Is my pension pot on track?

rebeccaw6891

I want to retire at age of 62 and I am currently aged 33 years.
My number of qualifying years will be 9 at end of 5 Apr 2019.

I currently have a workplace pension pot of value 15,100.

I am planning to contribute £300/month from April and this will be matched to another £300 by my employer.

Can I realistically achieve a retirement annual income of 30,000? Or to rephrase what do I need to get a retirement income of £30,000

Please note I am newbie on this forum.

Zorillo

You need to increase your contributions considerably, in my opinion. And invest it fairly aggressively. And hope for a fair wind.

hugheskevi

I need to get a retirement income of £30,000

Pre or post tax? Relative to today's prices, earnings or something else?

It is very hard to know what the target retirement figure will be so far from retirement. If based on current spending patterns, take into account that £30,000 in today's price terms will be much lower relative to earnings in 30 years than it is today.

I want to retire at age of 62 and I am currently aged 33 years.

So that is at least 6 years prior to State Pension age which will require extra funding before State Pension comes into payment.

My number of qualifying years will be 9 at end of 5 Apr 2019.

Seems well on target for full State Pension qualification.

Can I realistically achieve a retirement annual income of 30,000? Or to rephrase what do I need to get a retirement income of £30,000

Full State Pension is £8,500 p/a.

That means you need £21,500 p/a from private pension. Using a drawdown rate of 4% that is a pot of £537,500.

Add to the £537,500 six years of State Pension to fund early retirement and that is an extra £51,000 for a total pot of £588,500.

To get that sort of pot given your current contributions would require an annual rate of return of 5% above inflation, after charges. That is possible, but above typical return forecasts.

A personal contribution of around £600 p/m in addition to the employer contribution of £300 p/m would get to about the right figure assuming a rate of return of 3% p/a above inflation, after charges.

Note:

1. The above is based on pre-tax income. Using post tax would require a higher figure.
2. State Pension is likely to increase above inflation, reducing the figure needed.
3. An even contribution pattern is unlikely to be the most efficient. Taking advantage of employer matching, salary sacrifice, higher/additional tax relief, avoiding child benefit taper, retaining Personal Allowance, gaining Universal Credit and other means-tested benefits can all boost the effectiveness of pension contributions.

Dazed_and_confused

As you have effectively got two different retirement dates can you clarify of the £30k include the £8.5k* you can expect to get in State Retirement pension at age 68 (or later)

* assuming you gain sufficient qualifying years

Or is it £30k from age 62 plus the State Pension at age 68?

dunstonh

I want to retire at age of 62

Realistically, you are currently behind in your personal provision to retire at state pension age. Let alone 62.

I think you need to view your planning in two stages. Age 62 income until state pension age and then beyond.

rebeccaw6891

Apologies for a bit vague and thanks for the insightful responses.

I was looking for £30k - based on current buying power, so this number will have to probably go up with time.

This £30k would be income, so subject to tax and NI deductions.

This £30k will be when I turn 62 years old and state pension will be another bonus (to take care of inflation) when I am 68 years.

xylophone

Increase the pension contribution every time you get a pay rise.

squirrelpie

This £30k will be when I turn 62 years old and state pension will be another bonus (to take care of inflation) when I am 68 years.

It isn't realistic or sensible to think like this. Nobody has any idea what inflation will be like then, or in the intervening time. Or even much idea what the state pension will be like then. But in the absence of information, the best you can do is to assume that the state pension takes care of the same percentage of your income as it would now. Inflation is a whole different subject.

hugheskevi

This £30k would be income, so subject to tax and NI deductions.

Neither State Pension nor private pension income would be subject to National Insurance.

This £30k will be when I turn 62 years old and state pension will be another bonus (to take care of inflation) when I am 68 years.

Personal contributions of about £950 p/m in addition to the employer's £300 p/m would be broadly consistent with your target, assuming returns of 3% above inflation, after charges.

Another way of looking at it is that you are currently contributing £7,200 p/a for another 29 years to fund £30,000 p/a for about 28 years.

I was looking for £30k - based on current buying power, so this number will have to probably go up with time.

So tripling or quadrupling current personal contributions would be a decent starting point.

Thrugelmir

Is my pension pot on track?

Impossible to forecast. Though as others have commented your current level of contribution may well be too low. What you will need to do is pay as much in as soon as you are able. As it's compounding over the years that will perform the heavy lifting to increase the value. Then it's down to market timing as to when you'll be able to retire. Might be that there's a global reccession when you reach 62. You need to accept the fact that markets are volatile they do not incrementantly increase year on year.

planteria

some great responses, not least hugheskevi's post:T..

hugheskevi wrote: »

A personal contribution of around £600 p/m in addition to the employer contribution of £300 p/m would get to about the right figure assuming a rate of return of 3% p/a above inflation, after charges.

putting away c£1k/m is a big ask for most people, but it's the kind of commitment that many of us here should be making.. so it's good food for thought.

and agree with Thrugelmir.. in a way all rebecca, and the rest of us, can do is put away as much as we can, with a broad plan in place, see how it goes, and act, including decisions re. retirement date/income level, accordingly.