34 tomorrow, terrified I'm not on track

LW7

It's my 34th birthday tomorrow (thank you, thank you) and for the last 4 years I'm terrified that about what my future looks like.

I currently only have a pension pot of £30k as I only upped it from the minimum contribution a few years ago, after not taking saving seriously. I pay in £211 per month, and my company pays in £369. I've toyed with the idea of upping my contribution, but for every 0.5% I go up over the 8%, the company only does £0.05%. So I don't think I'd feel the benefit in the long term, vs what I would now, in the short term each month.

In addition, I'm scared that in 25/30 years, who knows where our pensions will stand, and will it be worth less? Will I have wasted all this money I could have been using elsewhere, in other forms.

How do you guys who invest in your pensions become content that it's the best method? I can't rest on the thought of if Pensions all go belly up, I may loose significant sums.

It's a lot of information to process, and understand, especially when it comes to being able to change your investment approach and such. 

Would you guys recommend seeking support and advice from an IFA to 1. See if a pension is still for me, given how old I am, and how little is in my pot? and 2. To see if my money is better spent elsewhere with a better chance of short term reward seeing as I'm already over 50% of what I wanted my retirement age to be.

Originally, I wanted to retire at 55, but that's near impossible now I feel, and as I push towards 60/65, my outlook on how long I may life diminishes rapidly. 

kinger101

Running those numbers on my python script, you'd have a pension pot of around £385K at 65 assuming 2.5% growth after charges and inflation.  This is a conservative but not pessimistic rate IMO.  At 3.5% safe-ish drawdown, that's an income of £13,475.  On top of that, you'd eventually get state pension, which based on 2020/2021 levels, will be another £9,140 a year income.  Post tax, that's about £1750 a month in retirement.

Based on the figures you've posted, you're a basic rate taxpayer.  If your pension scheme isn't salary sacrifice, then I'd probably us a LISA as an additional way of funding pension.  The reason being, you get an extra 25% gain.  Otherwise the figures within your employers scheme runs as follows;

For each £1 you put into your pension, the employer puts in 10 p.  This £1.10 gets taxed at 15% in retirement, becoming 93.5 p of net income. Without SS, the cost to you of this is 80 p.  93.5/80 = 16.875% uplift.  With SS, it costs 68 p.  93.5/68 = 35.5% uplift.

I think you should be more optimistic.  Time is on your side, and you have a number of options to improve your pension savings, either to retire earlier, on a better income, or a combination of the two.  As the the performance risk, the three decades you have for your investments to grow are the greatest mitigator of this risk.   

cfw1994

" for every 0.5% I go up over the 8%, the company only does £0.05%" - so you put a tenner in, they put a quid?
Sounds like free money to me!   Make it £100, that is a free £10 added to the pot, and that pot grows as you get older  -magic of compounding!
Most companies simply cap their contributions at a certain amount (ours match to 6% - doesn't stop me putting 15% in.....)

What pension is it?   
Generally speaking, pensions don't go "belly up".   If you can chose the funds they invest in, great, if not - what are they, and how have they performed (past perf not = future,, etc, but tells you at least how yours is performing!).  You can ask your company to share more information (or contact the pension scheme direct) - I would do that before engaging an IFA - FA/IFAs can certainly help you, but their fees will certainly drag any growth over the years ahead - the fact you have come here suggests you are willing to do some research yourself, which is great!

You are still young - I doubt my 'pot' was worth much more than yours back then, but you have time on your side.   
If I was speaking to my 34-year self, I'd have suggested putting a bit more into the pension, and a bit also into a S&S ISA (LISA if you haven't bought anywhere and think you might).   
Not that ISAs existed when I was 34, but the ISA is the thing YOU can get your hands on with no tax loss (tax paid ont he way in, not out).

& don't fixate too much on retiring at 55.   Focus on living a fun life on the way towards it!   I've reached that age, and (luckily) have the option to step back, yet right now I am continuing to work - having options gives you a different perspective.   F*-You money, I believe it is sometimes crudely termed 

Albermarle

For long term investing for retirement , then pension is clearly the best choice , especially if your employer contributions are 14%?, which is pretty generous by todays standards. So no need to be so 'terrified ' 

cloud_dog

cfw1994 said:

" for every 0.5% I go up over the 8%, the company only does £0.05%" - so you put a tenner in, they put a quid? 

Ummm, I think the calculation is incorrect, a bit too generous     £100 gets you an extra 50p

Linton

I suggest you have a play with a pension calculator such as https://www.direct.aviva.co.uk/myfuture/RetirementPlanner.  Dont treat it as gospel but it should give a reasonable idea of where you are now and how much you would need to contribute to a pension to meet your objectives.

Some points:

1) I suggest you plan on maintaining the same standard of living in retirement as you have prior to retirement.  The more money you contribute the less money you have now and the more you will have in retirement.  It's simply a matter of getting the balance right.

2) Pensions are the best method of saving for retirement:

 - tax benefits

 - employer contributions - anything is better than nothing

 - the money is invested for the long term.  This is the only way of getting decent returns.

 - If invested sensibly they will be based on holdings in hundreds if not thousands of companies from across the world.  If they all go bust I think your pension will be the least of your and the rest of mankind's problems.

cloud_dog

OP, as little as it is, it is free money. 
Having said that, I might consider using a Lifetime ISA (as kinger suggested), as you will get the 25% bonus and all withdrawals after age 60 is free of tax.

Linton

cloud_dog said:

cfw1994 said:

" for every 0.5% I go up over the 8%, the company only does £0.05%" - so you put a tenner in, they put a quid? 

Ummm, I think the calculation is incorrect, a bit too generous     £100 gets you an extra 50p

cfw1994 is correct - the employers 0.05% is 1/10th the employees 0.5%.

cfw1994

cloud_dog said:

cfw1994 said:

" for every 0.5% I go up over the 8%, the company only does £0.05%" - so you put a tenner in, they put a quid? 

Ummm, I think the calculation is incorrect, a bit too generous     £100 gets you an extra 50p

he said 0.5%, company going 0.05%......you could be right.....or so could I 

Thrugelmir

mossmanian said:

Originally, I wanted to retire at 55, but that's near impossible now I feel, and as I push towards 60/65, my outlook on how long I may life diminishes rapidly. 

Life is what you make everyday.  You only get one chance.  When investing for the long term the value of your investments is going to gyrate wildly. Just save a reasonable amount every month. Let compounding do the heavy lifting. Towards the end growthbecomes far more rapid. Pension wrapper being the best available at the moment while you are in employment. As others have said don't fixate. Life is a roller coaster. 

cloud_dog

cfw1994 said:

cloud_dog said:

cfw1994 said:

" for every 0.5% I go up over the 8%, the company only does £0.05%" - so you put a tenner in, they put a quid? 

Ummm, I think the calculation is incorrect, a bit too generous     £100 gets you an extra 50p

he said 0.5%, company going 0.05%......you could be right.....or so could I 

Ummmm.... I'm second guessing myself now.  I'll go with being wrong