Increasing pension contributions

Yazmina

I listened to a podcast which said that even a small increase to my contributions would make a lot of difference when I come to retire.  I'm 47 now.  My payslip says I am contributing 5.45% to my pension.  I put a 2% increase into an online calculator and it said I would get an increase of £251pa in retirement.

It hardly seems worth it.  Is there a better way to increase my pension using what I've already got?

dunstonh

s there a better way to increase my pension using what I've already got?

If you pay in peanuts, you get back peanuts.  Pension will beat the alternatives (i.e. cash savings, ISAs etc) but at the end of the day, the biggest influence is the amount you put aside.

 I put a 2% increase into an online calculator and it said I would get an increase of £251pa in retirement.

Calculators normally adjust the figures to give you todays spending power.   They can sometimes use pessimistic assumptions as well.    2% doesn't give us an indication of the monetary amount you are talking about.  What was that in money terms?

amanda1024

First you need to know what you’ve already got! Is it a defined benefit (final salary or career average) or a defined contribution pension? If the former, what’s your most recent annual pension benefits statement say; if the latter how big is your pension pot so far?

(based on the 5.45%, are you working in the civil service?)

Marcon

Yazmina said:

I listened to a podcast which said that even a small increase to my contributions would make a lot of difference when I come to retire.  I'm 47 now.  My payslip says I am contributing 5.45% to my pension.  I put a 2% increase into an online calculator and it said I would get an increase of £251pa in retirement.

It hardly seems worth it.  Is there a better way to increase my pension using what I've already got?

I don't understand this sentence. Do you mean choosing different funds in which to invest (if this is a defined contribution pension)?

Also...what 'preferred retirement age' did you put into the calculator? The lower the age, the lower the increase to your pension income.

LHW99

Also, with some workplaces, if you make a larger contribution your employer will too (not all). The calculator won't likely include that.

QrizB

Yazmina said:

I listened to a podcast which said that even a small increase to my contributions would make a lot of difference when I come to retire.  I'm 47 now.  My payslip says I am contributing 5.45% to my pension.  I put a 2% increase into an online calculator and it said I would get an increase of £251pa in retirement.
It hardly seems worth it.  Is there a better way to increase my pension using what I've already got?

If you're earning £30k pa, 2% is £600 a year. If you're a basic-rate taxpayer, your take-home pay will fall by £480 pa, £40 a month.

In your 20 years to retirement you'll contribute £12000.

£12000 will currently buy an average person an RPI-linked annuity of around £520 per year (see HL's best buy table here). What annuity rates will be in 20 years is anyone's guess, but it's a guide.

Yazmina

dunstonh said:

s there a better way to increase my pension using what I've already got?

If you pay in peanuts, you get back peanuts.  Pension will beat the alternatives (i.e. cash savings, ISAs etc) but at the end of the day, the biggest influence is the amount you put aside.

 I put a 2% increase into an online calculator and it said I would get an increase of £251pa in retirement.

Calculators normally adjust the figures to give you todays spending power.   They can sometimes use pessimistic assumptions as well.    2% doesn't give us an indication of the monetary amount you are talking about.  What was that in money terms?

An increase of £82 per month.  (The current monthly deduction is £218.  This would put it up to £300).

Yazmina

amanda1024 said:

First you need to know what you’ve already got! Is it a defined benefit (final salary or career average) or a defined contribution pension? If the former, what’s your most recent annual pension benefits statement say; if the latter how big is your pension pot so far?

(based on the 5.45%, are you working in the civil service?)

It's defined contribution.  I can't remember what the last statement said regarding how much I have already saved.

Yazmina

Marcon said:

Yazmina said:

I listened to a podcast which said that even a small increase to my contributions would make a lot of difference when I come to retire.  I'm 47 now.  My payslip says I am contributing 5.45% to my pension.  I put a 2% increase into an online calculator and it said I would get an increase of £251pa in retirement.

It hardly seems worth it.  Is there a better way to increase my pension using what I've already got?

I don't understand this sentence. Do you mean choosing different funds in which to invest (if this is a defined contribution pension)?

Also...what 'preferred retirement age' did you put into the calculator? The lower the age, the lower the increase to your pension income.

I mean a better way to increase my work pension.  I'm expecting to retire at 67.

Marcon

Yazmina said:

Marcon said:

Yazmina said:

I listened to a podcast which said that even a small increase to my contributions would make a lot of difference when I come to retire.  I'm 47 now.  My payslip says I am contributing 5.45% to my pension.  I put a 2% increase into an online calculator and it said I would get an increase of £251pa in retirement.

It hardly seems worth it.  Is there a better way to increase my pension using what I've already got?

I don't understand this sentence. Do you mean choosing different funds in which to invest (if this is a defined contribution pension)?

Also...what 'preferred retirement age' did you put into the calculator? The lower the age, the lower the increase to your pension income.

I mean a better way to increase my work pension.  I'm expecting to retire at 67.

The best way by far is to contribute more, but you seem to have discounted that possibility in your opening paragraph.

You could choose different funds in which to invest, but remember you need to take higher levels of risk in the hope of higher returns.

Yazmina

Right.  So the advice that small increases to my contributions now will make all the difference later, is useless?