Should I contribute more to my workplace pension?

LHW99

JohnWinder said:

Tax, contribution matching and all the other perks aside, the more you contribute earlier rather than later the better it is (if the fund returns are positive not negative over the relevant period). Get out a compound interest formula and play with it.

Surely early in you accumulation strategy is exactly when drops in the market are ideal.

I did say to our son, you want the stock market to drop right down while you are adding to your pension, and to shoot up just before you need to take it - then all the cheap units you bought early on will be worth a lot more when you need to take an income.

No guarantees it would happen (although that was just before Covid!), and it wouldn't be too good for those who needed the income in a prolonged downturn, but if you have 15 years+ to go, and you contribute regularly, you do get the "pound cost averaging" effect.

cloud_dog

Bemma said:

Pat38493 said:

Bemma said:

This is going a bit of topic for OP, but replying to @Pat38493

...My thinking right now is that if I am a pauper outside of pension and house assets on the day I retire that will be a success.

This is my thinking too, I would consider large amount of savings outside of a pension as I approach 55 as a missed opportunity for more tax relief. I am just about able to put £60k per year without going below NMW, I'm making up my income short fall from savings that will approach zero by the time I'm 55.

For a number of years now I have been liquidating some ISA investments each year to support sacrificing down to NMW.  Based on our 'Number' and just for our early retirement period, I will have deferred my 42% deductions (tax / NIC) to a position where I will pay c. 5% tax on the money (things change after SP age).

Looking at our numbers we are 12 months from being able to stop (assuming future finances pan out; unlikely not to at this stage).  I am, however thinking of working until the end of the 2024 FY, so end March 2025, just to provide an added 'comfort blanket'.

@Pat38493, redundancy would be a blessing given our circumstances, one can dream.

Bemma

I'm targeting about 8% tax at the start of retirement.

I will have deferred blended deductions of:
42% : HR tax and NI
62.8% : +HICBC @ 20.8% (2 kids)
32%: BR tax and NI

as my salary tumbles to NMW. Also an added 7% ER NI on top.
Overall I'm getting very close to 100% uplift on pension contributions and will pay 8% on the way out - When I mention this to friends and colleagues, they don't believe me and declare I've calculated it incorrectly!

Mark_Glasses

Thanks for the comments. It's in the default fund which I understand to be the best option at my age because there's less risk.