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dwtmahdc

Here's a question on pensions- advice is always 'save x% of income to a pension'. It's never clear if that's JUST your input, or if it includes any input from your employer.

How much do you guys save? Obviously this amount will have varied over time dependent on when you started.
I suppose this is a thinly veiled way of asking how much someone my age should probably be squirreling away haha. Very interested in others' amounts though- love having a wide variety of input, a lot of you seem really clued up.

ValiantSon

dwtmahdc wrote: »

Here's a question on pensions- advice is always 'save x% of income to a pension'. It's never clear if that's JUST your input, or if it includes any input from your employer.

How much do you guys save? Obviously this amount will have varied over time dependent on when you started.
I suppose this is a thinly veiled way of asking how much someone my age should probably be squirreling away haha. Very interested in others' amounts though- love having a wide variety of input, a lot of you seem really clued up.

This is probably not all that useful to you because I have a DB pension scheme, but I contribute 16.14% (which will increase every year by between 0.08% and 0.12%) and my employer contributes 16.48%, so my combined contribution is 32.62% and, next year will rise to 32.74% (with me making the extra contribution).

tibbles209

The "x%" does include your employer contribution. As I am sure you have read, the oft quoted guideline is approximately half your age when you started saving in the pension as a percentage of your income. This is of course a very vague approximation that is just designed to give you a ballpark and the actual amount you should be saving will depend significantly on what type of pension you have, what age you are planning to retire, what you are planning to do with your retirement years, what other income streams you may have in retirement, what your partner's pension provision is like etc. and a million other things.

And of course being so far from retirement it is difficult to know the answers to a lot of those questions for now I think you are doing well saving 18%.

N.B. Since you asked; I also have a DB scheme (NHS 2015 scheme) so my percentage contribution doesn't really matter.

dwtmahdc

I'd LOVE a DB scheme. However, I can't see them existing once current schemes run out. A few people at work have them and, unsurprisingly, they're pretty happy with them haha

I expect to retire between 70-75 as I don't hold out much hope for the State Pension (I'm a pessimistic realist). Might tweak it to 10% + 10% and see how that goes.

ValiantSon

dwtmahdc wrote: »

I'd LOVE a DB scheme. However, I can't see them existing once current schemes run out. A few people at work have them and, unsurprisingly, they're pretty happy with them haha

I expect to retire between 70-75 as I don't hold out much hope for the State Pension (I'm a pessimistic realist). Might tweak it to 10% + 10% and see how that goes.

If you are expecting to need the addition of the state pension to live on that would suggest that your DC scheme is underfunded. The state pension is a nice top up, but, for a high income earner, shouldn't be an essential part of the retirement plan. If there is no state pension when I get to NPA (which I think is unlikely, but my NPA may have risen again :mad:) then I don't expect it to be an issue. I have planned for a retirement without it and consider it as a potential bonus at some later point. I'd increase your pension contributions, if I were you.

bowlhead99

dwtmahdc wrote: »

Here's a question on pensions- advice is always 'save x% of income to a pension'. It's never clear if that's JUST your input, or if it includes any input from your employer.

There are all sorts of rules of thumb with different values of x. Most of them include the total of what is being put in, doesn't matter who puts it in.

A common one is "half your age when you start, and keep it that level forever". So if you start age 20, you can get away with just 10% going in for the next five decades or more. While if you only start at age 30, 15% forever might do it. Late to the party at 38 or 40, is going to be 19-20% minimum until you retire in your late 60s.

But all the rules of thumb are just there to get people thinking about pensions and to realise that if you start late you need to do a lot more than what some of your more responsible friends do or what your company pays for you. You can't take them all literally. The "half your age" one doesn't literally mean that you can put nothing away, then age 66 quickly put 33% of your salary in a pension once just before retiring, and then live like a king on that pension pot for the next three decades. It will be a *much* smaller pot than if you had put 10% of your lifetime salary into the pot for over four decades.

Also many of these "rules of thumb" have been going for a long time now and don't take account of the fact that people live longer these days and so might need an extra decade of retirement living. Or their specialist job might get replaced with a robot or computer when they get to age 50 and they need a huge salary cut for the last couple of decades before retirement, when the model assumed that they would keep getting promotions and inflationary pay rises.

And further, you can imagine that as a pensioner, you might be happy with living on y% of your lifetime average salary if that salary was nice and big. If it's a low salary you might really need to target z% instead if you want to subsist on more than beans on toast.

How much do you guys save? Obviously this amount will have varied over time dependent on when you started.

Yes it will vary on that, and on whether people have dependants and other priorities for their money, or e.g. a partner bringing in household income, with or without their own pension provision etc.

And it will vary on income levels because if I am on £100k I can put away 10% and it will be the same as if I put away 20% of a £50k salary, and I might be happy to retire on the sort of pension pot than can be acquired with 20% of a £50k salary. If will you have a paid-off house by the time you get to retirement, you need less than if you don't. And so on.

I suppose this is a thinly veiled way of asking how much someone my age should probably be squirreling away haha.

You could look at a couple of the rules of thumb and ask yourself

- was your pension pot at least £30k by age 30? If so you are probably roughly on track, if you keep going doing what you are doing and hey some promotions at work as your career advances. But you might have got lucky with timing of stock markets ups and downs to create a quick bit of pension wealth so best to be on the safe side and do more...

- if you are age 32 then even if what you currently have put away is not very much, if you put in 16%+ a year between you and employer you'll be OK according to the "half your age" rule, which is not really a rule... That's assuming you keep working to retirement age and the 16% is on all of the money you're used to living on (bonuses and secondment premiums and second jobs and side incomes from gambling etc) and you don't mind a relatively frugal retirement. If not, do more.

Basically the 18% between you and employer is probably about right at your age and better than many other people. But your goal is to be comfortable no matter what life throws at you rather than just better than many people who are very uncomfortable. So, if you can afford it, top up to 20%. You might find the extra 2% doesn't make much difference to your after-tax take home pay.

And yes, investigate LISA for any incremental contributions assuming the employer won't increase theirs above 10%. Even if you could get a little more absolute wealth via salary sacrifice (NI saving), the flexibility of a LISA is useful.

dwtmahdc

bowlhead99 wrote: »

There are all sorts of rules of thumb with different values of x...

Phenomenal response :T - if I could click 'thanks' 3 times, it'd happen.

Thanks!

Definitely made me realise I need to invest more in the old and decrepit version of me (in comparison to the younger, slightly less decrepit version of me).

dwtmahdc

ValiantSon wrote: »

The state pension is a nice top up, but, for a high income earner, shouldn't be an essential part of the retirement plan.

I'll let you know when i'm one of those haha

Fatbritabroad

The other thing at the moment though I'm hoping it goes by the time
I get there is the lifetime allowance. Currently just over million and set tree by inflation. I used to think this was Only a worry for oligarchs until you realise a million gives you between 30k and 40k to live on.hardly a millionair lifestyle. I'm 37 and yes I earn a decent wage but with bonuses I'm going to have over 200k in my pension by 39 and am contributing 18.97%including tax and ni rebates and employers contribution . Meaning if I going to well breach the allowance by 57

ValiantSon

dwtmahdc wrote: »

I'll let you know when i'm one of those haha

Sorry, my mistake. I had your thread confused with someone else who had posted that they earned £50,000 p.a.

I'd still up the pension contributions though!