bonuses (which dont count towards my pension %).
Im thinking this year with the reduction in wages before paying 40% tax to pay AVC's.

Is there a % anmount of current salaries that can be applied (aware i wont have a mortgage by then etc)

Aegis

How are the projections calculated? Do you have the option to show the projected effect of changes made to contribution levels, the risk taken or the age at which you commence payment?

If not, it might be worth using a pension calculator like this one to help you work out what you might get (though bear in mind that it's still fairly limited in terms of what assumptions you can use):

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

dunstonh

The crude method is half your age. However, that makes many assumptions which may not fit with your plans. (e.g. when you want your money, how you want your money, what risk level you are investing at and how much income you want in retirement).

gazza975526570

Thanks both - yeah ive played around with various calculators at my employers and elsewhere - the problem being in my OP im not really sure what % of my salary i should be aiming for. Is there a viewpoint for what the "average" person should be aiming for?

PS - thanks for the calculator Aegis - i used that just before posting.

Dunstonh - as a side comment do you mean i should (roughly) contribute half my age in contributions? IE at 35 contribute 17.5%?

Aegis

gazza975526570 wrote: »

Thanks both - yeah ive played around with various calculators at my employers and elsewhere - the problem being in my OP im not really sure what % of my salary i should be aiming for. Is there a viewpoint for what the "average" person should be aiming for?

PS - thanks for the calculator Aegis - i used that just before posting.

Dunstonh - as a side comment do you mean i should (roughly) contribute half my age in contributions? IE at 35 contribute 17.5%?

I may have misunderstood the original question - I thought you were asking what percentage to aim to contribute. If you're looking for what you should aim to achieve in retirement, that's very much more open to debate.

The simplest way to do it is to work out how much you would like to spend each year and aim for that. For example, if you're going to be mortgage free, work out how much you would pay in council tax and utilities, food shopping, holidays, monthly entertainment, travel costs, etc, all in today's terms. Then aim for that as your real (inflation-adjusted) requirement for income. You might also want to add on a bit extra so that you can life comfortably rather than just within your means.

If that's too much work, take a look at 50% and 65%, as many people shoot for those sort of figures. This is much less reliable than a lifestyle planner, however, and you may end up with less than you need even if you hit your target.

paulwellerfan

dunstonh wrote: »

The crude method is half your age. However, that makes many assumptions which may not fit with your plans. (e.g. when you want your money, how you want your money, what risk level you are investing at and how much income you want in retirement).

my daughter is nearly 18 and on 14k:j
where as i am on about 28 and 40 plus years old:mad:

very crude figures:)

dunstonh

my daughter is nearly 18 and on 14k

So, assuming she has no retirement provision to date, she should be looking to pay around £105 pm gross.

where as i am on about 28 and 40 plus years old

assuming you have no retirement provision to date (which we hope not), then you would have to be looking at £466pm gross.

snowqueen555

I read an article last week saying the highest average gross is 16.5% of salary.

The highest for my scheme is 14% and the normal is 10%

However I'd pay more if I could

Loughton_Monkey

Averages are averages. Individuals are individuals.

It is a 'fact' that to retire at, say, age 65 on 2/3rds of final salary will have required and avearge input of up to 25% of salary over the whole career. There is no escaping this ball-park fact - although there are very valid arguments, of course, that this 25% doesn't have to be all in pensions. There are other investments. So I always prefer to suggest that 'investing' about 25% for retirement is necessary.

However, individuals are different. It can be a different figure for people in different circumstances. To illustrate with an example: Imagine a family who have one main wage earner. Reasonable salary, say, of £20K when he started - moving up with promotions to £50K towards retirement - ALL in today's values.

Imagine they have three children. Wife has chosen to be career mother and housewife. Kids have been doted on. No expense spared. Mortgage has been struggled with. Occasional necessary expenditure on roof of house. Kids get priority for money - music lessons - best computers.... All go to University. All well 'finded' by parents. Throughout life, the parents have also had to struggle with parents - failing health. A bit towards nursing fees or helping parents out...... you get the idea.

Now it is more than likely that this couple can approach retirement on their own. House paid for. Youngest daughter has just had her (expensive) wedding. All children left home - all with nice careers.... Now in the final analysis, this couple have actually led their own personal lifestyle on, say, £20K a year (today's values). Between them, they will get £12K State pension. So 'all' they needed to provide was another £8K per year (inflation proofed) to contiue that lifestyle until they die. This would come at a far lower cost than 25% of salary.

This is why I tend to suggest that retirement planning should be done completely aside from 'salary' but more from the point of view of (a) Knowing intimately the 'cost of lifestyle' and more importantly the cost of the lifestyle you want to maintain, and (b) ensuring that the amount by which total spending is less than income is invested properly, and that this investment needs to supplement State Pension and ensure that it makes up the difference.

In my own case, for example, I think I am the 'reverse' of the mythical couple above. We have no children, and so, to a large extent, all our spending - apart from mortgage payments - could be defined as 'cost of our lifestyle'. As a consequence, I have probably needed to save more than 25% on average - and indeed almost certainly did - not least because I could retire early.