Topping up a pension with an SIPP, how much to contribute?

J89eu

Great, she has moved it to the higher risk fund but is allowing it to move to the less equity pot as she gets closer to retirement (it will auto switch 10 years prior)

She is also asking about salary sacrifice so hopefully hear about that soon.

J89eu

So to update this my Mrs still has not got any information from her place of work... They are not proactive in answering anything like this, meanwhile we are no further on getting anything sorted. What should we do? Keep pushing for an answer or just go our own way and set something up?

MallyGirl

take a look at the costs for running SIPPs - it might focus her mind into pushing her HR people to answer the questions. SIPPs do allow great flexibility but at a cost.
For me it is worth the cost but if the numbers are small then that might not be so obvious

swindiff

I know it is just a rough guide, but at what age does the "guide" of half your age as a percentage into a pension become a total nonsense.

So at age 20, contributing 10% into a pension might been as adequate for the remainder of your working life.

But contributing 30% at 60, probably not.

MallyGirl

It's about what to contribute when you start.

So if you start contributing to a pension at 20 you put in 10% for the rest of your working life.
If you leave it to 40 to start contributing then you need to put in 20% for the rest of your working life.
and so on.
Just a very rough indication of the cost of delaying the start of pension contributions really

dunstonh

I know it is just a rough guide, but at what age does the "guide" of half your age as a percentage into a pension become a total nonsense.

From the day you are born.

So at age 20, contributing 10% into a pension might been as adequate for the remainder of your working life.

Or it may be too little or too much. Its not a guide to how much you should contribute. it is an indication of the sort of figure you are likely to be looking at.

if you cautiously invested, you would need to contribute more.
If you dont have the capacity for losses, you would need to contribute more.
If you wanted earlier than state pension age you would need to contribute more.
If you lead a consumer spending lifestyle, you would need to contribute more.

It is also worth noting that this "half age" indication was being used in the 80s when consumer spending was much lower and growth rates were higher and annuity rates were more than double what they are today.

swindiff

MallyGirl wrote: »

It's about what to contribute when you start.

So if you start contributing to a pension at 20 you put in 10% for the rest of your working life.
If you leave it to 40 to start contributing then you need to put in 20% for the rest of your working life.
and so on.
Just a very rough indication of the cost of delaying the start of pension contributions really

I realise that, but at some point it will become a nonsense, was wondering at what age that was. To take it to the extreme. Retire at 68 and start contributing 34% at 68 really is going to help very little with pension provision.

thickasabrick

As mentioned by previous posters you both need to make a decision on were you want to be at retirement age and whether it's normal retirement age or financial independence/early retirement as this will affect the split between the tax wrappers of pension / SIPP / ISA and how much you need to invest to reach that goal.

The risk of the government changing the goalposts with respect to flexible access at age 55 is quite low for me (only a couple of years away). Being a higher rate tax payer going in and a lower rate tax payer out also skews the equation for me. So nearly all my saving is via my workplace pension (salary sacrifice) with additional contributions via my SIPP.

You don't necessarily need to setup a SIPP if your workplace pension has the funds you want to invest in and their cost structure is not too high. If you can put additional contributions above the defaults in there it might save on the cost of a SIPP.

If I was 35 I'd probably split some of the contributions between pension and ISA.

Monevator article "SIPPs vs ISAs: pensions knock ISAs into a cocked hat if you want to retire"

Which article "How much will you need to retire?"
Based on normal retirement age of 68 (includes state pension) so if you're aiming for earlier such as 55 you'd have to increase your savings rate to hit the target pension pot size for the lifestyle you want.

J89eu wrote: »

Reading the title I guess I'd just get responses of "Half your age!" but please do read on!

My other half who is 35 has the workplace pension, that's it. She has been paying in since it was mandatory for companies to have it so that's 5% monthly as of Jan 2018 I believe. I understand it goes up to 8% this month but we want to go further, we can afford to put more aside, probably into a SIPP. The question is how much?

I'd think she'd need 17.5% total so is it as simple as 8% Workplace pension and then 9.5% into a SIPP? Or do we need to think about tax of some sort?

J89eu

I must admit it's all going over my head at this point... Struggling to work out what to do without making day to day life difficult for us! I really don't think she will get any response soon regarding the salary sacrifice question either

cloud_dog

I'm unsure how long your OH has been working for the current employer but, does she have 'proper' printed pay slips, or a P60??

The pay slips will sometimes refer to 'sal sac' or something similar.

For the P60, is the total earned income less than what her actual salary was (for the year in question), i.e. if they have a P60 it is likely to be for the last tax year, so 17/18? If it is then this may indicate that SS is in operation.