Is pension pot of 160k good at 40?

JustAnotherSaver

I'm not a million miles off 40 and I'm about 30k all in all. Would need to check. I started at about 28 which is late or early depending on who you're talking to. For most of that time I was earning maybe about 18k per year +/-. 

Want to trade pots? 

The way I look at it is how I looked at putting down a deposit for the house - it's never enough because I want to retire yesterday and I can't. 

[Deleted User]

michaels said:

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

That is incredibly pessimistic.  Are you assuming zero growth?

Albermarle

1980ds said:

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

The current Lifetime Allowance threshold is approx £1.07 Million and it currently increases with CPI. It only applies when you actually start to take money from the pension, not when the pension reaches that value .Often the payment is delayed until age 75.
So it would not be sensible to  worry about paying some extra tax at some far point in the future, when all the pension tax rules will probably have changed anyway . The usual mantra is ' Do not let the tax tail wag the investments dog' In other words do not let some possible future tax , affect your wider plans today.

barnstar2077

Albermarle said:

1980ds said:

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

The current Lifetime Allowance threshold is approx £1.07 Million and it currently increases with CPI. It only applies when you actually start to take money from the pension, not when the pension reaches that value .Often the payment is delayed until age 75.
So it would not be sensible to  worry about paying some extra tax at some far point in the future, when all the pension tax rules will probably have changed anyway . The usual mantra is ' Do not let the tax tail wag the investments dog' In other words do not let some possible future tax , affect your wider plans today.

I bet the government started that saying though! :  )

Alexland

I am similar age and have used around 40% of the LTA which I hope will grow at least 2% above inflation such that my existing contributions should have used around 60% of an inflation adjusted LTA at early retirement. Assuming I can get the same 2% real return on future contributions it means I am probably limited to adding around £15k pa for the next couple of decades before I would hit an inflation adjusted LTA. I am still contributing more so might be done by the end of my 40s.

Albermarle

Alexland said:

I am similar age and have used around 40% of the LTA which I hope will grow at least 2% above inflation such that my existing contributions should have used around 60% of an inflation adjusted LTA at early retirement. Assuming I can get the same 2% real return on future contributions it means I am probably limited to adding around £15k pa for the next couple of decades before I would hit an inflation adjusted LTA. I am still contributing more so might be done by the end of my 40s.

Although if you are a 40% taxpayer and getting employer contributions , then there is still a tax benefit to keep adding to a pension .
Plus all capital growth and dividends are shielded from tax and currently also from IHT .

Cus

1980ds said:

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!

If you earn over £100k now, with the last handful of years at that level, and you have been employed for 20 years at decent levels (say at least 10 years at more than £50k then £160k pot at 40 is poor imo considering equity growth.
If you earn £25k, and a lower earlier in your career, then you've done well to get to £160k. Some of the most impressive stories on this forum are people who save/invest so well considering their earnings.

Alexland

Albermarle said:

Although if you are a 40% taxpayer and getting employer contributions , then there is still a tax benefit to keep adding to a pension .

Plus all capital growth and dividends are shielded from tax and currently also from IHT

Maybe but I'm starting to think it might be better not to have an employer in my 50s. I had a high starting amount on the new state pension so should be done with NI contributions towards the end of my 40s too. Just wish the S&S ISAs were bigger to bridge the gap without needing to rely on inheritance etc