Concerned about future pension

Zola.

I am playing about with some numbers on the HL Pension Calculator.

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

I am 32, and I have a small amount in my pension (£15,000).

I earn £32,000 a year... I have very recently upped my pension from 4% to 6%. My work puts in 6% also. This is through salary sacrifice. So that will be £320 a month going in to my pension pot.

It seems I am a long, long way away from an estimated 'this is what you need' target.

HL say:

Most people need a retirement income which is about two thirds of their salary.
For you, this is:
£21,300 per year.

Now, even if I stick in 30% and work puts in their 6% (6% is their max), HL still say I am only 84% of the way to the estimated requirement. :eek:

There's no way I can stick in 30% of my pay every month of course, for now at least...

This has me rathered concerned. The growth rate I kept at 5% as I think our pension is fairly moderate risk.

I also plug £250 into a S&S ISA also every month, but is there a serious cause for concern here?

Andy_L

Zola. wrote: »

HL say:

Most people need a retirement income which is about two thirds of their salary.
For you, this is:
£21,300 per year.

That target should include the state pension of ~£8k/year

kidmugsy

The balance to strike is that sal sac is an attractive way to save into a pension. It's so attractive that you have to suspect that a govt will abolish it one day, so it's tempting to 'use it or lose it'. On the other hand you are only 32 so the money will be inaccessible for about a quarter of a century. At 32 one can imagine other demands on your funds - housing, children, ....

Tricky. What other options for your spare cash might appeal, other than ISAs, pensions, or spending?

Have you built up an emergency cash fund e.g. worth 6 months of your vital expenditure? Have you insured against being permanently or temporarily unable to work for reasons of health? Have you insured against being out of work for more than, say, 6 months? If you have dependants, have you got life insurance?

Zola.

We both have life insurance yep, and at least a 6 month emergency fund also.

I get married this year, so a lot of money is being tied up in a wedding fund.. I am not sure what you mean for other options? We are not lavish spenders really, but do enjoy holidays etc.

My partner's pension is only automatic enrollment, so its basically minuscule.

I dont know if I am fretting too much at this stage, but HL's results make me wonder if I am going to be a poor old man at this rate!

dunstonh

I am 32, and I have a small amount in my pension (£15,000).

That suggests you are a little behind but not a level that is too far to be recoverable. Nothing to lose sleep over as long as you treat it seriously going forward.

I earn £32,000 a year... I have very recently upped my pension from 4% to 6%. My work puts in 6% also. This is through salary sacrifice. So that will be £320 a month going in to my pension pot.

So, still not really paying in enough. Another 5% should be fine.

Now, even if I stick in 30% and work puts in their 6% (6% is their max), HL still say I am only 84% of the way to the estimated requirement.

Sod HL. Focus on you. What do you need? What does your spouse/partner bring in (now and future)? What will your spending habits be.

You must personalise these things to your situation. Not rely on some made up figure. Don't forget state pensions.

Zola.

dunstonh wrote: »

That suggests you are a little behind but not a level that is too far to be recoverable. Nothing to lose sleep over as long as you treat it seriously going forward.

So, still not really paying in enough. Another 5% should be fine.

Sod HL. Focus on you. What do you need? What does your spouse/partner bring in (now and future)? What will your spending habits be.

You must personalise these things to your situation. Not rely on some made up figure. Don't forget state pensions.

Thank you for your reply. My partner brings in circa £32k a year also.

I will ask to up my pension by another 5%, which would bring it to 16% all in, will no doubt make a big difference.

I really don't know how much I will need, I just want to have a solid amount. I definitely dont want to be one of those elderly folk that just stay indoors all day (but maybe we will if we both grow old!)

ischofie1

Be careful about using projections from pension providers. They tend to assume you'll buy an annuity & from them without shopping around.
This is probably the least efficient use of a pension pot.
I'd advise you model your own figures in Excel & concentrate on the drawdown option.

Triumph13

ischofie1 wrote: »

Be careful about using projections from pension providers.

If a pension provider suggests you put in too little, then you'll probably try to sue them later. If they suggest you put in way more than needed then it increases their funds under management and hence their profits. It would be unwise to treat them as unbiased in such a situation...

edinburgher

I agree completely that rules of thumb should be taken with a pinch of salt.

That said, it sounds like you have been throwing away free money by not maximising the employer match (or do they pay in 6% regardless)?

I wouldn't panic too much, 17% (not sure where you get 16% from) + 9.3% of gross salary going into your ISA sounds pretty healthy compared to most.

Your partner, on the other hand, may not have adequate provision and this will have an impact. If you think about your total provision, your average percentage will look pretty meagre at this point.

We're a year or so older than you, similar salaries and have upped our contributions to 25% of our total wages.

Zola.

edinburgher wrote: »

I agree completely that rules of thumb should be taken with a pinch of salt.

That said, it sounds like you have been throwing away free money by not maximising the employer match (or do they pay in 6% regardless)?

I wouldn't panic too much, 17% (not sure where you get 16% from) + 9.3% of gross salary going into your ISA sounds pretty healthy compared to most.

Your partner, on the other hand, may not have adequate provision and this will have an impact. If you think about your total provision, your average percentage will look pretty meagre at this point.

We're a year or so older than you, similar salaries and have upped our contributions to 25% of our total wages.

Thanks Edinburgher.

6% is the amount my work puts in on the condition that you put in at least 4%. It is capped at 6% though, so I haven't been missing out on their contributions at least.

Would there be a SIPP that you could recommend that she looks to pay into or anything?

dunstonh

I really don't know how much I will need, I just want to have a solid amoun

Look at your spending habits today. Remove the things you wont be paying in retirement. Add the cost of things you want to be doing (more holidays, dining out more etc). Allow a margin on top and that is your figure.