How to calculate what to contribute in to a pension?

Malthusian

JustAnotherSaver wrote: »

It's about getting the right balance. If i'm fortunate enough to live until retirement i may be unfortunate enough to only live 1 year into retirement, in which case i could've enjoyed all that money now & only saved a small amount for retirement rather than wasting it.

Unless you have a terminal disease, living to retirement isn't any more fortunate than successfully crossing the road without being hit by a car is fortunate.

As I said, if you find that you saved too much in your 20s or 30s, it will have made virtually zero difference to your overall happiness, and you will be able to cut your pension contributions and enjoy the money in your 40s or 50s, or even retire early.

I don't get pension funds for babies either. If you've maxed their junior ISA allowances and you've already put enough by to help them out with school fees, university, their first house, wedding etc etc, so that the only way left to give them a helping hand is to pay into a pension, then you're sufficiently loaded that the £2,880 contribution limit won't be worth the admin.

Linton

JustAnotherSaver wrote: »

I knew that these figures weren't gospel & mainly just try to drum it in that most people will need to pay in more. I just wondered how you calculate properly.

It's about getting the right balance. If i'm fortunate enough to live until retirement i may be unfortunate enough to only live 1 year into retirement, in which case i could've enjoyed all that money now & only saved a small amount for retirement rather than wasting it.

Since i've read online calculators for projected income are not the most reliable, i don't really know how much i should be putting away.

If you live until retirement, say 65, the Office of National Statistics data suggests that the chances of you dying by 66 are about 1/10th the chances of you living to 100. It would therefore make sense to devote much more thought to the latter possibility than the former.

kidmugsy

Alexland wrote: »

Another part of me thinks it would be a good way to disinherit myself early

The 40% IHT rebate does change things. Alternatively build up your own pension and aim to leave some unclaimed and allocated to your children after your death. If that got you 40% income tax relief that might be a winner.

Alexland

Yes you mentioned this on the NEST thread and it's a really good idea as whichever side of 75 you die your children would get the pension either tax free or at their marginal rate but likely to be less than 40% inheritance tax and no worse than at the rate a child pension would be taxed (assuming the child will save enough themselves to be a tax payer in retirement) and it also takes away the risk of living longer than expected and running out of money. My only difficulty is that I might have an LTA risk so would want to do it via my wife but it would need to be matched against her declining income.

Cheekyface0094

Just save as much as you possibly can afford

OldBeanz

http://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html

JoeCrystal

When I read an article like that, I am just glad that I decided to do something about my pension early in my life (at age of 24) rather than ignoring it. Hopefully, the auto enrolment will help young people into saving up that early as well.

jamesd

JustAnotherSaver wrote: »

I'm just wondering how you calculate that, especially for someone like me who has a variable wage.

I try to provide some idea at How much do I need to pay in each month to get to a particular income level at a target age? That just uses a regular savings calculator to give a fair idea. It's not really important to get exact monthly or annual amounts as long as it's fairly close. It's also useful to try to pay in more during the early years because that money has more time to grow.

kidmugsy

OldBeanz wrote: »

http://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html

Even better for some, save into an S&S ISA in your twenties and then move the capital into pensions later in life when you are a 40% taxpayer. Another duty for the Bank of Mum and Dad?

JustAnotherSaver

kidmugsy wrote: »

Notice that it's a "retirement plan" not a pension. I'm rather sceptical about youngsters (if young you be, OP) on modest wages heaping money into pensions unless they are using salary sacrifice, or harvesting an employer's contribution. The money will be inaccessible for ages, and there's no way of knowing what income tax laws will apply to you at the point of retirement. Moreover there's a chance that the rate of tax relief will go up for 20% tax payers: why not wait a few years to see whether that happens? An S&S ISA might be a better home for some of the money. You can always reverse that decision later, withdraw the capital, and contribute it to a pension. Maybe you'll get 40% tax relief. Yippee! As you get older the balance of advantage changes in favour of pensions, not least because you can begin to guess how much Personal Allowance you will have unused in retirement.

Meantime youngsters often have serious other financial needs e.g. saving towards eventual house purchase. Then a LISA might be attractive.

Of course these musings assume that you have enough self-discipline to avoid splurging your savings and investments on follies.

Well i'm 34. Some say i'm young (generally people in their 60s), others say i'm getting on (people in their late teens), for me i certainly don't see myself at the beginning.

I have already bought my house. No intentions to sell. Many tell me that'll change but then these many people don't know what i'm like That's why i've been in the same job since i was 14. I don't really 'do' change.

As for self discipline regarding savings - i have plenty. I was able to save up over £40k for a house deposit on an income of at the time £16k thereabouts. I guess many people at my age then would've bought a nice new car, clothes, would've put god knows how many notes down the drain on a Friday night but i had my mind set - the money was for a house & for a house only. I can be very focused when trying to achieve a goal. Tunnel vision almost (which i know isn't always a good thing).