Age/Pension Pot

grey_gym_sock

10% is unlikely for a real return. it's possible for a nominal return, but then the results include "inflation illusion". i.e. a pound was worth a lot more when she was saving £20 per week than it is when she has a pension fund of £500,000.

if you suppose 4% real return, then £20 per week can turn into a pension fund of about £70,000. or, if you prefer, £130 per week can turn into a fund of £500,000. (and that is stating all figure in pounds of the same value.)

compound returns are still very effective, but i doubt that most ppl can accumulate a pension fund that looks big (to them) by making savings which they won't even notice.

OTOH, Extravaganza is a much better name than Prudence

planteria

it is indeed

whatever the rate of return is...it is clear that starting as early as possible, and therefore having plenty of time for a pot to compound, is a good idea.

of course, if Prudence had kept at it, and increased her contributions over time, she would have been better off still.

planteria

planteria wrote: »

i intend to have above £100k invested by the time i am 40...is that enough for a comfortable retirement:question:

i should say, i am planning to invest (on current plans) £20k/yr for the 20 years following 40..so, if i said i was to retire at 60, would a £100k pot compounding for 20 years, with a further £400k thrown at it during that period be likely to roll into a £1m pension pot:question:

this might not be possible, with other commitments and plans, and a house to buy, but i'm just trying to put together a long-term investment plan.

ShootForTheMoon

Bit of a rookie question - but I want to get to grips with my pension whilst I'm still young enough to do something about it!!

I'm 25 years old and have served in the Police for 4 years now.
I joined the pension scheme (no-brainer) where we contribute 11% of our salary. Then there's something about 1/70 - this bit I don't really understand...
I still hope to retire aged 56-57 after 35 years service... although this remains to be seen.

First question, how can I find out what is "in the pot" at any given time?

With the Public Sector pension reforms, I know that we are significantly worse-off now than we expected to be at the point of joining. Which leads to my second question;

Is it wise to think about running another pension alongside the Police Pension, or should I look at making investments in property etc. later in life in order to boost my "pension" when I retire?


Your thoughts would be very much appreciated. I know retirement is a loooong way off for me, but I want to understand how my pension works in order to live comfortably when I have the time to enjoy it!

Thanks!! x

planteria

i don't know much about the police pension scheme, but i know that you should be maximising the benefit you can get from it. and, if you have some spare money that you can invest each month, i would start something alongside too. my first thought would be a SIPP and to do your own research and select some funds that you think will do well in the long-term.

ShootForTheMoon

Excellent, thanks for the response, Planteria!!

I know it's a very specific pension scheme - the only "advice" we've ever been given is "Just join it" - which is obvious, but I have a poor understanding of how it actually works! Which I guess is pretty much the case across the board as those nearing retirement are on the far more generous old scheme.

This thread has got me thinking and I will do some research into it today! Hopefully it can only be a good thing!!:o

N1AK

R_P_W wrote: »

I'm 31' starting paying 6% into pension when 19 and my employer paid 7. I increased it last year to 9 and they match it.

Think my pot is around 70k, which doesn't sound enough so far to me! So was surprised that having 35k at 35 age is a rule of thumb!

It's a little dated, and there are many issues with any simplification, but it is still useful. Perhaps something like £32k at 32 or some such would be better now.

I don't think the point is to suggest that £35k at 35 is 'good', more that if you have less than that you can expect to live frugally in retirement if you don't either have alternative plans or change your behaviour.

If you've reached £35k by 35 then reasonably you could be expected to pay in an additional £65k+ by retirement (likely more, but accounting for couples etc) add on an assumption of some growth after inflation and you could be talking a fixed annuity of ~£7k (very rough figures). Given that this is roughly equal to the single state pension rate you would be much better off than someone without a pension.

Obviously reaching retirement with a considerably larger pot (which you are on your way towards doing) means you can look to retire earlier and/or with considerably more spending power :beer:

Lokolo

ShootForTheMoon wrote: »

Excellent, thanks for the response, Planteria!!

I know it's a very specific pension scheme - the only "advice" we've ever been given is "Just join it" - which is obvious, but I have a poor understanding of how it actually works! Which I guess is pretty much the case across the board as those nearing retirement are on the far more generous old scheme.

This thread has got me thinking and I will do some research into it today! Hopefully it can only be a good thing!!:o

You could consider, instead of using a SIPP, putting money into S&S ISA. If you use this as a long term/retirement supplement vehicle then the income from this will be tax free.

Assuming you have a 1/70th pension, after 35 years of service you would recieve around half your final (or averafe) salary as a pension. I am unsure whether it is FINAL or AVERAGE. I do not keep up with public sector pension changes.

Effectively, you don't have a "pot", unlike a lot of posts on here. You have an outcome. So with us, we build up a pot of X amount. Instead, you have an outcome of Y amount, this is based on years of service and your final salary or average salary.

N1AK

ShootForTheMoon wrote: »

I'm 25 years old and have served in the Police for 4 years now.
I joined the pension scheme (no-brainer) where we contribute 11% of our salary. Then there's something about 1/70 - this bit I don't really understand...
I still hope to retire aged 56-57 after 35 years service... although this remains to be seen.

First question, how can I find out what is "in the pot" at any given time?

Thanks!! x

It sounds like your on a final income or average income scheme based on 1/70th of earnings per year worked. You don't have a 'pot' as such, instead you have a promise that they will provide you with that income (increased with inflation) in retirement.

So 35 years service would give you the equivalent of 35/70 (half) your average salary during the time you worked there.

That would be a reasonable retirement income, you certainly wouldn't 'need' extra income but may want a higher income if you intend to spend more. I'm a little dubious about additional pension payments, for anyone who won't be claiming for decades, because I simply don't trust that the rules won't be changed (or money outright reclaimed) by the time you'd want to use it; however I may just be very paranoid.

GwylimT

I have worked (apart from in total a 13 month period) since I was 18 and I'm now in my early mid forties, since then I have paid NI of course and by retirement I will have well over 45 years worth of contributions.

While not in the same job I have worked in the same sector since the age of 25 with a contribution of 8% from myself, for the first five years my employer contributed 8% but it has now increased to 16% from my employer. During times of unemployment with help from my wife I have been able to maintain my own contributions but not those from my employer, but 13 months isn't too much.

Currently in my works pension I have just shy of £81K as for most of that time I have worked full time and in many cases at the end of each year I have been able to top up my contribution amount. I'm working part time at the moment so my contributions are down, but from September I will be back in full time work so they will return to 'normal'.