Advice at 30

30andcounting

Hi - 30 year old with a workplace pension with Royal London. I pay in 5% and Employer the same. That is the max they will pay in , so I am able to increase but they won't above 5%.

Current pot stands at a measly £17k, my Salary is £57k so should contribute £5,700 per annum into the pot. I was wondering if this is enough? I really could do with my income not going any lower (we have a baby and partner self employed, decent sized mortgage etc) I could probably stretch to 6%.

I am trying to find out what the average 30 year old is paying into their pension at the moment., whether at £475 per month I am ahead of the game or not.

Thanks

MallyGirl

a very rough rule of thumb is to be paying in a percentage of half your age when you start - so 15% for a 30 year old. Given the balance so far you have really only just started. Sorry to break it to you but you are not ahead of the game.
If it is salary sacrifice I would take a good look and see whether you can contribute enough to take you down to basic rate tax - so gross of £46,350 (I think). That way there would be 40% tax relief benefit on all of your contribution.
The more you can contribute now in the early stages, the longer it has to grow/compound

MEM62

Based on your age and current contribution levels, that will give you an income of around £21,000 per annum in today's money. That's not going to provide much of a retirement.

Accepted wisdom is that you work out what kind of retirement you want and what level of income you will need to support it. You can then work that back to see at what you need to be contributing to your pension pot.

Play with this. It's a useful tool.

https://www.aviva.co.uk/retirement/tools/my-retirement-planner/

ruperts

There's little value in comparing yourself to other people or thinking of it as a game in which you can be ahead of or behind other people.

There are many variables and the only way you can get an accurate picture of how much progress you are making is to sit down and go through it all.

The first thing to consider is what type of lifestyle you might want in retirement, the likely cost of that lifestyle and at what age you want to retire. That'll give you a rough idea of needing a pot of £x at age x. Armed with that information, some quick spreadsheet calculations will tell you how much you need to contribute at a given rate of return to reach the target.

Eg if you work out that your desired lifestyle will cost you £30k per year, then using a 4% withdrawal rate you'd need a pot of £750k. If you wanted to retire at 55 then you'd need to be contributing about £15k per year at 4.5% return.

There are a few other factors like tax but if all you want is a rough guide then the above will get you started.

Nasqueron

Average 30 year old isn't on 57k - need to judge this on your own plan, not others.

Johnnyboy11

Another way of getting a handle on how much you need invested in your pension pot is the 4% rule-of-thumb. Example: 4% of £1 million would generate a pension of £40k per annum, and you are unlikely to run out of money, ever. Your current £17k pot would generate an annual pension of £680, not a lot!

lisyloo

MEM62 wrote: »

Based on your age and current contribution levels, that will give you an income of around £21,000 per annum in today's money. That's not going to provide much of a retirement.

Accepted wisdom is that you work out what kind of retirement you want and what level of income you will need to support it. You can then work that back to see at what you need to be contributing to your pension pot.

Play with this. It's a useful tool.

https://www.aviva.co.uk/retirement/tools/my-retirement-planner/

£21k sounds way too high.
At 4% pa that would require a pot of £525k (in today’s none).
What assumptions did you use to get to that figure?

ColdIron

MallyGirl wrote: »

If it is salary sacrifice I would take a good look and see whether you can contribute enough to take you down to basic rate tax - so gross of £46,350 (I think).

Today that is right, £11,850 personal allowance plus £34,500 basic rate band. From Saturday it will be £50,000 (£12,500 + £37,500)

Albermarle

One point is that it is better to put more in now than later due to the compound growth .
If you increase your contributions now you can always reduce them again if you need the money fr other things .
Also you should look to see what funds your money is invested in . Most likely a medium risk default fund and you may want to consider switching to a higher risk/higher potential gain , especially as you have many years to ride out the markets ups and downs

30andcounting

Thanks for the replies guys. My point being - not trying to be ahead of the game, just trying to see those around me at a similar age are contributing more or less. If I’m in the top 20% for example it’s more likely on pension income alone I should be by retirement age “ok”. Understand many other factors that get thrown into it. I also agree 17k is naff all, I have only really had higher % contributions and been on 50k plus for a few years.

Think I will up it to 6% - I can always reduce later down the line. I want to try and overpay my mortgage too. So much to think about and juggle at this age!

fiisch

For comparison: I am 32. At 31, I was earning a very similar salary, but paying in 22% (they had a good 10% non-contributory pension scheme + 5% match, and I stretched to 7%). Unfortunately, prior to that job, I'd never paid much attention to my pension so didn't have much saved up.

Today I have £23k, but I'm now a contractor, so no "free" pension contributions. I am putting in £1000 per month into a SIPP, which is about 10%. From talking to friends of a similar age, I'm behind the curve, and will look to up contributions further once I have suitable cushion (as a contractor, I need to account for months when I may be out of work).

I would suggest knowing what I know now that on a salary £57k, if your employer offers salary sacrifice, it is a no-brainer to sacrifice your income to below the higher rate tax threshold...