Pension Direction

princeofpounds

The best option for you basically depends on what tax band you are in, plus consideration of a few more details.


It is likely, but not certain without details, that the best thing for you to do is to increase your contributions to your workplace pension. That is especially the case if your employer will match them up to a particular level. Find this out.
A pension is also likely to be a better bet if you are a higher-rate tax payer. If you are not, then you might find the new Lifetime ISA is a better vehicle.

I'm happy to pay an extra £100 a month into my work pension (the auto enrolment one) and my wife can possibly pay half of that into hers.

Either way, this is not going to be enough.


You need to start using some pension calculators. Start with what sort of income you want to have in retirement and your desired retirement age. Then work back from there. Tell us the information and results too, so we can help you understand them.


https://www.standardlife.co.uk/c1/guides-and-calculators/pension-calculator.page
http://www.aviva.co.uk/retirement/tools-and-calculators/my-retirement-planner/

I don't want to scare you but quite some time back I read that when you start contributing to a pension you should be using your age as the % of your income to save (so 40% in your case) - I stress this was from quite a while ago and I can't quote the source but it was something that stuck in my memory.

It's half your age. It's not remotely an accurate rule, but it can get the point across on what sort of ballpark of contributions can make a difference to retirement.

ex-pat_scot

LXdaddy wrote: »

It sounds like you are a long way behind.

...

I don't want to scare you but quite some time back I read that when you start contributing to a pension you should be using your age as the % of your income to save (so 40% in your case) - I stress this was from quite a while ago and I can't quote the source but it was something that stuck in my memory.

The old rule of thumb used to be that you should ensure that your contribution percentage of your salary when you start your pension should be HALF your age in years.
Thus for the OP, starting at age 40, (s)he should be contributing 20%


However:
1. that does not account for increasing the % later on
2. it certainly does not account for the zero interest rate current environment
3. nor does it talk about WHEN you would be expecting to retire
4. nor HOW MUCH you would have, relative to income.


Even with these limitations, it's a great yardstick as a starting point for discussion. Recent government discussions have bandied 15% as a reasonable level of contribution.


Me: I'm on 32% and already have a decent pot, but am still rather concerned...


I would start on working out what the employer offering was, and (at the least) contributing up to their max threshold. By way of salary sacrifice, if at all possible.
When you consider the 32% tax relief (basic rate) / 42% (higher rate) PLUS employer contribution, then frankly it's (to paraphrase Kevin Bacon) a "no-brainer".


The WORST thing you can do now is to do nothing. Frankly there's nothing you can change about the lost years behind you, but you sure as 'eck can do something about the now and future.

bigfreddiel

Workplace pension is the way to go for both of you, if you are in a nice safe job for the next 20+ years. If not check the scheme details to see what happens if you leave for any reason.

If that looks bad then your next option is to go down the SIPP route.

The old rule of thumb for the amounts to put into your pension was to take your age, 40, divide by 2, and that is the percentage of your salary to pay into your pension, whic is 20%.

If you had started at 20 years old it would only be 10%, and that would stay at 10% for your working life.

Leave this till you're 50 and you are looking at 25%!

Good luck fj