Pension % contibution, and combining pensions

Chris4

Hey,

I'm 26 and been paying into my pension for about 4 and a half years.

Martin Lewis says: "Take the age you start your pension and halve it. Put this % of your pre-tax salary aside each year until you retire."

Based on this, I was about 22, so I should be putting in 11% for the rest of my life. Is that correct?

At my previous company of 3.5 years, I believe it was around 5% (2% from me, 2% from employer, and national insurance). My current employer pays 2%. After reading Martin's calculation, I upped my contribution to 10% a few months back, but have recently halved it to put more towards upcoming plans. Just looking for a bit of guidance here as to what I need to be putting away.

Also, I'm a bit unsure what to do now I have money is two pension pots. I read Martin's advice about combining pensions, and the first company provides a better deal (less % annual charge), but my new company won't pay into this. I am lined up for a promotion soon - would it be in my best interest if I try to negotiate this in?

Thanks,

Chris

El_Torro

Chris4 wrote: »

Also, I'm a bit unsure what to do now I have money is two pension pots. I read Martin's advice about combining pensions, and the first company provides a better deal (less % annual charge), but my new company won't pay into this. I am lined up for a promotion soon - would it be in my best interest if I try to negotiate this in?

I wouldn't try negotiating that your employer pay into your old fund. You'll just appear awkward, and they're unlikely to want to / be able to do it anyway.


There isn't really a problem with having two pots, or lots more than that, as long as you keep track of them all. You could even transfer some money from your new pot to your old pot occasionally if you're that fussed about growing the old pot.

dunstonh

Martin Lewis says: "Take the age you start your pension and halve it. Put this % of your pre-tax salary aside each year until you retire."

It is a 30 year old saying that was designed to get people to realise the sort of ballpark they are looking at when it comes to contributions.

Its a dirty figure and not necessarily reliable. it also assumes you will be having a fairly consistent income (in real terms) and looking to retire at stage pension age (not earlier) and it applies to you solely and not if you have a spouse/partner (who may have provision of their own and requirements may be better unbalanced - i.e. one being higher rate taxpayer and the other not).

ust looking for a bit of guidance here as to what I need to be putting away.

You should contribute whatever is required to meet your objectives. If you want more accuracy than ballpark/dirty guides, then you need to do a proper analysis based on your current and future circumstances and your future objectives and include spouse/partner.

I read Martin's advice about combining pensions, and the first company provides a better deal (less % annual charge), but my new company won't pay into this

Martin doesnt give advice in regulated areas. Its all generalisations which may be right some of the time but not all the time. it is also not all about charges.

I am lined up for a promotion soon - would it be in my best interest if I try to negotiate this in?

If you dont ask, you dont get. However, your employer also has to be wary of discrimination. For example, why should you get a different amount to a colleague doing a similar role? What if that colleague is disabled or a woman? Can you imagine the sort of issues the company could be facing.

Your company is unlikely to pay into your individual pension as that would require you opting out and creating them extra work.

MallyGirl

El_Torro wrote: »

There isn't really a problem with having two pots, or lots more than that, as long as you keep track of them all. You could even transfer some money from your new pot to your old pot occasionally if you're that fussed about growing the old pot.

This is the really important bit. We often see people on here who haven't kept old paperwork and it can be tricky coming back to old accounts as companies merge/get bought.

I had all the paperwork for mine - I had 7 old ones plus current company. I decided to take stock when I turned 50. It took many, many hours to get the info into excel so that I could track performance, compare charges, see where each one was invested. I am gradually transferring some of the old ones to a SIPP now that I have that info.


The more you can afford to pay in at the beginning, the better.

Chris4

El_Torro wrote: »

I wouldn't try negotiating that your employer pay into your old fund. You'll just appear awkward, and they're unlikely to want to / be able to do it anyway.


There isn't really a problem with having two pots, or lots more than that, as long as you keep track of them all. You could even transfer some money from your new pot to your old pot occasionally if you're that fussed about growing the old pot.

Okay, I wasn't sure how it worked with having multiple pots. So would I just ensure they're all aligned with my retirement age, and then when I retire I'll be paid a bit from each?

dunstonh wrote: »

You should contribute whatever is required to meet your objectives. If you want more accuracy than ballpark/dirty guides, then you need to do a proper analysis based on your current and future circumstances and your future objectives and include spouse/partner.

Okay. I guess I don't really know what my objective is, and how much I'll need. There is some online pension calculators I've tried, so I'll probably base it off that until I have more of an idea in later years.

dunstonh wrote: »

If you dont ask, you dont get. However, your employer also has to be wary of discrimination. For example, why should you get a different amount to a colleague doing a similar role? What if that colleague is disabled or a woman? Can you imagine the sort of issues the company could be facing.

It wouldn't be a different amount, I was just thinking pay the same amount into my other pot, so it's all in one. But as El Torro said, it doesn't matter how many pots you have as long as you keep track of them - which I will do, thanks.

MallyGirl wrote: »

This is the really important bit. We often see people on here who haven't kept old paperwork and it can be tricky coming back to old accounts as companies merge/get bought.

I had all the paperwork for mine - I had 7 old ones plus current company. I decided to take stock when I turned 50. It took many, many hours to get the info into excel so that I could track performance, compare charges, see where each one was invested. I am gradually transferring some of the old ones to a SIPP now that I have that info.

Thanks, I'll be sure to keep all the paperwork and keep track of them.

dunroving

Chris4 wrote: »

Okay, I wasn't sure how it worked with having multiple pots. So would I just ensure they're all aligned with my retirement age, and then when I retire I'll be paid a bit from each?.

You don't necessarily have to ensure they all align with the same retirement age. A defined benefit pot that matures earlier might, for example, facilitate you taking partial retirement, or fund a particular planned life event.

The other aspect of having multiple pots (if the same rule applies when you reach retirement age - who knows?) is the trivial pension pot rules. If you have some trivial pension pots, you could potentially cash them in without triggering the MPAA restrictions.

Jarevena

I’m 61 yrs old and have accrued 42 yrs National Insurance payments.
My state pension age is now 66.
I’ve been told that if I was able to stop working now, I would still have to pay contributions for the coming 5 years, to be eligible for a FULL pension.
If this is right, it’s wrong!!
Anyone?

bigadaj

Jarevena wrote: »

I’m 61 yrs old and have accrued 42 yrs National Insurance payments.
My state pension age is now 66.
I’ve been told that if I was able to stop working now, I would still have to pay contributions for the coming 5 years, to be eligible for a FULL pension.
If this is right, it’s wrong!!
Anyone?

No it's not.

You've presumably been contracted out, in which case you are a beneficiary of the pension changes, a little knowledge is a dangerous thing, not sure what no knowledge is though.

xylophone

It seems probable that at some point during those 42 years you have been a member of a contracted out pension scheme.

Is a COPE shown on your statement?

If so, at 6/4/16 two calculations were done

Full Basic State pension + (SERPS/S2P - deduction for contracting out)

Full New State Pension - Contracted Out Pension Equivalent.

Your starting amount was the higher of the two, probably in the region of £130 or thereabouts.

To get a full new state pension you need to pay ( through work/voluntary contributions) or be credited going forward with the NI contributions stated.