Ok, 38, no savings, no pension started...

RedfordML

...where to begin!!




I am...was totally clueless of the importance of a pension. As I changed retail jobs regular, I never signed into one as I didn't understand you could have multiple. I never understood how I would access the fund on retirement, I basically didn't understand.


Now, I am keen to start. In a year or two I hope to be a qualified teacher, with a starting salary around the 25k mark.


I have a mortgage. I aim to be mortgage free by 60-65! (£185k left on a house valued at £260k, not relevant im sure for what I am asking!!)


I predict I will try and put in £75 a month. Is this added the state pension people receive? How much is the state pension? I have worked since I was 16 in low paid retail jobs.


So....


If I start a pension @ 40, putting £75 in a month, added to a state pension (if that is what happens) what kind of pot would I expect??


Thanks anyone who reads or can help!! Much appreciated.

TcpnT

To be truthful £75 per month for someone of your age with no existing pension provision is going to be a drop in the ocean and far from sufficient to provide meaningful extra income at retirement. It will however be in addition to the state pension so there will be some extra benefit.

However if you start a job as a teacher you will probably be eligible to join the Teachers Pension Scheme. This has the potential to provide much more significant pension. You should investigate and understand this option before starting contributions to any other scheme.

RedfordML

Perfect, thank you. This is an avenue I would definitely look to explore!


Out of interest, what is the state pension, in real £££ terms? Is this the same £££ to everyone?


Really silly question, how do people afford to live on the state pension alone, if no savings, especially if they don't own a property??

marlot

The teachers pension scheme is one of the best there is. Make sure you join it! But I'd recommend saving some money over and above too, to make up for your lost years.



When would you like to stop work? If (say) 68, that gives you 30 years to save into a pension. If you assume that you'll live to 98, then you'll be drawing that pension for 30 years.

marlot

RedfordML wrote: »

Out of interest, what is the state pension, in real £££ terms? Is this the same £££ to everyone?

Really silly question, how do people afford to live on the state pension alone, if no savings, especially if they don't own a property??

You'll be in line for the new state pension - a maximum of £164 a week (£8,500 a year) at the moment.



There may or may not be other benefits you can claim when you get to the appropriate age. I prefer not to take the chance!

bostonerimus

If you inflate the current flat rate state pension of about 8.5k/year by 3% for 25 years you get 18k. So that's a veery rough estimate of what you might expect for state pension.

As far as pension contributions go you should be contributing at least 10% of your gross salary and making sure you get the maximum employer match......as you are just starting at age 40 I'd try to go for even larger amounts. I suggest a detailed budget would be a good thing to do so you can see where you might shift money from spending to investing.

Spreadsheetman

Current full sp is £8,546.20. You need 35 years of NI contributions to get that amount.


£75pm contribution for 28 years at 5% return ends up at around £55k. This is possibly worth £2200k pa at age 68 (assuming 4% pa drawn) - i.e. not a lot.


The full sp will probably be around £20k pa then assuming 28 years of 3% inflation - but that is crystal ball territory.


Realistically you (or you+employer) are going to need to contribute a lot more to a pension. If you wanted to match the SP amount it would be more like £700pm to save if you were starting at 40.



(note this is all a massive simplification - future investment returns, inflation etc. can only be estimated and I don't know what current public sector pensions are offering)

dunstonh

I predict I will try and put in £75 a month.

£75pm is an good starting contribution....for an 18 year old. It is woeful contribution for a 38 year old who is massively behind on their retirement planning.

If I start a pension @ 40, putting £75 in a month, added to a state pension (if that is what happens) what kind of pot would I expect??

You would expect an in income in retirement of around £75pm in todays terms.

You are very behind. It needs to be taken more seriously than just £75pm. Luckily, the teachers pension will help a lot but you need to do something to catch up.

atush

First off, who do yu work for now? Join their pension ASAP. The best pensions are those that others pay into for you.

Then you can transfer that pension when you leave (as you could have done at all your other employers pensions you didnt join) to a personal pension. Youc an keep paying into ti- even when you are a member of the teachers pension. As this will be either extra income in retirment, or it will help you retire before SPA.

But first with no savings, you need to start and build up an emergency savings pot (even if you join your employers pension scheme). Do both.

If you find things tight, go over to the Debt free forum for help cutting back your outgoings.

ex-pat_scot

Ok.


http://www.hl.co.uk/tools/calculators/regular-savings-calculator
£75 per month.
30 years ie to you reach 68
5% growth ie equities (moderate to high risk).


Gives you £61,000 total pot, in today's money.


That will sustainably give you a grand total of around £2,400 per ANNUM in retirement from then on.
Add that to a full SP (if you manage it) of £8,500 pa takes you to £11,000 pa.


That might be sufficient for some, but it looks like meagre rations to me. The only upside is that you won't be paying any tax.


As others have said - you are woefully late and woefully under contributing. The teachers scheme will be much better, but you will probably need to supplement that, given you will only be starting in the scheme at around age 40.

justme111

well if OP lived on low paid jobs with a mortgage chances re his disposable income was not that different from SO one without a mortgage so no need to panic.