How much is needed for a pension?

TWATTY

Is there a way of working out how much to put in a pension to the return?
I'm thirty eight and a half now so would I have to pay a mega amount to catch up with normal savers?

FLAPJACK

As a rough estimate to obtain an annual pension of £6000 (gross of tax) you would need a pension pot of approx £100,000.

Any savings into a pension scheme will attract help from the taxman...you pay in £80 per month the tax man will add £20 = £100 goes into your pot.

If you use an employers scheme (mostly career average now) some employers will contibute to your pot too as well as the taxman.

hugheskevi

Is there a way of working out how much to put in a pension to the return?

Use a pension calculator, such as this one. The answers are very dependent upon the assumptions, particularly around expected return, but it is a start.

I'm thirty eight and a half now so would I have to pay a mega amount to catch up with normal savers?

Don't worry about 'normal savers' - many people are saving woefully little into a pension so if you aim to match a perceived normal person you will be aiming to fail.

Work out your future goals and ambitions (mostly how much you want at retirement, what you want that to increase by, and when you want to retire), then work out how best to fund those ambitions. Pensions are likely to be a part of that, but so might SSISAs and other investments.

But if you have no retirement provision or decent amounts of assets, you probably will need to save a high proportion of income to catch-up. But that is far better than ignoring the issue as you either have to save more later when you do address the issue, work until later than you may desire, or accept a lower standard of living in retirement than you may wish.

TWATTY

Thanks guys, I just had a play with that calculator and it's totally put me off. I think I'll stay away from a pension though. Thank you for your time.

dunstonh

I'm thirty eight and a half now so would I have to pay a mega amount to catch up with normal savers?

Better to look at what you need and when you want it. Not what others may need and when they may want it.

Focus on you. Not others.

Thanks guys, I just had a play with that calculator and it's totally put me off. I think I'll stay away from a pension though. Thank you for your time.

Pensions will produce the greatest income of all the conventional options going. Are you planning to do nothing towards your retirement now and look forward to £7000 a year state pension instead?

hieveryone

Wow I just had a play with that calculator and I can't quite believe the calculations!! I used to grudge the £300 odd a month going out, but when it tells me I have that amount to look forward to I feel a bit better about it!

FLAPJACK

I wouldn't be so hasty to write off a pension....even if you just put in each month what you can afford you will be attracting "free" money....from the taxman and from an employer.

Even if the total sum doesn't add up to much at least it is an income stream together with your state pension....and some of the income will be financed by the taxman and an employer.

TWATTY

I've got 27 years until I'm 65, if I pay £200 a month into a pension I get back £4+ a year. In that time I can have a couple of rentals paid for giving me a lot more than that, surely.

p00hsticks

TWATTY wrote: »

I've got 27 years until I'm 65, if I pay £200 a month into a pension I get back £4+ a year. In that time I can have a couple of rentals paid for giving me a lot more than that, surely.

If you can only put away £200 a month (which comes to less that £65k over 27 years, ignoring any interest you can make on it ), how are you going to be able to afford to buy 'a couple of rentals' ? The rental value in the very few locations where you could afford to do that isn't going to be enough to support you.

And note that your state pension age is likely to be 68 at least, not 65 ......

TWATTY

Pull some equity out of my house now and buy 2 so the rental incomes each cover a 25 year mortgage. Over pay my mortgage with the £200.

dunstonh

I've got 27 years until I'm 65, if I pay £200 a month into a pension I get back £4+ a year. In that time I can have a couple of rentals paid for giving me a lot more than that, surely.

You will need around 6-8 rentals to make retirement viable on average.

At 27, there is no way that £200pm results in £4 a year. This would indicate that you have not used suitable assumptions in the calculator. It is important that the assumptions you use are sensible and realistic. The problem with online calculators is that they can allow silly assumptions to be used.

I used age 27 with £200pm net, indexed at AWE, on a retirement age of 68 (matching state), with a 7% gross return with 1% charge (making 6% net growth) and 2.5% inflation to give a real terms figure. Income on single life basis, level. That would result in a pension of £18,079 in todays terms.

Todays terms means todays spending power. It would be higher than that but that puts it in todays spending power. (in unadjusted for inflation terms, the pension would pay £49,758)

So, you are getting £4 a year and I am getting £18079 a year. That suggests something is wrong with your calculation which in turn means your assumptions have to be unrealistic.