Worth increasing my pension?

tell_it_how_it_is

Hi all

I started a personal "with profits" pension just before I turned 21, and have pretty much paid £55 a month into it for over 20 years (now 41).

I was thinking of upping this to £75, but a friend suggested the benefits of doing this now would quite possibly be negligible. Can anyone advise?

At present it is guaranteed at over £80k, assuming retirement age of 65 in 2035 (although I would ideally like to retire at 55 or 60).

Many thanks in advance

xylophone

How much annual income are you likely to need when you retire?http://www.thisismoney.co.uk/money/pensions/article-1633402/Pension-pot-calculator-How-need-save-retirement.html

CLAPTON

what do you mean guarenteed? or is this an estimate

55 per month isn't much to put into a pension now a days

dunstonh

I started a personal "with profits" pension just before I turned 21, and have pretty much paid £55 a month into it for over 20 years (now 41).

What a shame. You started at a good age but have spent 20 years paying less in each month in real terms. £55 was a good amount 20 years ago. Now it is a tiny amount that is barely worth the effort.

I was thinking of upping this to £75, but a friend suggested the benefits of doing this now would quite possibly be negligible. Can anyone advise?

A £20 increase after 20 years is negligible. However, if you increase it annually with inflation then it will become something.

To put it in perspective, £100 is where most providers have their minimum contribution.

although I would ideally like to retire at 55 or 60

Not going to happen unless you have other means. The pension by itself offers little or no chance based on current value and contribution.

Telling you how it is (as your bad name says) means that you need to look at what you want and when, then calculate what you have and what you are paying to see what that will likely provide at the age you want and then see how much you need to fill that shortfall. It will be a shortfall and it will probably need a much larger amount to fill it. You may need to revise your goals and current lifestyle. if not, it will likely impact on your future lifestyle.

Any pension is only as good as what you pay into it. If you pay £25 for 20 years then you shouldnt expect back much more than £25 in real terms in retirement.

atush

With profits is not what I would recommend in general, but it depends on who you are with (as some providers have a better record than others).

I would recommend you increase pension provision and save into cash and S&S isas as well. But maybe into another pension instead of WP. Having said that you put in a little over 13Kand from what you say is worth 80K so hasn't done too badly. Who is your pension with?

tell_it_how_it_is

Hi all

Many thanks for the replies.

The pension is was with United Friendly (now Royal London), and the £80k+ is the "guaranteed fund which will be available to buy pension benefits at the pension date providing all contributions which are due are paid".

Like you say dunstonh, it was a good time to start - on the advice of my then boss - but I know I have in reality overlooked it since then.

I do have other funds well into five figures (ISA, normal savings, premium bonds), so have been doing my bit elsewhere.

I could probably comfortably double my contributions to £100-£110 per month if need be, so would that be worth doing considering the age I'm at?

As for the amount I'd ideally like, with the house being paid for (by 50), I'd hope to live on say a lowish wage for today - something like £12k pa, £1k pm - nothing extravagant.

The missus is quite a bit older, so I'd like to make sure we have some work-free time together before the old Doris pops her clogs.

I've thought about stocks and shares ISAs before, but while I'd like to think I'm of reasonable intelligence, the prospect of those - and getting them reasonably right - scares me a little.

Many thanks again

atush

So the return isn't as good as I thought, as they were counting all the future payments too in the figure.

So your pension wont be enough as it stands, and unless you have other investments such as cash and S&S ISas you aren't going to ahve enough to retire early. So you realy need to start saving hard, how/where you do that is up to you.

Linton

In talking about increasing your pension only to £100/month I fear you are a long way from understanding how much money proper pension provisioning really costs.

Suggest you start playing with a pension planner for example standard life's

If you want to retire at 55 and not take pensions until pension age of 67 you have to add in £12K X 12 = £144K, a figure which is of course rising with inflation each year.

An £80K pension pot plus a 5-figure sum in ISAs is way off the mark.

JoeCrystal

Well... in order to get twelve thousand pounds per year in 24 years, starting from zero. I honestly have no idea how older scheme would work in this aspect. £80,000 is still worth something though... Let assuming that it pay £3,524 per year. By using my favourite pension calculator, and starting new private pension scheme, to generate £8,476 per year by time you retire at 65 would require contribution of £450 per year. (Annual growth of 7% and rising contribution. All projected of course. Investment rise and fall sadly.)

Not including state pension but currently you get that at age of 67. Needless to say, if you want to retire at 55 and wanting an potential income of £12,000 per year from pension, then you would need to pay roughly over £1,600 per year and £1,000 per year at 60.

I wonder if your employer have any pension scheme they pay contribution into? Catching up is going to be sadly expensive so employer's contribution can help a lot.

Cheers

Joe

tell_it_how_it_is

Many thanks all for example figures etc., and the Standard Life planner is certainly an eye-opener, and gives food for thought!

As I said, I have accrued a fair amount elsewhere (feels unnatural disclosing, but it's £50k), so it's not all doom and gloom - but maybe some of that now needs to go on the 2.35 at Cheltenham (or not!).

Cheers again.