Private pension

Harrybrown100121

I am 32 years old, I want to start investing in a private pension but do not where to start. I could only afford to put between 100 to 200 a month in. Is that enough?

Dazed_and_confused

Enough for what?

It's better than nothing.

If it's to a relief at source scheme and you pay say £200 then the pension company (courtesy of HMRC) will add £50 basic rate tax relief.

So after a year you will have £3,000 in the pension (subject to any investment profit or loss).

SonOf

Saving for retirement will only be as good as what you pay in.

At 32 years old, you are late to the party but not terminally. However, £100pm is the minimum premium of many providers. You cant be on minimum when you starting late unless you plan to be frugel in retirement or are looking at your 70s before stopping.

Do you have access to a works pension or are you self employed?

thickasabrick

Looks like it is doable for the figures quoted from the Which article "How much will you need to retire?". Target is £20000 for individuals enjoying a comfortable retirement spend each year.


Rough calculation
Using the figure from this Which article "How much will you need to retire?"
£215,450 How much you need in your pension to get £12000 a year from income drawdown at normal retirement age 67. Include state pension of £8000 to make annual figure of £20000 for a single pensioner .
Savings goal calculator
Savings goal: £ 215450
How Much You Already Have Saved: £ 0
How Much You Save Each Year: £ 2400
Annual Rate of Return (%): 5%
You will reach your savings goal in: 34.9 years

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Harrybrown100121 wrote: »

I am 32 years old, I want to start investing in a private pension but do not where to start. I could only afford to put between 100 to 200 a month in. Is that enough?

JoeCrystal

Harrybrown100121 wrote: »

I am 32 years old, I want to start investing in a private pension but do not where to start. I could only afford to put between 100 to 200 a month in. Is that enough?

Are you self employed? If not, then you should be auto-enrolled into your workplace pension scheme? As for how much contribution, you need to figure out how much income you would like to have in your retirement and work backwards from it.

Alexland

Thickasabrick - an average return of 5pc above inflation and fees is extremely optimistic. I would also be uncomfortable with the sustainability of a 5.5pc drawdown rate. My calculations are based on around 2pc real return and 3pc drawdown.

Albermarle

Their middle ground outlook for pension performance during drawdown is as follows :

fixed interest at 4.75% a year and equities at 7.25% a year.

So a typical 50:50 split would give an average return of 6% ( before inflation ) I would say this is an optimistic outlook rather than a middle ground one.
Also there is no mention of being prepared to deal with sequence of return risk .
A big fall in fund value soon after drawdown starts can have a huge effect on drawdown success , even if the growth comes back later it is normally too late . So any drawdown projection such as Which have done, should include the warning that a significant cash buffer is needed to neutralise this issue.

Harrybrown100121

Thanks

I am in a civil servant pension but want something else as I am worried that the retirement age will rise again and don’t want to work until I am 75

MaxZorin

I very much doubt your retirement age will be 75! 70 maybe.

What scheme are you in? Most can be taken 10 years before SP age though are obviously reduced if you do. I'm in a similar boat though have 14 years in Classic I can take at 60. The rest is in Alpha.

To create an additional pension pot for me at 60, I'm currently contributing to a LISA. May be worth a look if you're a lower rate taxpayer.

Alexland

If you are a basic rate taxpayer it is worth considering a S&S Lifetime ISA for a 25% bonus on contributions of up to £4k per tax year. If you open before 40 you can contribute until 50 and withdraw (with no tax) from 60. For a modest monthly contribution then a Hargreaves Lansdown LISA investing in the discounted BlackRock Consensus 85 fund might be a good choice.

Alex

MaxZorin

You can probably purchase EPA via your Civil Service scheme to enable you to receive your pension up to 3 years before SP age as well.