Embarrassed 40 year old - no pension.

uk1

Hi,

Should you not increase your annual contribution from flat to an increasing number increasing each year in line with your presumed increase in earnings in order to maintain a consistent share of your earnings devoted to pension contributions.?  I don’t wish to needlessly make your life more complex, but you then need to factor back by an index factor ie inflation purchasing power for the forward buying power of your future pot at “today” value.  

Once you have completed this sheet you might think about a larger sheet with all your realisable  assets and other capital.  I had such a spreadsheet which had in effect become my long-term financial life planner.  I take or should say I took the unusual and controversial  view of seeing it as a sinking fund where in effect I was  saying something along the lines of “if everything went wrong today how long could we survive for and what would our life look like”.  It also gave a decent as best I could idea of what we might retire with and what it’s purchasing power would be. The underlying controversial idea is that your total value should be seen as a sinking fund where at your presumed death all other calculations being correct you end up with nothing left.  It is controversial it seems because I disagree with the commonly held approach that capital must always been protected whereas I think it should be used during your life.

This approach enabled me to take slightly better informed choices about the professional risks I was contemplating whilst being very honest with my wife about the risks I was asking her to confront if she backed my thoughts about the risks I wanted her to sign up for and to share with me. So when we started I could say “if everything went wrong now we could buy a caravan and live for a few years” until we eventually reached 50’ish and I was able to answer a direct question about life choices where I could aay that “to the best of my knowledge we could stop work and retire today  and I believe our wealth will increase each year and it is unlikely we will actually never run out of cash even with a pretty decent lifestyle”  So my wife supported the idea of giving up an extremely safe and comparatively high salary and benefits  to embark on what was a higher risk but more exciting set of naturally evolving and developing and unforeseen business ventures  that others said wouldn’t work and for many would seem an extremely rash thing to do. It all turned out to be extremely good fun and a real adventure. Without my spreadsheets I’m not certain we would have been bold enough.

I provide this rather detailed reply because although I do not know the wider aspirations it was my sense that your current question might be becoming a part of a larger set of things you are trying to make sense of.   I think that many would benefit from such an approach but from experience I do know that many will disagree. It can sometimes offer some confidence when confronted with tough life options and decisions because you can say “what is the worst that will ever happen to me”.  This approach although in no way is it a precise art or science but it certainly   enabled me to be a lot more bolder and not overly or more accurately needlessly cautious at the appropriate moments. 

Good luck with your mission to make sense of this stuff and extremely well done for recognising you challenge and doing something about it.

And so so bed …..

Jeff

Albermarle

The £2,000 gain is approximately a 5% gain last year.

When looking at these types of figures you need to be very careful with the time period you are looking at.

'Last year' could mean the whole of 2021 , or it could mean the last 12 months from today.

In fact the figures quoted are from 6/04/2021 to 05/04/2022.

Each of those three time periods would give you a significantly different outcome.

sho_me_da_money

Had a question.

If Truss increases the 20% tax threshold from 50K to 80K, how should I adjust my pension contributions?

I am paid approximately 70K per annum and have been salary sacrificing an amount that gives me an equivalent salary of 38K

Does anything need to change on my ends?

JoeCrystal

How about waiting until it actually happens!? No point worrying about it until then!

noclaf

OP I am same age as you and also in the midst of reviewing/tweaking my pension funds.
I am not an experienced investor compared to some of the folks on here but some thoughts, 30% EM is quite high so just go in with your eyes open....you only need to see what's been happening in the world recently with some EM countries..it could get messier. However I could be wrong and he who dares...might win! Personally 10-12% EM is my comfort zone and due to concerns with China and the China/Taiwan tightrope I am a bit nervous as most EM trackers have a fair chunk of both China and Taiwan. 

I am currently wrestling with whether to go Dev world only in my main pension or add some EM....first world problems I know.

SouthCoastBoy

sho_me_da_money said:

Had a question.

If Truss increases the 20% tax threshold from 50K to 80K, how should I adjust my pension contributions?

I am paid approximately 70K per annum and have been salary sacrificing an amount that gives me an equivalent salary of 38K

Does anything need to change on my ends?

I'd be very surprised if the threshold will be increases by that amount

scobie

sho_me_da_money said:

Had a question.

If Truss increases the 20% tax threshold from 50K to 80K, how should I adjust my pension contributions?

I am paid approximately 70K per annum and have been salary sacrificing an amount that gives me an equivalent salary of 38K

Does anything need to change on my ends?

That’s an extraordinary proposition. What on Earth makes you think that’s going to happen?

UrbanAchiever

scobie said:

sho_me_da_money said:

Had a question.

If Truss increases the 20% tax threshold from 50K to 80K, how should I adjust my pension contributions?

I am paid approximately 70K per annum and have been salary sacrificing an amount that gives me an equivalent salary of 38K

Does anything need to change on my ends?

That’s an extraordinary proposition. What on Earth makes you think that’s going to happen?

Sounds bonkers doesn't it!

But I saw it being touted here:  https://inews.co.uk/news/politics/national-insurance-cut-will-liz-truss-ni-plans-what-mean-how-much-tax-pay-1838607

Hard to believe it will come to pass, but you never know!