Saving for Retirement - Is employer contributions enough?

artyboy

Although this thread has been revived from a few months ago, one thing that I don't think was mentioned was if the OPs employer offers matching contributions beyond the 'base' 12% that they put in? It's a pretty common structure for occupational pensions (well, the more generous ones anyway!), and if the OP isn't taking advantage of this, they are missing out on some serious free money...

Put it this way - my own employer gives me less than 12% as a base contribution, but will match up to another 7% that I put in myself. 

Or to put it yet another way, with the effect of these base and matching contributions, plus salsac and my current tax banding, I'm getting £40k of annual pension input for an effective net pay cost to me of £7k. No wonder there's constant talk about pension reliefs being too generous.

(Note to self: stop worrying about LTA, current benefits still massively outweigh that potential charge...)

Albermarle

(Note to self: stop worrying about LTA, current benefits still massively outweigh that potential charge...)

Also pension pot protected from IHT, for now....

artyboy

Albermarle said:

(Note to self: stop worrying about LTA, current benefits still massively outweigh that potential charge...)

Also pension pot protected from IHT, for now....

I would be very surprised if any government (other than a fairly hard left one) would be brave enough to bring pensions into scope for IHT - given the trustee structure, it would likely need a wider legislative change anyway.

But I'm sure there's an 'influencer' think tank out there proposing just such a thing...

Albermarle

 given the trustee structure, it would likely need a wider legislative change anyway.

For sure, the devil would be in the detail.

YoungSaver20

artyboy said:

Although this thread has been revived from a few months ago, one thing that I don't think was mentioned was if the OPs employer offers matching contributions beyond the 'base' 12% that they put in? It's a pretty common structure for occupational pensions (well, the more generous ones anyway!), and if the OP isn't taking advantage of this, they are missing out on some serious free money...

Put it this way - my own employer gives me less than 12% as a base contribution, but will match up to another 7% that I put in myself. 

Or to put it yet another way, with the effect of these base and matching contributions, plus salsac and my current tax banding, I'm getting £40k of annual pension input for an effective net pay cost to me of £7k. No wonder there's constant talk about pension reliefs being too generous.

(Note to self: stop worrying about LTA, current benefits still massively outweigh that potential charge...)

Sadly not (speaking in the capacity I believe both original author and I work in the same company) they do offer 12 % without you needing to contribute anything. However if you contribute to the pension, they don’t offer any matching.

For any contribution you make, they will add 13.8 % - which is the employer nics.
So for me £967 monthly 

13.8 % of the £967 = £133

12 % of my salary = £363.5 

so each month = £1463.50 per month 

I think this is about £650 - £700 cost to me net each month

JohnWinder

‘I am a realist, so on the off chance I do make it to my 60s or 70s, how much should I be saving into pension?’

Here’s some simple maths to help you, not to answer the question accurately (because of the assumptions necessary) but to help…..

Ignore inflation from the considerations (ie pretend it doesn’t exist), to make it simpler, and hope your income rises with inflation. Firstly, estimate how much you’ll need when you retire, and then use this maths to see how to get there.

How much will your current £13k be worth in 30 years if it grows at 4%/year? Answer: (1+4%) raised to the power of 30, times £13k. The 4% is written as 0.04. And remember the order you have to do these operations (plus, times etc): BODMAS, brackets first, then powers (Orders), then divide/multiply, then add/subtract. About £42,164.

So, on a scientific calculator, on your phone, press 1.04, then press the x with the little y above it, then press 30, then press multiply by, then press 13000. Answer £42,164.  Then, add to that however much you can get by contributing some amount each year……

So, how much does £8 added to your pension savings each year for 30 years become if it grows at 4%/year?  Answer: ((1 + 4%) raised to the power of 30, then subtract 1) times £8, divided by 4%. So, the order on the calculator: press 1.04, then the power key (x with the little y above it), then press 30, then equals, then minus 1, then equals, then times 8, then divided by .04. Answer: £449.

Use your own figures, obviously, and choose 3% if you think your investments can earn only 3%/year in addition to inflation.