How much do I need to save in a pension?

nearlyrich

I am 45, currently paying into a money purchase company scheme where the company put in more than me (about double) the fund was worth £19 k last April when I got my last statement. I also have a private pension that is now in a NU Stakeholder Pension worth just over £57 k today.

I am about to lose financial responsibilty for my children as they become financially independant this year and I don't know whether to increase my pension contribution or save in another way for my retirement.

My DH is older and is already retired so I want to stop working sooner rather than later, I have applied for a pension forecast and I am opted out of SERPS. I don't want to spend my old age eating beans and wearing 20 jumpers to keep warm but with a shorter working life I appreciate that I can't have everything I want.

I don't expect anyone to know exactly what will happen in the stock market etc but I would be interested in some insight into how much my pension fund might be worth if I retire at 50 or 55.

dunstonh

I don't expect anyone to know exactly what will happen in the stock market etc but I would be interested in some insight into how much my pension fund might be worth if I retire at 50 or 55.

You cant retire at 50 so you can ignore that. 55 is the earliest.

You can ask for projection from your pension schemes for different ages and they will oblige. NU take about 10 days to get it to you. Alternatively, your servicing IFA can knock out a projection in seconds if he/she has the right software.

nearlyrich

I though I could take my private pension at 50, that's a bit of a blow that I can't take it till 55, looks like I will have 9 more years to contribute to my fund.

dunstonh

It was 50 but increases to a minimum of 55 from 2010. State retirement age is increasing as well to 68 in stages. Your state retirement age will be 66.

nearlyrich

dunstonh wrote:

It was 50 but increases to a minimum of 55 from 2010. State retirement age is increasing as well to 68 in stages. Your state retirement age will be 66.

Yes I knew that, it was 60 when I "joined" and it was bad enough going to 65 but to add 5 years to when I can take my pension from a scheme I volutarily paid into (when I was quite skint) is a bit of a liberty IMO.:mad:

Is there a site where I can find out what my pension pot will pay as a monthly pension?

EdInvestor

How much is being paid into the current scheme?

Looking at the old NU one, if nothing further is paid in and it grows at 7% net of charges over the 10 years, it would be worth 112,128 when you retire.This would give you a tax free cash lump sum of just over 28k and an annuity of around 4,000 a year before tax.

Pathetic, isn't it?

If you retired at 55, IMHO you would be wise to consider putting the fund into "income drawdown" where you leave it invested and take an income, rather than buy a fixed annuity.

This is because you probably have another 30 or 40 years to live, and even at current low levels, inflation will cut the spending power of a fixed annuity in half over 20 years.After 40 years it might buy you a box of matches.Annuity rates for young females are even worse affected, so you are on a hiding to nothing.

With an income drawdown plan you can take a higher income than with an annuity - perhaps another 1k a year on top. But this does involve risks.Fortunately you have plenty of time to learn how to invest your money so that you make good returns while reducing those risks.

Learning how to invest (not rocket science) is the key to successful retirement for many people, though you won't necessarily get much help on how to do it from the usual sources, more's the pity.

dunstonh

Looking at the old NU one, if nothing further is paid in and it grows at 7% net of charges over the 10 years, it would be worth 112,128 when you retire.This would give you a tax free cash lump sum of just over 28k and an annuity of around 4,000 a year before tax.

Pathetic, isn't it?

Hold on Ed, you are disregarding the value of that 28k and you have stopped premiums. That is why the figure is low.

though you won't necessarily get much help on how to do it from the usual sources, more's the pity.

and the "unusual" sources often dont give the risk warnings and give their opinions without knowing the facts or the full range of options available.

nearlyrich

I don't contribute to the NU Stakeholder because I am paying into my employer's scheme thatthey also contribute to. My NU plan was converted from a Friend's Prov pension last year and it has grown by over £10k more than the FP deal ( I track both to make sure I did the right thing).

I plan to have a meeting with my IFA soonish to discuss my options and make him work for his commission LOL.

Thanks for your opinions both, I know very little about investing but I have a plan to learn a bit more over the next few months.

dunstonh

NU is a bit better on the medium risk side than FP who are better on the lower risk side. Neither are that good with the medium/high or higher risk stuff.

nearlyrich

EdInvestor wrote:

How much is being paid into the current scheme?

I pay £48.90 plus £73.35 and employer pays £97.60 and £146.50 ( I think some of this is opted out of SPII/SERPS(?))

The lower figure is "compulsory" for employer to contribute the second figure is optional and can be increased or decreased, employer contributes double what I put in. I need to check if I can increase this and get a valuation at 55.

I just bought "Retiring Wealthy for Dummies", bedtime reading for the next couple of days!;)

nearlyrich

dunstonh wrote:

NU is a bit better on the medium risk side than FP who are better on the lower risk side. Neither are that good with the medium/high or higher risk stuff.

I think the driver to change was capped low charges and better performance in the NU scheme than the FP, I am quite impressed with the growth and it's done better than the FP funds.