Will my pension be enough???

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Hi,.

Obviously this question is different with each person. But say u earnt £20k per year, FS/CARE pension 1/49.

Say u work for 49 years, your pension is 100% of your yearly salary, (obviously inflation it will be more)

Will this £20k be enough(even with today standard)

And if this is not enough, what kind of pension/saving/investment should I go for????

Mainly interested in pension wise option

Thanks

Lokolo

Surely the question of "Will this be enough?" is down to the individual and their spending habits.

Do not forget about state pension.

coyrls

If you can live off £20K per year when you are working, why wouldn't you be able to live off £20K per year when you are retired (assuming inflation increases)?

Most people retire on less than 100% of their pre-retirement income.

You don't seem to have included state pension in your example either and so you would end up with an income higher than your pre-retirement income, which is virtually unheard of.

Triumph13

If the pension isn't enough then the salary definitely won't have been!
Quick calculation:
£20k pa less 5% pension contributions = £16,080 pa take home.
Assume the pension is only worth 90% of salary due to incomes going up faster than the CARE revaluation so at SPA you get £18k from the pension plus £8,300 of state pension. With no NI to pay and no pension contributions either that gives £23,340 pa take home - a 45% pay rise!


If this is the kind of career path you expect then it probably only makes sense to have additional pension provision if you are going to use it to fund early retirement.

Malthusian

No, with inflation it will be the same. You've overlooked that your salary at the end of your 49 years will be much higher than £20k due to inflation.

In the very unlikely event you manage to accumulate 49 years in the same job and same CARE pension scheme, and end up with 100% of your final salary, then it should be a lot more than enough. Conventional wisdom says that most people will need around 66% of their working income in pension income, but this percentage goes up the lower your employment income is.

Plus you'll also get State Pension. So assuming a full NI record you'll end up with 140% of your final salary in guaranteed income.

This does not mean that someone in a CARE scheme doesn't have to make any further plans for retirement, because in reality hardly anyone ends up with 100% of their final salary in a CARE scheme. Virtually no-one spends 49 years in the same job. And if you get promoted or receive any pay rises above inflation then your CARE pension will fall below your final salary. If you have the money to make additional pension contributions and it's tax-efficient then you should.

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Thank you all for quick reply..... Yes there is state pension too.....

But let's say I want to save more in term of the 'pension route'.... What would you recommend ....

Or would u say no other pension product will suit me? (Nothing can beat FS/CARE pension)

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Malthusian wrote: »

No, with inflation it will be the same. You've overlooked that your salary at the end of your 49 years will be much higher than £20k due to inflation.

In the very unlikely event you manage to accumulate 49 years in the same job and same CARE pension scheme, and end up with 100% of your final salary, then it should be a lot more than enough. Conventional wisdom says that most people will need around 66% of their working income in pension income, but this percentage goes up the lower your employment income is.

Plus you'll also get State Pension. So assuming a full NI record you'll end up with 140% of your final salary in guaranteed income.

This does not mean that someone in a CARE scheme doesn't have to make any further plans for retirement, because in reality hardly anyone ends up with 100% of their final salary in a CARE scheme. Virtually no-one spends 49 years in the same job. And if you get promoted or receive any pay rises above inflation then your CARE pension will fall below your final salary. If you have the money to make additional pension contributions and it's tax-efficient then you should.

Wouldn't this make my pension higher instead

What product would you recommend???

Malthusian

Yes. But your salary, and therefore your income needs in retirement, will have gone up by even more.

Let's pretend you have been in the scheme for one year with a salary of £20k. Let's also pretend you're planning to retire in 32 years. And you will need 2/3rds of your income in retirement, i.e. £13.3k. If you're on £20k a year for the whole 32 years, ignoring inflation, you'll get 32/49 x 20k = a smidgen under 13.3k. So you're sorted.

Now let's say halfway through your career you get a big promotion and a pay rise to £30k. Your pension will be based on the average salary over your career, which is now half of 20k + half of 30k = £25k. However, your lifestyle is based on what your income is now, i.e. £30k. So come retirement you'll need 2/3rds of £30k = £20k. But your pension will be 32/49 x 25k = £16.3k, quite a way under.

Your actual career history will of course be more complicated than this, but it works the same way. The income you need in retirement will be based on the lifestyle you're used to immediately before retirement, i.e. it will be based on your final salary. But the pension is based on your career average salary, which is highly likely to be lower.

The answer to your question depends on how much you are looking to save, when you expect to spend the money, whether you have any debts, whether you have used your ISA allowance yet, and a number of other things.

AnotherJoe

Malthusian, you are making the assumption that salary determines lifestyle. It needn’t,

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Would any additional 'pension' product be a good investment for me the fact I already got a FS/CARE pension?

If so, Wouldn't the money be tied in till I'm retire? (I am only 30)

I already open LISA (for my first property) and for my retirement (is this a good option) to go along with my FS????

I think what my question is is my 'pension' good enough so I can say 'yep it's the best out there in the market' and move on to the next portfolio - housing, share, saving etc

Thanks

coyrls

[FONT=&quot]If you decide to invest more in a pension, it would be in addition to your FS/CARE pension, not instead of your FS/CARE pension. You haven’t really given enough details of your circumstances and your plans for anybody to say if you should be making additional pension contributions.[/FONT]