How much to put into pension?

JoeCrystal

mickd27 said:

Just wondering from this how I can estimate how much pension I would have near retirement age and if I should be contributing more? Cheers.

It would be difficult to estimate, but you can play around with assumptions on the calculator like this one: https://www.hl.co.uk/pensions/pension-calculator 

Do not be disheartened if the annual pension projected do not meet your expectation since it seems more common to drawdown from the pension fund rather than opting for an annuity.

But I would encourage you to contribute as much as you can into the pension scheme but only as part of the overall plan covering short-term, medium-term and long-term goals. After all, you do not know if your good salary will last so make hay while the sun shines.

cfw1994

mickd27 said:

Hi,
I'm 34 years old and current pension pot is about £30k. Should be around £35k by age of 35. 
My pension contributions have been up and done my whole career due to my pay being up and down. Now I'm in a steady job I will be putting in a total of 9% into my pension automatically. My salary is £40k.
Just wondering from this how I can estimate how much pension I would have near retirement age and if I should be contributing more? Cheers.

Have you skimmed the MSE Guide?
It suggests a good “rule of thumb” being half your age in % terms.
So at 34, try to put away 17% (including employer contributions).
Never quite that easy - we all have lives to lead which put many pressures on our income - but as someone else put it, your future self will thank you for putting more in today.
Pretty sure my 34-year old self wasn’t focussed on his pension, so well done for taking that step at least!!

mcooke999

Half your age is a good guide if you're planning on retiring at 65, any earlier and you'll obviously need to put more in. The younger you are the more achievable it is.

bowlhead99

mcooke999 said:

The only thing with a LISA is you wouldn't be able to transfer it into a SIPP at a later date...

If you put it in an ISA you'll be able to offset your earnings should you ever go above the higher rate tax threshold in future...

You would be able to put it in a pension at a later date, it would just cost you a withdrawal penalty to do so. The withdrawal penalty is an annoying 6% (as it costs you 25% of the 125% of the amount you had originally invested). But 6% is not the end of the world if you're paying that penalty to get yourself a high rate of gross up (100/60 albeit taxable at marginal rate in later life).

Obviously paying 0% penalty after withdrawing from a normal ISA sounds better than a 6% penalty on LISA, but needing to free up investment monies to be able to make higher rate tax releivable pension contributions is not something you will necessarily need to do or be able to do. As the LISA is a use-it or lose-it allowance, it does deserve proper consideration for the flexibility it offers compared to pension contribution or ISA. All routes have their pros and cons.