Age to start paying into a pension?

candykisses

[QUOTEAge 40 is the point where you need to start paying £300 to get that £12k. Its three times more expensive now than starting at 18.

The steepness of the increases now shows as it only takes to age 44 to require you to pay £400pm and just over 47 to require £500.[/QUOTE]


hi , sorry to butt in on the thread - I'm approaching 40 and was asking about pensions on another thread recently, basically haven't got one yet.

so if I started at 40 with a net contribution of £300 per month, aiming for a £12k per annum pension - would my £300 per month stay at that amount for the whole term or would I have to increase it every year?

that's what the worrying thing is about starting one for me. yes, i could at a push afford £300 per month but if by the it was suddenly escalating dramatically I doubt I could afford to do it.

also, when you say around £12k, do you mean that in todays terms - ie. I would have the spending power of £12k when I was 67 for example - or would that £12k the equiavlent of say just £4k when I reached retirement?

sorry for being a bit dim!

dunstonh

so if I started at 40 with a net contribution of £300 per month, aiming for a £12k per annum pension - would my £300 per month stay at that amount for the whole term or would I have to increase it every year?

On those examples, it assumed a 3% p.a. premium increase and a medium risk investment strategy.

that's what the worrying thing is about starting one for me. yes, i could at a push afford £300 per month but if by the it was suddenly escalating dramatically I doubt I could afford to do it.

3% isnt bad and its actually below inflation. So, it should be affordable.

also, when you say around £12k, do you mean that in todays terms - ie. I would have the spending power of £12k when I was 67 for example - or would that £12k the equiavlent of say just £4k when I reached retirement?

Todays spending power.

candykisses

dunstonh wrote: »

On those examples, it assumed a 3% p.a. premium increase and a medium risk investment strategy.



3% isnt bad and its actually below inflation. So, it should be affordable.



Todays spending power.

Thank you duntosh.

is that 3% compounded each year? just seems that by the time I hit 50 my net contributions would be getting quite hefty (usually get a 2% pay rise per annum)

I just used a pension calculator online http://www.hl.co.uk/pensions/interactive-calculators/pension-calculatorand it said if I put in 300 per month that by 67 i would have a fund of £161k with a projected income of £7500.


Does this mean £300 net contribution without any increases over the next 27 years? and would that be £7500.00 in PER ANNUM?

does this £7500 per annum mean that say when aged 67 you would get £7500 and for every year after that the same amount because at age 77 it wouldnt have the same spending power anymore.

thank you

gadgetmind

candykisses wrote: »

Does this mean £300 net contribution without any increases over the next 27 years? and would that be £7500.00 in PER ANNUM?

If you look at "Assumptions Used", HL apply a 2.5% per annum increase to your contributions.

Your can also choose "Today's Terms", which show spending power, or "Money Terms", which is pretty much meaningless!

candykisses

Thank you , so it would be 2.5% compounded from year one - that would be quite a high contribution in the last 5 years then?

also, is the pension of £7500 per annum they pay out, is that how much you receive each year with no increase as surely this would be diminishing in value during your retirement years?

gadgetmind

candykisses wrote: »

Thank you , so it would be 2.5% compounded from year one - that would be quite a high contribution in the last 5 years then?

No, not really as it will only just be keeping up with inflation. I'd expect you'd want to be increasing your contributions more than this particularly as and when you get pay rises or hit the 40% tax bracket.

also, is the pension of £7500 per annum they pay out, is that how much you receive each year with no increase as surely this would be diminishing in value during your retirement years?

Hit the "Advanced Options" button. The default is for a (from memory) escalation of 3% per annum and a 50% spouse pension, but you can tweak all of this.

candykisses

i've done a rough calculation and that seems to be roughly a ten pound per month additional contribution per during the first ten years of the plan increasing to an additional contribution of fifteen pounds a month during the later years.

so by year 10 i would be paying around 400 per month and by year 25 around 600 per month?



I'm just wondering what the best thing to do is, net joint income now of approx £2500 per month.
me being £1500 and him £1000

he is 47 years old and I'm nearly 40

our mortgage and council tax are £400 per month in total

we have 18 years left on mortgage, current balance around £58000

house currently worth £110,000 - plan to do an equity release on this at 65 as no dependents and no-one to leave the house to.
I think this would be a good alternative to taking a pension cash sum? as long as we could live in the house until we die.

also want to build up a nest egg for the future.

I had a state pension forecast in 2006 (just applied for an updated one) and that was around £138 pwk (that showed £85 per week basic plus £52 per week additional todays money in 2006)
not sure where the additonal amount comes from?

i've no idea yet what my partners state pension would be - am going to apply for a forecast for him but assuming his will be a basic one

we aren't big spenders at the moment really (don't drink smoke) but would like to have a meal out once a week and cinema or weekends away in this country - perhaps one weeks foreign holiday a year.

not sure what our target pension should be, ie what sort of monthly income we would require at age 67 (i think that will be my state retirement age, as I'm 40 in december)

just seems so confusing and we aren't big risk takers, just left things late due to past relationship mistakes etc. (so please no hurtful comments about being stupid for leaving things til now) but we want to try and make the best of our situation and secure a comfortable retirement.

i do plan to see a financial advisor in the next couple of months but its nice to hear other peoples input on here sometimes.

my ex boss was always the one saying pensions were a waste of time, used to give me horror stories about people putting in more than they got out (during the late 1990's etc) and as a result I always buried my head in the sand a bit. he always used to say invest in bricks and mortar instead and live off a rental income.

any advice please.

gadgetmind

If you work on £240 a week each from state pensions (it should be higher but let's use this) then you'll be getting about £960 per month between you. Could you live off that without doing equity release? Planning on equity release at the tender age of 67, without it sounded like downsizing is an option, doesn't leap out as being a great idea.

An extra £600 a month would probably make a big difference, and as you've seen, that would cost you £300 gross now, which is only £240 net - the figures on HL are gross, so watch for that.

How to bias the split of pensions between the two of you all depends on the outcome of HMG's green paper on pensions.

candykisses

gadgetmind wrote: »

If you work on £240 a week each from state pensions (it should be higher but let's use this) then you'll be getting about £960 per month between you. Could you live off that without doing equity release? Planning on equity release at the tender age of 67, without it sounded like downsizing is an option, doesn't leap out as being a great idea.

An extra £600 a month would probably make a big difference, and as you've seen, that would cost you £300 gross now, which is only £240 net - the figures on HL are gross, so watch for that.

How to bias the split of pensions between the two of you all depends on the outcome of HMG's green paper on pensions.

Hi - thanks gadgetmind - that seems less worring now I've read your post. I think if we assumed 960 in total for the state pension then an extra 600 per month on top (all in todays money of course!) then we could quite comfortably live on that.

i hadnt realised they grossed it up on the calculator, so if i put in 300 on the online calculator , then that means that my net payment would only need to start at 240 per month from my bank account from age 40, increasing by 3% annum (default)?

i mention equity release because who else would the house go to when we die otherwise, just thought even if we got half its value when we were 67 - that would mean around 50k in the bank account for treats and holidays.

we have no children to leave the house to.

gadgetmind

candykisses wrote: »

i hadnt realised they grossed it up on the calculator, so if i put in 300 on the online calculator , then that means that my net payment would only need to start at 240 per month from my bank account from age 40, increasing by 3% annum (default)?

Yes, those numbers look right, but do check that 3% and generally poke around all the assumptions and options.

Won't your employers contribute anything?

even if we got half its value when we were 67 - that would mean around 50k in the bank account for treats and holidays.

Well, you can always take your 25% tax free lump sum from pensions to cover this. Maybe equity release is a good option for you, but perhaps one best used later in life.