Is your pension pot going to be large enough?

Jowo_2

Procrastinator333 wrote: »

Why only £5k state pension? Assuming you have the NI contributions and your OH has worked or looked after kids (or other way round). The state pension is £163 for a couple isn't it? That is £8,476.

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I used to think that couples could only get a couple's rate, a third less than two single pensioners, but this is not the case if they are both up to date with NI.

In that case, they will get £97.65 each - that's £10155 for the household per annum which is supposed to go up to around £102 pw each for 2011-12 (approx £10.6k for a couple).

http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_188551

The proposed flat rate pensions that are being considered is allegedly going to be £155 per person. I don't know if there is a 'couples' penalty but if not, thats 16k for a couple.

chucknorris

Procrastinator333 wrote: »

Apologies, had taken the quote below to mean you were ignoring it as only neglible and so not including it.

No worries, I have to teach our new module 'whole life costing' probably starting in the next acadmic year. So last week I was looking up what rate the Gov uses for discounting, at the moment the Gov uses 3.5% (which is where I got the 3% assumption from, erring on the cautious side of that figure))

Procrastinator333

Joeskeppi wrote: »

That's good to know. I have 10 years service at the moment so well in the extra part.

If you ever look to move jobs, keep in mind the value of that pension. Say you are 35, getting 12% company contributions. There is another job, 8% payrise, but only 3% employer contributions. You are worse off. Plus if by moving you give up that escalation in later years, it is even worse. At 55, you are basically getting another 20% of your salary for free. The catch is of course you can't get it until you are 55.

I personally would like to be putting in a little more than that, the rule I will try to stick to is that I want the total amount going in to my pension to always be half my age as a %. I think if I can stick to that we will be very comfortable in retirement. Should probably give the option of retiring a little early too.

System

Procrastinator333 wrote: »

If you ever look to move jobs, keep in mind the value of that pension. Say you are 35, getting 12% company contributions. There is another job, 8% payrise, but only 3% employer contributions. You are worse off. Plus if by moving you give up that escalation in later years, it is even worse. At 55, you are basically getting another 20% of your salary for free. The catch is of course you can't get it until you are 55.

I've never thought of that, cheers, good advice.

LilacPixie

chucknorris wrote: »

Well I think you are certainly ahead of most by thinking about it now. I think a lot of people stick their head in the sand and don't think about it until it's getting too late.

I started my pension when I was 20, but stopped it a few years later (I'm 52 now). But I did invest in property in the 90's so have no problems with retirement. But I think a lot of people are in for a shock now that final salary schemes are disapearing. I can see a lot of poverty for pensioners in the future.

To be honest I have my dad to thank for that. When i left Uni and got my first job ( still in it) he said the night before I started join the pension scheme asap and I did. The contribute double what i do up to 15% so at the moment i do 5% and they do 10%. OH scheme they match his contributions so he also contributes 5% and then match it. Pension statements come in every so often and I must admit to burying head in sand or well in a drawer to be honest so I have no idea what the current position is.

We decided a few years ago to have our family young and work butts off to be mortgage free by 40 and then enjoy our middle ages and possibly retire mid 50's if we could so really I have no option but to get my brain in gear and sort things and really what better time than while i'm on maternity leave and the baby is still sleeping quite a bit.

Procrastinator333

LilacPixie wrote: »

To be honest I have my dad to thank for that. When i left Uni and got my first job ( still in it) he said the night before I started join the pension scheme asap and I did. The contribute double what i do up to 15% so at the moment i do 5% and they do 10%. OH scheme they match his contributions so he also contributes 5% and then match it. Pension statements come in every so often and I must admit to burying head in sand or well in a drawer to be honest so I have no idea what the current position is.

We decided a few years ago to have our family young and work butts off to be mortgage free by 40 and then enjoy our middle ages and possibly retire mid 50's if we could so really I have no option but to get my brain in gear and sort things and really what better time than while i'm on maternity leave and the baby is still sleeping quite a bit.

Is that if you put in 15, they put in 15%?! Or up to 7.5% and 7.5%? Either way, please don't give away free money! Up your contributions. Assuming basic rate taxpayer, for every £80 of net salary you give up, you get £200 in your pension pot. Take whatever they will match. If you can't do it now, do it next time you get a payrise, rather than spending the extra 2,3%, up your pension contributions. Don't give away free money!

You won't be retiring on your pension in your mid 50's with your current levels of contributions.

Just to add to this. I see you are aiming to be MF. In terms of long term wealth. What do you think is better, £80 off your mortgage today, or £200 in to your pension pot. The £80 off your mortgage may feel more tangible today, but that £200 in your pension will in the long term make more of a difference. Imo.

LilacPixie

Procrastinator333 wrote: »

Is that if you put in 15, they put in 15%?! Or up to 7.5% and 7.5%? Either way, please don't give away free money! Up your contributions. Assuming basic rate taxpayer, for every £80 of net salary you give up, you get £200 in your pension pot. Take whatever they will match. If you can't do it now, do it next time you get a payrise, rather than spending the extra 2,3%, up your pension contributions. Don't give away free money!

You won't be retiring on your pension in your mid 50's with your current levels of contributions.

See thats what i mean by burrying head in sand.. with min they double my contributions up to 15% for them so if i contributed 3% they would do 6% so 9% altogether. If i contribute 7.5% they will ad 15% but if i added 105 they would only contribute 15%. I will up contributions early 2012 when i return from maternity leave I think. and yeah we are both basic rate taxpayers at the moment although I am sailing pretty close to the 40% banding so a payrise added to no elevation in the bracket could knock me into it

With dh they match his to a maximum of 10% i think but I would have to dig out the paperwork. He is a fair bit from 40% though

I think your right and we need to address the contributions, our mortgage is less than 2 times joint salary and we have a very comfortable lifestyle at the moment, we literally could up contributions with very little sacrafice but with ostrich syndrome we have just let things tick over quite happily.

Procrastinator333

LilacPixie wrote: »

See thats what i mean by burrying head in sand.. with min they double my contributions up to 15% for them so if i contributed 3% they would do 6% so 9% altogether. If i contribute 7.5% they will ad 15% but if i added 105 they would only contribute 15%. I will up contributions early 2012 when i return from maternity leave I think. and yeah we are both basic rate taxpayers at the moment although I am sailing pretty close to the 40% banding so a payrise added to no elevation in the bracket could knock me into it

With dh they match his to a maximum of 10% i think but I would have to dig out the paperwork. He is a fair bit from 40% though

Wow, that is also very generous, bite their hand off!!!

When you are debating between paying off mortgage or upping your contributions. Think £80 off the mortgage (net pay) or £300 in the pension pot (Your £100 gross, plus 2X matching). For your OH, the option is £80 off the mortgage, or £200 in the pension. Personally I would be paying up to the point they no longer match for both schemes. This is of course only true up to the point they stop increasing their contributions for both of you.

It might make becoming MF more difficult, and might make money a little tight, but it will make such a difference. Also keep in mind, with a pension, you can take 25% tax free on retirement. So even if you hadn't managed to become MF because of this, you will clear it off with your pension lump sum.

Each to their own, but matching contributions are free money. I personally never say no to free money!

michaels

I worry with pensions that there is nothing stopping the govt changing the rules and moving the goalposts - look at Hungry where they 'nationalised' private pensions - similarly they can change rules on taxation of pensions, tax free lump sums, annuity rules etc at will. already everyone pays a levy out of their pension to cover underfunded schemes, may be at some point the govt will decide it is unfair that some have much bigger pension pots than others and move to 'share' them a bit.

At least if you have the 'cash' there is the opportunity to move it in to different asset classes or even 'hide' it if need be.

vivatifosi

michaels wrote: »

I worry with pensions that there is nothing stopping the govt changing the rules and moving the goalposts

That is something that needs to be considered michaels. In my scheme and I'm sure many others across the country, we're having to take advice on the whole RPI/CPI thing. So people have accrued benefits on RPI and the government want to change it to CPI, and this may not just be public sector pensions either. There's more to play out here, but people should certainly be aware of the ramifications and keep an ear out for what happens.