Is pension pot of 160k good at 40?

1980ds

I am at a little over 160k pension pot valuation and 40 years old.  Whilst I was slow to the party the last couple of years I have managed to increase the pot by 40k per year contributions. Is that a decent sized pot at my age?

I am aiming to continue with 40k annual contributions (includes employer) for the next 5 years, then taper it down to hopefully have 600k by 50 years old and then pick and choose work as is required. Plan is to have mortgage paid off by 50 and then do interim roles with a bit of travel mixed in.

is there anything else savings-wise I should be considering? I’ve started a stocks and shares isa, 10k, and will look to grow over the years also.

any advice is appreciated!

Dazed_and_C0nfused

To some degree it's all relative.

If you are earnings £100k it doesn't sound that good.

If you are earning £30k it would be different.

The fact you are focused on pension saving is a definite plus and your £160k has 20+ years to grow irrespective of any further contributions.

But I'm not sure you will be able to "taper it down" much.

£160k + £200k (£40k x 5) = £360k at age 45

£600k - £360k = £240k to add in five years = £48k/year.

Obviously this isn't including investment growth but even so I think your £600k is optimistic if you want to reduce contributions significantly in 5 years time.

If you are paying higher rate tax (after existing pension contributions) then it might be worth looking at carry forward if it's available to see if you can benefit from further higher rate tax relief in this tax year.

MK62

TBH, nobody can say if 160k at 40, and 600k at 50 is/will be a decent sized pot for you....it depends when you want to retire and how much income you'll need/want.

If that's 55 and £50k pa, then possibly not........60 and 30k, then most likely yes.

The good news however, is that you have made a good start and have a pension plan.....the ISA provision won't hurt either.

Your ability to be flexible about work/earning in the future will also be a bonus, as will paying off the mortgage.

If I was in your shoes I'd be sleeping fine over this at the moment.......though of course I'm not actually in them.....

1980ds

Thanks for your replies - yes, thinking about it maybe I am being a little optimistic for 600k at 50 but hoping on 4-5% investment growth but appreciate this isn’t a given.

2nd_time_buyer

https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2016tomarch2018
According to Figure 10 in this, the average pension wealth for the 35 to 44 age group is £112k. 
- This is the mean average - median will be substantially lower 
- Refers to household wealth not individual

- over the period 2016-2018 (wealth has increased since)

michaels

Probably pessimistic but I see each 40k of pension contributions as being worth 1k per annum of pension income based on retirement at 55.

Brynsam

Depends what you're earning. If you are on minimum wage it's fantastic; if you're on £99K a year and hoping to retire in your mid to late 50s on a pension of around £60K a year, that won't do it.

There really is no point comparing yourself with other people who have completely different levels of income, saving and aspirations. The only thing which really matters is whether your savings are likely to give you the sort of financial comfort you aspire to.

barnstar2077

If I was you I would start by defining what you want to achieve.  Ask yourself what age you wish to retire at and on how much, then go from there.  You probably won't be able to access your pensions until you are 58 so if you want to retire, be financially independent, before then you will also need to think seriously about how much you will need in your ISA by then.

From my personal point of view I would say you are doing very well, but as others have said it all depends on your objectives.

Thrugelmir

If you plan to cease contributions at 50. Then £160k is on the low side. The challenge you face is that real investment returns may be lower in the next decade. Little scope for recovery if there's blips along the way. Growth is never linear. 

1980ds

Thrugelmir said:

If you plan to cease contributions at 50. Then £160k is on the low side. The challenge you face is that real investment returns may be lower in the next decade. Little scope for recovery if there's blips along the way. Growth is never linear. 

Probably not cease contributions at 50 but pick and choose work and add to pension fund at a lesser amount than in my 40s. 

In terms of the tax above the circa £1m, is the theory that this threshold will increase with inflation? I guess anything can change over the next 2 decades

1980ds

Plus I’m thinking if I get to 600k at 50 and assuming 4% growth it will be £1.2m 18 years later.  Appreciate with inflation that’s not the same £1.2m that is today