Is your pension pot going to be large enough?

chewmylegoff

Joeskeppi wrote: »

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

the image you posted refers to "membership" not "service" - which implies that you have to have been a member of the scheme for 5+ years to receive the higher contributions from your employer, the length of service you have may be irrelevent.

not possible to conclude anything just looking at the image, but you may just want to clarify this with your employer.

Procrastinator333

michaels wrote: »

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.

Worth considering for personal contributions. But then how could you ever quantify this risk anyway? But it doesnt' change the logic of matched contributions. Take a straight 1 for 1 match (which most schemes offer to some point). That is £80 from your net pay = £200 into your pension. Imo the government will never make a change that would more than offset that advantage. Matched contributions are free money and a complete no-brainer.

Plus, that cuts both ways. It may be that in future in an effort to increase personal pension savings, the government actually cuts tax on pension arrangements.

michaels wrote: »

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.

I think you have either not written what you meant to, or don't understand what a pension is. There are not many asset classes that you can't invest your pension in.

michaels

I agree with this but all the asset classes must remain within the pension wrapper - you can not use it to fund life saving treatment for your child in the US that the NHS does not cover or to purchase a property in France.

The danger being that anything within a pension wrapper is by definition subject to govt rules on pensions that may change - what better way to fund the deficit if markets become jittery than to insist that pension funds must be invested at least 50% in guilts...

chucknorris

michaels wrote: »

I agree with this but all the asset classes must remain within the pension wrapper - you can not use it to fund life saving treatment for your child in the US that the NHS does not cover or to purchase a property in France.

The danger beign that anythign within a pension wrapper is by defniniton subject to govt rules on pensions that may change - what better way to fund the deficit if markets become jittery than to insist that pension funds must be invested at least 50% in guilts...

This is the reason I haven't really paid much into pensions. I did quite a detailed analysis on a spreadsheet to see if a DC pension was worth it (whilst beinga 40% tax payer). The conclusion I came to was that as an investment product it was quite good. But didn't invest because of what you highlight about it being stuck inside the pension wrapper.

Of course I can only say that because I am going to be quite well off when I retire. If however I was not in that position then of course I would be in a different position and actually NEED that secure income in my retirement from a pension, which then changes everything and means a pension is a necessity.

Loughton_Monkey

chucknorris wrote: »

My wife and I were talking about how much you need/want when you retire and we concluded about 16k (gross) a year. But we then wondered if most people will have this.....

Most people require a different amount.

Different people spend their lives in different occupations, on different salaries, and some with wife working and some not. So you cannot generalise.

A couple retiring when both were earning £50K would not be able to live on £16K.

We all work. We all earn money. We all earn different amounts. WE all choose between (a) spending every penny, and retiring on state pension only, or (b) saving some of it, so that we have more than state pension to live on, or (c) save enough of it to continue the same lifestyle after retirement.

Given that state pension is a flat amount, option (c) costs much more (as a proportion of salary) for high wage earners than low wage earners.

I simply chose option (c).

chucknorris

Loughton_Monkey wrote: »

A couple retiring when both were earning £50K would not be able to live on £16K.

Not everyone has the same spending patterns, my wife and I both earn more than 50k (by quite a margin) but we both feel that 17k (we forgot about dog ownership hence 17k not 16k) is about the minimum level that we would require. As it happens we both will have much more than that as we have provided very well for our eventual retirement. In fact I retired early (from my career but not my businesses) about 10 years ago but after selling one of my businesses decided to do something else, so came out of retirement to do part time lecturing last year.

Obviously different poeple will require different amounts, it's very subjective. The reason I posted this thread is that a lot of my friends don't seem to have thought out how much they need and I was amazed that most of them have not given the subject much thought. We have if anything massively overshot the amount we needed to acquire and have identified that we can and perhaps should be spending a lot more money than we currently do (which would of course take us to a higher requirement level than the 16k mentioned above).

setmefree2

Our pension plans were going great until we discovered how much it is going to cost to get our kids through uni

PasturesNew

I don't have a pension - and it's not worth starting now. If you have a manageable house paid for, then the basic, single state pension's enough to live on. As a single person, it's 1.5x what the dole is. And now the new/bigger one's going to be there, that's 2.5x dole... to be honest, it'd be hard (with a house paid for) to ever find a job that paid that much after housing costs.

The late Ed Investor on Investments said to me that unless you're a higher rate taxpayer, with an employer that pays into your pension, it's almost impossible for somebody to get any benefit from savings/pension, because the system always penalised you for it (no top ups available such as Pension Income Guarantee). With the PIG the single pension was topped up about £35/week, so unless your pension was paying you more than £35/week you'd have it clawed back from PIG - effectively spending your life throwing money you desperately needed down the toilet.

setmefree2

Procrastinator333 wrote: »

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.

Only if the stock market is rising - so that's a gamble - and your pension company isn't taking massive fees - also a gamble - since with most company pensions you have no choice over who manages your money. £200 in your pension pot sounds great until you realise how much of it gets taken in fees and how much you (can) lose when your investment goes down. AND you have to pay income tax on that £200 when you take it as a steam of income (pension income ) in your retirement.

Imho there is no point in puting all your eggs in one basket. Save for your retirement and pay off your mortgage. The £80 you pay off your mortgage today isn't just £80 it attracts compound interest for 25 years.

Personally, we put into our pensions as much as our companies will match, then it's Cash ISAs, some Share ISAs, then anything left POTM (pay off the mortgage).

setmefree2

michaels wrote: »

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.

and too many company pensions schemes have too high fees also and too few good funds to invest in imho.