Advice on my pension provision

Savernotspender

I'm hoping you can help me.

I started saving for retirement a bit later than I would've liked in 2009. I'm 30 now. I earn £35K and currently put £150/month into a stakeholder pension (my company doesn't offer pensions) as well as £170/month into a stocks and shares ISA I already had.

I've been trying to work out if this is enough, I'm having trouble with pension calculators as it's not all in a pension and therefore not all "grossed up"

I've tried to find out what to aim for and seem to have confused myself - is it half my age - 15% and in which case 15% of what? gross salary or takehome?

So basically - do you think this is enough or do I need to up my contributions?

Many thanks.

Lokolo

The percentage is really what you should have started with, so if you start now you want to put in 15% of your gross salary.

Personally, £150 on £35k is nothing..... around 5%. Depending on your lifestyle you should be putting more in. Do you have a house or do you rent? Do you have kids or not or planning on having them?

HL's pension calculator gives a predicted income of £5,100 in today's terms based on your contribution. Plus the state pension of £5k means you will be living off approximately £10k a year through your pension, no idea about S&S ISA, without tax bonus you will have 20% less in your pension pot so I imagine that could give you income of around £3k. Overall thats approximately £13k a year you'll be living off.

dunstonh

The "half your age" guide is for people who have yet to start provision. Its not for those that have existing provision. It is also more of a guide to get people to think of realistic payment amounts and not just £50pm.

Savernotspender

Hi,

Thanks for your advice.

So from Lokolo's calculations I should be looking to double my contributions? I'm assuming I could happily live on £26K a year (I own a home with my partner and would hope to be mortgage free by retirement, no plans for kids) but not £13K.

Is that right? £650/month? :eek: I couldn't afford that. Am I already b*ggerd?!

Lokolo

On £35k and you cannot afford to put £650 away for retirement? Start by increasing your pension contributions every few months. So say 1% every 2 months for the next year. You will gradually get used to the less income every month. Another idea is whenever you get pay rises, instead of leaving pension contributions the same, increase them to offset the salary increase. So if you go from £35k -> £38k, make your take home stay at £35k and put the extra £3k by increasing pension contributions.

http://www.makesenseofcards.com/soacalc.html

If you want to budget a little better you can do the above and see where you are "overspending" because honestly, if you are on £35k your take home after your current pension should be £2k. Which makes £650 in your pension completely affordable, especially if you have a partner (and assuming they pay half the mortgage and bills!)

mania112

you really think someone should be able to put £650 in a pension when they have £2k, per month?

That doesn't sound realistic to me.

What about other savings? Saving for retirement isn't the only requirement.

dunstonh

What about your partner's pension provision?

£20k income in retirement income in your name would see you pay £2000 tax. £10k each would see you pay no tax. The contributions required for that would be the same.

Also, if you aim for £26k in your name only, you will be over the age allowance reduction figure. So, using spouse or partner helps reduce that (as well as ISAs).

you really think someone should be able to put £650 in a pension when they have £2k, per month?

£650pm into a pension costs £520. So, its not as bad as that. However, more realistic is £250pm and then using the days of no more mortgage payments in your 40s and 50s to make up for the lower amount you paid in your 20s and 30s.

Lokolo

mania112 wrote: »

you really think someone should be able to put £650 in a pension when they have £2k, per month?

That doesn't sound realistic to me.

What about other savings? Saving for retirement isn't the only requirement.

I will be on £33k, I will be putting 8% in pension, saving £1k a month but will be living at home, the rest will be for entertainment, and travelling costs (commuting into London). When enough saved I will buy a house and still live off this. I will be living alone. The fact the OP should only have half bills and mortgage repayments makes me think he should be able to save more.

Even with a mortgage of £1k, then halved, means the OP can easily afford it:

£2200 take home:

£650 into retirement
£500 mortgage
£80 food
£200 bills (extravagant life style!)

This leaves £700 for travel, other savings and entertainment. Are you saying this isn't possible?

Savernotspender

Hi,

Thanks for your replies.

My partner's an NHS dentist so from what I understand her pension should be pretty good.

I think I could put my contributions up a bit more. I'll try and up it when I get a pay rise as well. I do save cash for other more mid-short term purposes (I hope to get married one of these days!) and I don't want to reduce that at the moment.

It's pretty tricky balancing living now with saving for future. I don't want to spend the next the 35 (40?) years being dead tight, not going on holiday etc. in the hope of going on a couple of cruises before i'm too poorly and spend the rest of my life in a nursing home!

mania112

Lokolo wrote: »

I will be on £33k, I will be putting 8% in pension, saving £1k a month but will be living at home, the rest will be for entertainment, and travelling costs (commuting into London). When enough saved I will buy a house and still live off this. I will be living alone. The fact the OP should only have half bills and mortgage repayments makes me think he should be able to save more.

Even with a mortgage of £1k, then halved, means the OP can easily afford it:

£2200 take home:

£650 into retirement
£500 mortgage
£80 food
£200 bills (extravagant life style!)

This leaves £700 for travel, other savings and entertainment. Are you saying this isn't possible?

in the real world, no i don't think this would be possible.

the OP has since responded as i expected, why are you assuming both are on £35k?! The split is rarely 50/50, i'd wager.

I'd suggest your estimate of a food bill is too low.

And you've forgotten (unless included in £200 bills) petrol, car insurance, credit cards, loans, gym membership, mobile phone, life insurance, etc etc etc

I guess the moral of the story is that it's too difficult to answer the most simple questions on a forum when a full 'factfind' of circumstances are required.

Lokolo

mania112 wrote: »

in the real world, no i don't think this would be possible.

the OP has since responded as i expected, why are you assuming both are on £35k?! The split is rarely 50/50, i'd wager.

I'd suggest your estimate of a food bill is too low.

And you've forgotten (unless included in £200 bills) petrol, car insurance, credit cards, loans, gym membership, mobile phone, life insurance, etc etc etc

I guess the moral of the story is that it's too difficult to answer the most simple questions on a forum when a full 'factfind' of circumstances are required.

I believe I am being a little general, and obviously you are quite new to budgeting, £80 per person for food is not difficult, I do it every month and there are plenty of people who do (just go over to Debt Free Wannabe board and ask how much people do spend on food).

Petrol and Car insurance under the £700 for travel.
CC - what has a CC got to do with anything?
Gym - £30 max a month, and is a luxury, so comes under the £700 for entertainment
Mobile Phone - again a luxury which would come under the £700
Life Insurance - again a luxury

For the above things you have described it would take off around £150, still leaving £550 a month for other luxury such as saving for a holiday, MOT, emergency savings (but tbh I would count £650 as some of this) and travel.

There's a difference between necessity and luxury.