What number are you aiming for - solely DC pot

Mistermeaner

Deleted_User said:

I kinda think that this thread is unhelpful, other than for boosting ego here and there. A young worker should focus on saving and investing and repaying debt. The size of the pot is “whatever it will be when time comes”.  Can’t predict the future.  Pay yourself first and you’ll be fine. 

I dont think this is right; just meandering along and seeing what the pot will be at the time you need it is incredibly irresponsible and suggests that no one has any choice or influence over it
We all have options around lifestyle and how much we spend of what we earn vs how much we save - we also all have options about taking on debt.

Anecdote I know but a young (30s) lad that works for me has had his wedding pushed back to 2021 due to covid - unprompted by me he was saying its all good because they can now save up even more and spend even more on their wedding.... a very poor decision IMO

JoeCrystal

Pile_o_stone said:

The other worrying aspect is that the majority of public sector pensions are not fully funded. A third of council tax payments are used to pay the pensions of council workers, and this keeps increasing. We are finding ourselves in the odd situation where young taxpayers are funding the pensions of public sector workers who retired before the taxpayer was even born. With falling birth rates and increasing longevity we will have more pensioners funded by fewer taxpayers. Taxpayers who will receive worse services because a large portion of the money they pay for these services are used for pensions. It's just not sustainable. Nothing will happen though until the whole Ponzi scheme comes crashing down because politicians are at the front of the gravy train.

While your post does make sense for the unfunded public sector pension schemes, LGPS is an entirely different animal. I am finding it difficult to believe that the employer contribution takes up a third (If you can give a link where you got the statistic from, that would be amazing). My local council is paying £25 million into LGPS, and the council taxes is £217 million so just over 11% of the council taxes. The contribution against the benefit paid in 2018/19 is £2 million surplus. However, the asset for that scheme is up by £200 million to £3 billion for the local councils across Dorset. Somehow, I don't think LGPS will have any problem paying the benefits since their assets are so substantial and healthy. (This is why I want to work for the local government in the future, so I can transfer into the LGPS if they allow it.)

The last valuation for the LGPS put it at 98% overall, so it is very well funded.

Robwales

Im a DC only - and also came to the revelation in last few years (very naively) that my pals that are on DB seem (in pension terms) on a cushy number.   I have worked my !!!!!! off for the last 20 yrs, got the work-life balance all wrong to try pay off mortgage, and accumulate as much into my savings /  pension as poss.  Im 49 and PAYE and impacted by tapering so couldnt really contribute in to my pension in 19/20...but paying prior years and sticking at it, ive now accumulated £675k pension + £450k cash and ISA funds...all earned (or growth) / no DB or inheritance etc.  Im kinda "proud" of what ive achieved to date in financial terms but i wish in hindsight id been a teacher i think as it give me benefits (lilke time off and pension) that i really value...now.  The company matches 5%...and i have a private pension as well ie the vast majority of the pension is my own savings and contribution.  Yes i have been fortunate to create / find a very lucrative position but its Sales and hence precarious and demands a lot of my energy and time.  i dont enjoy work v much any more and cannot wait to retire (i have loads i want to do, will not be bored) but also have 3 school age kids.  Back of a fag packet my "number" (as i get increasingly eager to stop) i reckon is £1.5m...£375k to go...hope to get their by 55, if i dont keel over when i get to that point and not see the fruit of my labours! (gawd ive just re-read this and i sound F-ing mesirable haha)

Prism

Mistermeaner said:

Deleted_User said:

I kinda think that this thread is unhelpful, other than for boosting ego here and there. A young worker should focus on saving and investing and repaying debt. The size of the pot is “whatever it will be when time comes”.  Can’t predict the future.  Pay yourself first and you’ll be fine. 

I dont think this is right; just meandering along and seeing what the pot will be at the time you need it is incredibly irresponsible and suggests that no one has any choice or influence over it
We all have options around lifestyle and how much we spend of what we earn vs how much we save - we also all have options about taking on debt.

Anecdote I know but a young (30s) lad that works for me has had his wedding pushed back to 2021 due to covid - unprompted by me he was saying its all good because they can now save up even more and spend even more on their wedding.... a very poor decision IMO

Why focus on something you have very little control over. We can make all the assumptions based on historical returns that we want but on any given day the point might be half of what you thought it would be through no fault of your own. Sure have a rough target but expect the result to be quite different. Like you say focus on the things you can control like saving rate and income.

I have a lot of statistics of how I got to where I am today and I could plot a graph of where that might get me by a certain date but the reality is I have no idea and little control what my pot will be in 5 years time or if that will allow me to step back from work. I couldn't have predicted that I would have almost no income this year which is going to have a knock on affect on my future plans.

Save what you can and see where you end up is a fine plan for me.

Linton

Prism said:

Mistermeaner said:

Deleted_User said:

I kinda think that this thread is unhelpful, other than for boosting ego here and there. A young worker should focus on saving and investing and repaying debt. The size of the pot is “whatever it will be when time comes”.  Can’t predict the future.  Pay yourself first and you’ll be fine. 

I dont think this is right; just meandering along and seeing what the pot will be at the time you need it is incredibly irresponsible and suggests that no one has any choice or influence over it
We all have options around lifestyle and how much we spend of what we earn vs how much we save - we also all have options about taking on debt.

Anecdote I know but a young (30s) lad that works for me has had his wedding pushed back to 2021 due to covid - unprompted by me he was saying its all good because they can now save up even more and spend even more on their wedding.... a very poor decision IMO

Why focus on something you have very little control over. We can make all the assumptions based on historical returns that we want but on any given day the point might be half of what you thought it would be through no fault of your own. Sure have a rough target but expect the result to be quite different. Like you say focus on the things you can control like saving rate and income.

I have a lot of statistics of how I got to where I am today and I could plot a graph of where that might get me by a certain date but the reality is I have no idea and little control what my pot will be in 5 years time or if that will allow me to step back from work. I couldn't have predicted that I would have almost no income this year which is going to have a knock on affect on my future plans.

Save what you can and see where you end up is a fine plan for me.

I would take a different view....
One should always have a plan, it might turn out wrong or it might turn out right, it doesnt actually matter because it should be updated with reality on a regular basis.  One always has a lot of control, the question is how to use it rationally in the midst of uncertainty. To apply that principle to someone young starting work thinking about how much to put into a pension....

The approach I would advocate would be to assume a retirement date, inflation rate, rate of return, rate of increase in wages etc and calculate how much to contribute so that one's living standard in retirement matches that whilst in work.  After each year, things will have changed so the plan can be updated with the latest numbers.  Possibly one might want to change some of the assumptions if the plan continually fails to match reality in a consistent way.  Eventually by the time one is ready to retire the plan will match reality exactly.

Working in this way one always has a rational justification for any decisions and to the best of one's knowledge at the time is putting exactly the right amount into the pension.  The alternative of doing something, anything, and seeing how it works out is very arbitrary and may well encourage short termism if there is no understanding of the future implications.

kinger101

Agree with Linton.  I also think taking an active interest is also going to leave someone in a much better position for managing the pot in retirement.  And make more informed choices on tax efficiency while saving.

marycanary

I work in local government. My employer contributes 12% and the scheme has a slight surplus. I don't know where the 30-40% contributions or 1/3 of council tax comes from but it is not where I live and work.
Mary

[Deleted User]

Linton said:

Prism said:

Mistermeaner said:

Deleted_User said:

I kinda think that this thread is unhelpful, other than for boosting ego here and there. A young worker should focus on saving and investing and repaying debt. The size of the pot is “whatever it will be when time comes”.  Can’t predict the future.  Pay yourself first and you’ll be fine. 

I dont think this is right; just meandering along and seeing what the pot will be at the time you need it is incredibly irresponsible and suggests that no one has any choice or influence over it
We all have options around lifestyle and how much we spend of what we earn vs how much we save - we also all have options about taking on debt.

Anecdote I know but a young (30s) lad that works for me has had his wedding pushed back to 2021 due to covid - unprompted by me he was saying its all good because they can now save up even more and spend even more on their wedding.... a very poor decision IMO

Why focus on something you have very little control over. We can make all the assumptions based on historical returns that we want but on any given day the point might be half of what you thought it would be through no fault of your own. Sure have a rough target but expect the result to be quite different. Like you say focus on the things you can control like saving rate and income.

I have a lot of statistics of how I got to where I am today and I could plot a graph of where that might get me by a certain date but the reality is I have no idea and little control what my pot will be in 5 years time or if that will allow me to step back from work. I couldn't have predicted that I would have almost no income this year which is going to have a knock on affect on my future plans.

Save what you can and see where you end up is a fine plan for me.

I would take a different view....
One should always have a plan, it might turn out wrong or it might turn out right, it doesnt actually matter because it should be updated with reality on a regular basis.  One always has a lot of control, the question is how to use it rationally in the midst of uncertainty. To apply that principle to someone young starting work thinking about how much to put into a pension....

The approach I would advocate would be to assume a retirement date, inflation rate, rate of return, rate of increase in wages etc and calculate how much to contribute so that one's living standard in retirement matches that whilst in work.  After each year, things will have changed so the plan can be updated with the latest numbers.  Possibly one might want to change some of the assumptions if the plan continually fails to match reality in a consistent way.  Eventually by the time one is ready to retire the plan will match reality exactly.

Working in this way one always has a rational justification for any decisions and to the best of one's knowledge at the time is putting exactly the right amount into the pension.  The alternative of doing something, anything, and seeing how it works out is very arbitrary and may well encourage short termism if there is no understanding of the future implications.

One should always have a plan. A plan should state objectives, approach to risk and a strict procedure for saving and investing, an IPS. What you save and how you invest is under your control. 

Also, good to calculate what you need for a given lifestyle - thats part of your objectives. 

Saying “I will have a million in 3 years” isn’t a plan at all. That’s a hope, Del-boy style. Completely out of your control.  It is the kind of hope which causes bad behaviours.  

This can lead to overly aggressive approach to investing in later years - if you “need” an X percent return to meet your hope. This can also lead to extra stress during downturns: “Aaaah! My hope is going up in smoke!” And again, bad decisions. 

We’ve also seen such hopes forcing people to do crazy things (eg “FIRE”, timing the market or going to “star” fund managers and chasing returns).

” The approach I would advocate would be to assume a retirement date, inflation rate, rate of return, rate of increase in wages etc and calculate how much to contribute”.  You put !!!!!! in, guess what you get out. All of these inputs are unpredictable. Have a target for saving, maximize saving while allowing your family to live. And all will be well.  The key variable here is “when you can afford to retire”. 

 

barnstar2077

Seems crazy not to have a plan tbh.  I suppose it is part hope and part dream, but as long as it is based on realistic numbers then all I see it doing is giving you more options later in life.  You may find yourself with a different (and completely unreasonable) manager, or you may develop an ailment that is aggravated by continuing to work.  Keeping your eye on the ball, and making a few smart decisions along the way could be a God send one day.

Mistermeaner

Anyone who adopts the “whatever will be will be” attitude to something as important to them as retirement will imo greatly regret it when it matters