Where do I begin on pension savings?

IloveElephants

Hi,

I need some advice and direction please, 

I am 38 and have £3,000 in my nest pension. It was from my old workplace. I am now thinking of opening a private personal pension (ones that I can log in myself and add funds) and set up a direct debit monthly to put money in. 

I am not including employment pension as I worked for companies that did not contribute to my pension and I also worked for myself so I am not relying on this.

I would like some advice on how to get an income of 30k per year by retirement, how much should I save per month, who shall I open the private SIPP pension with? Once I open the pension to play catchup how much shall I deposit as a lumpsum to meet my goals?

I was looking into HL
Aviva
Vanguard
Legal & general
Scottish widdows
Wealthify

Thank you everyone, 

Dazed_and_C0nfused

Will you have any earnings, for example wages or business profits, in this tax year which count for pension contribution purposes?

If so roughly how much will they be?

Is the £30k inclusive of the State Pension or in addition to that?

gazapc

One key fact you missed out is what age do you want to retire? A £30k target would be different at age 57 vs 70.

And just to clarify, are you not currently employed by a company that offers a workplace pension scheme? You only mention that this was previously not the case.

gm0

Good for you to be getting onto this.

You need to understand a few pension rules.  On tax relief specifically.   Which is not lump sum friendly.

The most significant rules are Annual Allowance.  (The limit each year which can go to a pension - currently 40k)

And the rule on pensionable earnings (which defines how much can go in from £40k (Max AA) down to £2880 made up to 3600 (with relief) for non-earners with 0 income.  Income has to be employment or self-employment. Not other investment income or interest.  That's generally not "pensionable income" as far as the tax man views it.

Anyone can have a pension and put in 2880 each year to get this top up to 3600 provided they can find the £240 per month.
The benefit of tax relief on pension saving is a very big part of the attraction to locking money away in this tax wrapper until your mid-50s or later.  As a result it can be difficult in practice to make contributions which don't attract tax relief as this is a strange thing to do and thus uncommon.  So providers may not make it easy/permit it.  In any case an S&S ISA would do the same investing job without the additional limits, restrictions etc.  If you wish to invest lump sums this way the 20k ISA allowance each year for this may be helpful to look at.

Who you save with can be chosen on their viablilty/reputation and "costs" and "range".  How much and how often you will save and trade funds will affect cost.  Some platforms are better for traditional funds, others are setup to be cheaper to hold ETFs.

Do they have the funds you want.
How much does it cost to trade monthly (if that's what you want).
Platform fees
Digital facilities may matter to you or not.  Some on your list will be more basic than the others.

As to your question. How much

First pass - you can get a 30k income at 3% drawdown from a fund of £1m. 
Or a lesser fund of 750k if you project a higher rate of drawdown closer to 4%.
 
A lot depends on how long you plan to take it (from retirement age to death) and what inflation indexation of the retirement income you wish to plan for.  And whether you bump drawdown income down when your State Pension happens.  There are web calculators to play with these assumptions on many of the provider sites.

But rough amount. Age 38 to 60.  Saving around the £2,000 per month level should sort it (tax relief included)

Compounded ~820k fund to support £30k, indexed, WR=3.6%) saved by age 60 (with an assumption of 4% compound returns on savings from now.  Nobody can say what the long term average for 22 years will be. 

Less than that.  A lot more.  Once people would have used 7% or more in a calculation like that with very different results i.e. a savings rate closer to half the size.  Your guess is as good as mine. 

Vanguard and others publish highly speculative material on long term equity returns.

dunstonh

I would like some advice on how to get an income of 30k per year by retirement, how much should I save per month

I think you need to be a little more realistic about your retirement plans unless you have a serious income level.   You are 38 and have just £3k.  Ideally, you should have around  £35k by 35.  So, that tells you how much behind you are.

it's not end of the world as you still have time but you really need to take this seriously otherwise you have no chance of achieving your objective.   How much did you have in mind for paying?

who shall I open the private SIPP pension with?

I would focus first on how much you are going to contribute because it really doesn't matter who you open the pension with and in the early years it doesn't matter how you invest.

Albermarle

I am not including employment pension as I worked for companies that did not contribute to my pension and I also worked for myself so I am not relying on this.

To reach your ambitious target, it will be easier if you have a job where the employer contributes. Nowadays they have to contribute a minimum 3 % . Some contribute more and this makes a big difference over 25 years.

Otherwise you can see from the figures mentioned in a previous post, you will need to earn a big salary to be able to contribute £20K pa to a pension on your own.

QrizB

There's something that's not clear from the opening post and hopefully the OP will be back with more info:

IloveElephants said:

I am 38 and have £3,000 in my nest pension. It was from my old workplace. I am now thinking of opening a private personal pension (ones that I can log in myself and add funds) and set up a direct debit monthly to put money in.
I am not including employment pension as I worked for companies that did not contribute to my pension and I also worked for myself so I am not relying on this.

Do you have other pension pots from your other employments, or is £3k in Nest the total of all your pensions savings to date? £3kseems very low for someone who is 38.

Are you still earning £30k pa, and hoping for a similar income in retirement?

You have a couple of previous threads on pensions from 2020, was it around then that you got started with Nest?

In very broad terms, you've got 30 years to work until you reach State Pension Age (SPA). The state pension currently pays just under £10k pa, so you only need to save enough to make up the difference between that and your target retirement income.

IloveElephants

Dazed_and_C0nfused said:

Will you have any earnings, for example wages or business profits, in this tax year which count for pension contribution purposes?

If so roughly how much will they be?

Is the £30k inclusive of the State Pension or in addition to that?

Hi Dazed,

Thank you for your kind reply

1. - I am working for a company which I just started 1 month ago, the company pays 5% and I pay 5% into my pension. Again its a on a probationary period for the first 6 months.

The £30k would be included with state pension aswell. I'm assuming the way things are going now the government will even abolish state pension and with inflation it wont be worth much. 

Thanks for your comment. 

IloveElephants

gazapc said:

One key fact you missed out is what age do you want to retire? A £30k target would be different at age 57 vs 70.

And just to clarify, are you not currently employed by a company that offers a workplace pension scheme? You only mention that this was previously not the case.

Hi Gazapc, thanks for your comment.

I hope to retire at 65 (God willing) would be nice if could do it before but have to be realistic with the increase in cost of living today.

My current company offers the scottish widdows pension scheme. I only just started working for them 1 month in my role. They pay 5% and I put 5% monthly. 

Dazed_and_C0nfused

IloveElephants said:

Dazed_and_C0nfused said:

Will you have any earnings, for example wages or business profits, in this tax year which count for pension contribution purposes?

If so roughly how much will they be?

Is the £30k inclusive of the State Pension or in addition to that?

Hi Dazed,

Thank you for your kind reply

1. - I am working for a company which I just started 1 month ago, the company pays 5% and I pay 5% into my pension. Again its a on a probationary period for the first 6 months.

The £30k would be included with state pension aswell. I'm assuming the way things are going now the government will even abolish state pension and with inflation it wont be worth much. 

Thanks for your comment. 

Interesting view on the State Pension. 

Politicians certainly have some strange views sometimes but a policy likely that is almost certainly going to see them voted out at the earliest opportunity so would be odd even for them!

And since the new State Pension was introduced the standard pension most people will get has significantly increased compared to the previous system.

IloveElephants

dunstonh said:

I would like some advice on how to get an income of 30k per year by retirement, how much should I save per month

I think you need to be a little more realistic about your retirement plans unless you have a serious income level.   You are 38 and have just £3k.  Ideally, you should have around  £35k by 35.  So, that tells you how much behind you are.

it's not end of the world as you still have time but you really need to take this seriously otherwise you have no chance of achieving your objective.   How much did you have in mind for paying?

who shall I open the private SIPP pension with?

I would focus first on how much you are going to contribute because it really doesn't matter who you open the pension with and in the early years it doesn't matter how you invest.

Hi Dunstonh

Thanks for your comment, yes its terrible, I have a lot of catching up to do. As you mentioned I should have 35k by age 35 years years. 

I have to make overpayments now, I plan on getting a part time job on the side and using that income to put in my private pension. Paying £300 per month of my own money in a pension. 

Thank you so much for your comment.