Aged 35 - I don't have a pension!

coastline

jimb0 wrote: »

There seems to be a lot of different figures out there for this.
ONS statistics mentioned in one article suggest an average (nearly always a misleading stat) of £91k for people retiring between 50-64. Something else I read elsewhere suggested that the average amount saved for women aged 56 is just £9k.

Wether its £91k or a lot less it shows many aren't picking up very big second pensions....considering an annuity of 100k only pays out around 6 grand a year at present..
You've got to have a pension in the future and I believe the government know it will be difficult for many to achieve healthy private pensions...
I'm guessing the state pension will still be around and the government are hoping the majority of workers will have built up enough funds to take them out of the benefit system...
Still time to build up a 100 grand pot at 35 yo...dont forget your inflation on top of course....I know it won't buy much but it pays the bills...

gadgetmind

coastline wrote: »

I know it won't buy much but it pays the bills...

If you start early enough, and save a decent percentage of your income, then the magic of compounding works well.

If you also get a good understanding of the basics of investing (and keeping fees low!) then things get even better.

rockitup

jimb0 wrote: »

I've opened a SIPP with HL in order to get access to a Vanguard LifeStrategy fund just to get things started after reading various things on Monevator etc. I am just waiting to find out what my new employer is going to do with pension provision under the new rules. They currently only offer a non-contributory stakeholder which is a bit crummy for a largish financial services firm...

The employer contribution rate will be 3% for defined contribution schemes under NEST, starting between 2012 and 2018 depending on size of Employer. Both Employer and Employee can have their contributions in the early years scaled in... Employer rate will start at 1% increasing to 2% then 3%.

jimb0

I'm hoping that they use the opportunity to come up with something a bit better than the basic but we'll see...

In common with the OP my wife is a teacher and on the final salary scheme. If I can psychologically deal with putting all income above 40% in to a pension from this year I should get over 100k in by age 40 which I think would have me back on track.

gadgetmind

jimb0 wrote: »

If I can psychologically deal with putting all income above 40% in to a pension

The other option is to psychologically deal with HMG taking 42% of it off you in tax and NI!

Rollinghome

dtsazza wrote: »

That's very true, it's not like someone would be out of time. What they have missed out on, is 15 extra years' worth of compounding that they would have got with investments at 20 (which is partly offset by likely higher contributions in later years).

If you assume 6% average growth, £1 paid in at 20 will have grown to £13.76 by 65 (1.06 ^ 45). Paying in £1 at 35, you'll see it grow to £5.74 by the same age.

Quite right though you might want to consider how valid assumptions of 6% are in real terms after inflation, even though the industry and its salesmen like to use such figures.

Had someone now aged 35 started at the age of 21, that would take us back to May 1998. Since then the FTSE has gone nowhere and is in fact now about 2% lower. So add on dividends but then subtract costs and, most importantly, inflation, and the result is a net loss, not a gain.

In practice the contributions would have been fed in throughout that period but would have included investing during the peaks of 2000 and 2007.

I'll let someone else do those sums but overall there's unlikely to have been much gained by investing during that period and anyone starting now rather than then might have reason to consider themselves lucky.

atush

I would also have meant investing during the troughs, and there were plenty. Lump sums invested at the 'wrong' time tend to be more problematic.

Good thing I don't invest 95% of our pensions in the FtSE 100 lol.

Anyone who invests everything in the UK market is in for a hiding at times.

gadgetmind

Rollinghome wrote: »

Quite right though you might want to consider how valid assumptions of 6% are in real terms after inflation, even though the industry and its salesmen like to use such figures.

Over longer periods, 5% in real terms (after inflation) is typical but over the last decade, it's more like 4%.

http://www.telegraph.co.uk/finance/personalfinance/pensions/9196443/Projected-returns-from-pensions-to-be-lowered-to-more-reasonable-level.html

Had someone now aged 35 started at the age of 21, that would take us back to May 1998.

Yes, that's been a very bad period, which is perhaps why you selected it?

Since then the FTSE has gone nowhere and is in fact now about 2% lower.

Fortunately, few people invest only in the FTSE.

So add on dividends but then subtract costs and, most importantly, inflation, and the result is a net loss, not a gain.

Please can I see your figures?

rockitup

atush wrote: »

I would also have meant investing during the troughs, and there were plenty. Lump sums invested at the 'wrong' time tend to be more problematic.

Good thing I don't invest 95% of our pensions in the FtSE 100 lol.

Anyone who invests everything in the UK market is in for a hiding at times.

Very true atush, in past years I have generally gone circa 50% invested in UK and the other half of my portfolio has returned better gains. Now reduced to around 30% in UK and some of that is in UK companies with foreign exposure.

coastline

If you want a quick look at inflation since 1948 look here...
As someone mentioned recently...the Bank of Englands target of stable inflation in the region of 2.5% is just that...a target...
The extra inflation above 2.5% can play havoc with your pension pot...hopefully someone can come up with the sums...thanks..

http://www.guardian.co.uk/news/datablog/2009/mar/09/inflation-economics