What is a "proper" pension pot nowadays?

jumperabv3

I'm 30 years old, my pension pot is currently £11,227.89
I put in around £240 each month (thus £300 with the 25% the govt. adds from the returns I file each year).

I've calculated that £300 x 12 months = £3,600/year, so in 25 years from now the pot could be around roughly £100,000 and maybe if the pension would do "well" and gain 10% it would be £110,000

So I don't think that could yield lots of income in 25 years from now ... and of course I hope and expect to raise the £240 contribution each month to £400 (as inflation goes up) but salaries have not gone up by much (unlike the un-real estate lol)....

Anyway what is a proper pension pot?
Do you think a pot of £100,000 would do anything or would be helpful in 25 years from now? Of course we don't know what would happen a year, a week or even a few seconds from now ... the minimum age of 55 could be set to 60 or higher ... things could change, ISIS could attack the UK but realistically - what would be a good pension pot? When do you think the contributions should be raised from £240 to a higher figure?

Would appreciate your feedback.

atush

Your figures are low because you are not adding in reinvestment of income.

In any case, the old rule of thumb was to have 35K by age 35, and to put in half your age when you start (what % of your income goes in incl employers contrib and TR, and how old were you when you started- age 24 means the min should be 12%).

Then once you have that down pat, you need to think at what age will I retire, and how much income will you require? Try a pension calculator on for size?

https://www.moneyadviceservice.org.uk/en/tools/pension-calculator

fastestlouigie

This is a depends on your circumstances now and what you anticipate or where you are planning to be in 25 years time kind of answer. I don't know what a £100,000 pot might buy you but if it was say £5k a year income in retirement, this may be comfortable for some but another person's nightmare scenario. I have a DB pension, so I'm pretty sorted but I've been "supplementing" my wife's DC pension to the tune of £350 a month, as we anticipate that we will require this income boost when she considers retiring in 15 or so years. Your pension provider should provide an estimate of what income you'll get and when. Is this figure going to be comfortable for you? The recommendation will be to increase your payment but other info. regarding your other outgoings/commitments would be helpful in guiding the advice you get.

Notfarfromtheborder

Think you are a bit pessimistic regarding growth of 10% over 25 years, if you take 4% after charges as an annual growth rate you will be looking at a pot of circa £190K, inflation would however reduce the buying power of this.


The sooner you raise contributions the larger the effect due to compounding. If you did it tomorrow and assuming the same growth rate mentioned above you would be looking at a pot of £300K

jumperabv3

Notfarfromtheborder wrote: »

Think you are a bit pessimistic regarding growth of 10% over 25 years, if you take 4% after charges as an annual growth rate you will be looking at a pot of circa £190K, inflation would however reduce the buying power of this.


The sooner you raise contributions the larger the effect due to compounding. If you did it tomorrow and assuming the same growth rate mentioned above you would be looking at a pot of £300K

Right now I invest the pot in an extremely low-risk product (1 out of 5), so I think it doesn't gain lots of % ... should I risk the pot on riskier products because it has a long lifeline?

Notfarfromtheborder

jumperabv3 wrote: »

Right now I invest the pot in an extremely low-risk product (1 out of 5), so I think it doesn't gain lots of % ... should I risk the pot on riskier products because it has a long lifeline?

Depends on your attitude to risk, 25 years (maybe longer if your pension goes into drawdown when taken) is a long time, there will be volatility. I would personally look for slightly higher risk now, maybe reducing the risk once you get closer to retirement.

atush

IMHO, you are investing too low on t he risk scale for your age. I would expect a 4 out of 5.

atush

fastestlouigie wrote: »

This is a depends on your circumstances now and what you anticipate or where you are planning to be in 25 years time kind of answer. I don't know what a £100,000 pot might buy you but if it was say £5k a year income in retirement, this may be comfortable for some but another person's nightmare scenario. I have a DB pension, so I'm pretty sorted but I've been "supplementing" my wife's DC pension to the tune of £350 a month, as we anticipate that we will require this income boost when she considers retiring in 15 or so years. Your pension provider should provide an estimate of what income you'll get and when. Is this figure going to be comfortable for you? The recommendation will be to increase your payment but other info. regarding your other outgoings/commitments would be helpful in guiding the advice you get.

You should consider starting a DC pension for yourself if A- you want to retire before scheme age, and B- you want a lump sum at retirement (as you generally should not commute a DB pension into a Lump sum.

jumperabv3

atush wrote: »

You should consider starting a DC pension for yourself if A- you want to retire before scheme age, and B- you want a lump sum at retirement (as you generally should not commute a DB pension into a Lump sum.

What are "DB" and "DC" pensions?

neilvw

Defined benefit = salary-related
Defined contribution = a 'pot', sometimes known as money-purchase

BananaRepublic

Yes, you should be in so-called higher risk funds when young. Generally tracker investment funds are seen as low risk, managed funds are seen as high risk, but I'd argue the converse. The UK and European markets are lower risk, the US might be higher, and Asian markets are even higher. Personally I avoid Asian and South American markets. I once made the mistake of buying into Japanese market. after 15 years I have just about got my money back, but with inflation losses. Put in as much as you can as early as you can. But beware that many pension funds are rubbish. Sadly you tend to be stuck with the one your employer chooses, but you can transfer funds to a better provider.

As an example, one of my tracker funds rose ~50% in 10 years, a managed fund rose ~200% in 10 years.

The state pension is actually quite good. The full amount is about £8,000 in todays money, which will cover the basics of living. You need about £100,000 to buy a £4,000/year index linked annuity.