Am I putting enough into my pension pot?

SavingSassy

This may be a question that is asked a lot, but I just can't work it out. I know that depending on circumstances that the outcome of pensions change, but is there a way of knowing roughly how much I would get when I retire? I am financially in a good place where I have no debt, I am trying to save my socks off, but I want to know that I am doing enough for the future.


I started paying into a work pension at the age of 26 and pay in 4% of my income a month which works out at £72.47. My employer then pays in 6% (£108.71) so I have a total amount of £181.18. I am 27 now and I have left it in the hands of 'Mercer' who at the moment are investing in stocks and shares - from what I understand, this is the best option for me now, but in the future, I should look at asking them to invest with less risk?


Thanks for any replies!

atush

first off use this for projections, you can fiddle with it and ask for help with input:

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

Second, starting a pension at 26, your total input Should have been in the 13% range, but you were only putting in 10%. So a bit of a shortfall there.

I don't know anything about Mercer, but I do know for someone your age you should be heavily in equities, but probably funds and investment trusts over individual shares.

xylophone

don't know anything about Mercer,

Mercer act as administrator of a number of pension schemes.
http://uk.mercer.com/referencecontent.htm?idContent=1423165

PeacefulWaters

SavingSassy wrote: »

This may be a question that is asked a lot, but I just can't work it out. I know that depending on circumstances that the outcome of pensions change, but is there a way of knowing roughly how much I would get when I retire? I am financially in a good place where I have no debt, I am trying to save my socks off, but I want to know that I am doing enough for the future.


I started paying into a work pension at the age of 26 and pay in 4% of my income a month which works out at £72.47. My employer then pays in 6% (£108.71) so I have a total amount of £181.18. I am 27 now and I have left it in the hands of 'Mercer' who at the moment are investing in stocks and shares - from what I understand, this is the best option for me now, but in the future, I should look at asking them to invest with less risk?


Thanks for any replies!

If you increased your contribution would your employer pay in more than 6%? If the answer is yes, maximise the free money.

Risk wise, seek out lower risk when you get to within 5-10 years of retirement. I'm assuming you're not in some wildly high risk option at present.

Am I putting enough into my pension pot?

Instinctively, I think 10% is too low. Increasing your contribution at pay rise time would help. Make sure you are maximising employer contributions.

I notice you have access to Sharesave schemes via your employer. Maximising these and utilising any profits to pay lump sum into a pension scheme can be a very positive way of boosting your future retirement income.

kidmugsy

One guide is that old-fashioned Final Salary schemes often received contributions from employee + employer in the range 20-25%. But there's no reason why all saving for your old age must be in a pension.

Take heed of PW's last two paragraphs.

FatherAbraham

kidmugsy wrote: »

One guide is that old-fashioned Final Salary schemes often received contributions from employee + employer in the range 20-25%.

And that low level of contributions has caused the enormous deficits of today.

Warmest regards,
FA

ukjoel

We were discussing this at work and the numbers were given as 25% of salary would be enough to get you about two thirds of salary as a pension.

This was a rough figure but as mentioned by kidmugsy was what many companies paid into their final salary schemes.

These days getting a 10% matched contribution is seen as a decent deal.

I think there will be a lot more part time working and people not retiring until they can either afford it or until they die.

kidmugsy

FatherAbraham wrote: »

And that low level of contributions has caused the enormous deficits of today.

In part because they didn't keep up with changes in the law. The Conservative governments of Thatcher and Major introduced changes such as compulsory index-linking, widows' pensions and, indeed, deferred pensions rather than the previous system whereby your pension could just evaporate if you changed employer. The Labour government of Blair took away the tax rebate on dividends that pension funds had previously enjoyed. So there you have it: the Conservatives increased the liabilities, Labour looted the assets, and increasing lifespans delivered the third blow. Sic transit…..

eastcorkram

FatherAbraham wrote: »

And that low level of contributions has caused the enormous deficits of today.

Warmest regards,
FA

You say 'that low level'. My workplace is introducing pension in May this year, due to the new rules. It is fixed as per the following. If I pay in 1%, the company add the same for the first year. 2% from both sides for year two, and then from year 3 onwards it is fixed at 3%. I assume that I could pay more if I were to go into it, but the company contribution will stay at 3%.

PeacefulWaters

eastcorkram wrote: »

You say 'that low level'. My workplace is introducing pension in May this year, due to the new rules. It is fixed as per the following. If I pay in 1%, the company add the same for the first year. 2% from both sides for year two, and then from year 3 onwards it is fixed at 3%. I assume that I could pay more if I were to go into it, but the company contribution will stay at 3%.

Put it this way, while contributions totalling 6% will get you something by way of pension, if you don't put significantly more in yourself you will regret it when you're old.

eastcorkram

PeacefulWaters wrote: »

Put it this way, while contributions totalling 6% will get you something by way of pension, if you don't put significantly more in yourself you will regret it when you're old.

Very true. But think I am already too old. Will be 55 this year. Have not been given the forms for this new scheme yet, but when I get them, I will be opting out.