pension pot size?

funscott

been working since i was 21 now earning £30k. been paying 8 - 10% into my pension and looked the other day to find my pension pot is £56k. is this a decent size pot considering i have another 35 years to go. well lets hope i dont have to work that long (have my fingers in a few other pies)

redbuzzard

That depends on what you expect from your pension, the net returns, future contributions, retirement age...

I suggest playing with this (read the destructions first so you understand the outputs). Other calculators are available and I'm making no recommendation for HL one way or the other.

http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

jamesd

8-10% is quite a decent rate. What you really should be doing is trying to plan for when you want to retire and on what income. If you plan for it you can probably retire at 55 using a combination of pension and ISA investing.

FatherAbraham

funscott wrote: »

been working since i was 21 now earning £30k. been paying 8 - 10% into my pension and looked the other day to find my pension pot is £56k. is this a decent size pot considering i have another 35 years to go. well lets hope i dont have to work that long (have my fingers in a few other pies)

Blimey, don't make it too easy for us, will you?

So we have to guess how old you are, and when you're planning to retire?

So, "35 years to go" might mean "35 years to my state pension age", I guess, so your state pension age might be 68?

That would make you 33 years old now then.

A 10% retirement-saving is terribly low. You're more likely to need 25-30%, although it's impossible to know what you "ought" to be saving until you state what your retirement-income goal is (33% of current salary, adjusted for inflation? 50% of current salary? 67%?

(Background: Long-term pension-projections are required to use a real return rate of 2.5% from next year. Index-linked, joint-life annuity rates for 68-year-olds are maybe 3%.)

However, you vaguely talked about "other pies". If those can also be considered retirement savings, then your true contribution rate will be higher than the 10% you cite.

Warmest regards,
FA

FatherAbraham

jamesd wrote: »

8-10% is quite a decent rate. What you really should be doing is trying to plan for when you want to retire and on what income. If you plan for it you can probably retire at 55 using a combination of pension and ISA investing.

I find these assertions astounding.

Retire at 55 on a 10% pension-contribution rate? How is that possible, with any meaningful level of retirement income?

Crunching a few numbers using a compound-interest calculator, a starting age of 21, the FSA pension-projection rate of 2.5% real, and a benchmark index-linked, 50%-survivor benefit annuity rate at 55 of 2.0%, someone saving 10% of salary can expect to have a annual pension of 9.3% of salary.

Please could you explain or justify your claim?

Many thanks,
FA

dunstonh

Planning for retirement for someone in a city location would need different amounts for someone in a more rural location.
Planning for someone wanting to retire at age 62 would need different amounts for someone retiring at age 68.
Planning for someone using low risk investments would need different amounts for someone using medium or higher risk investments.
Living standards/lifestyle requirements would need different amounts.

We need more to go on.

funscott

yes a few details missed out (it was late)

i am 31

also forgot to mention my employer pays an additional 5%

so i have been paying since i was 21 a minimum of 13% and currently paying 15% (have done so for the last 5 years)

I would like to retire at 60 with 20k minimum.

My state pension is 68. but im guessing there wont be one by then so not counting on it

atush

Have you plugged those figures into the HL calculator you were given?

What does it say?

funscott

age 60 - 13300 pa
age 65 - 18700 pa

this doesn't count that my employer will be upping their contribution to 6.4% this year and 7.2% the following year.

the above figures also excludes state pension (i dont think there will be one)

and my other pies

I might up my contributions to 12% once my student loan is paid (this years woohooo)

atush

no1, I do think there will be a state pension. What size it will be is another matter.

redo the calculator next year (and the year after) after the work rates go up. Once you are nearing your target, continue to save at the normal rate you are then, but also look into other savings venues that might allow an early retirement such as S&S isas, and making sure your mtg is paid off.


You do need to occasionally revisit your target figure (the Number) and make sure you can live on it. Living on it, for at least one year before retirement (saving the rest) is one way to make sure the number is correct.

redbuzzard

funscott wrote: »

age 60 - 13300 pa
age 65 - 18700 pa

this doesn't count that my employer will be upping their contribution to 6.4% this year and 7.2% the following year.

the above figures also excludes state pension (i dont think there will be one)

and my other pies

I might up my contributions to 12% once my student loan is paid (this years woohooo)

So you have a kind of answer (allowing that forecasts are always wrong).

What that does mean is that you can do that again every couple of years, sense check the assumptions, and see if you are on track. You may well need to make changes, but you should not get so far off course as to be unable to do something about it.

You might even want to get ahead of the curve if you have spare cash, either in the pension or outside it. Money invested earlier benefits more from growth. That also helps when the goalposts move. I had to do some serious catching up when my DB scheme scheme closed, and my annual accrual pension accrual dropped by (an estimated) £70%.