Pension Targets

SieIso

Hi All,

I have not always focused too much on my pension but in recent years I have taken a much keener interest in it. I spoke to a representative from my pension provider this week who was onsite at my workplace, they advised that my pension is "much too low" and I should make serious efforts to address this. The representative advised that he could not give any further advice. 

I am 40 and my pension pot is currently £86,400. My employer contributes 11% of my salary (£40k) and I contribute 10%. I have increased by contributions from 9% in 2023 to 10% in 2024. I am not sure what more I can do or what I need to do or even where I should be at this stage. I have been told before by the same provider that my pension pot should be of concern to me and I have tried to address this by increasing my contributions but I worry that I have left things too late.

I would like to get a pot that pays out approximately £25k per annum and I have no other pension pots.

Any advice would be great. 

MallyGirl

anything is always better than nothing. Do you have other pensions from previous employment or is this it?

Nebulous2

There are other people who will answer in more detail, but I would say you are looking through the wrong end of the telescope. 

You need to work out how much you will need in retirement, and when you want to retire, and then formulate a plan to get there. 

A pension pot figure in isolation doesn't mean much. 

Arthurian

I expect helpful forumites will reply explaining that we can't really help much without knowing your other outgoings, other savings, etc.  In spite of much derision from the world at large, I still turn to https://www.retirementlivingstandards.org.uk/ and https://www.retirementlivingstandards.org.uk/How-to-estimate-likely-RLS-2024.pdf for a guide which indicates how much you need to fund retirement.  I will say these figures are produced by the pensions industry, and most people think they are way too high. For a minimum income in retirement, they state a single person would need a fund worth £40 - £70k.

Somebody

How old are you?  At what age do you wish to retire? How much retirement income would you like?  If you do an online search, a rough rule of thumb for a DC pension pot is 25 times the desire annual income, so if you would like £25k p.a. retirement income then you need a pot of around £625k at retirement.

kuratowski

I feel the pension provider may not have been entirely impartial

According to these statistics, your accumulated pension is higher than the average 35-44 year old:
Household total wealth in Great Britain - Office for National Statistics (ons.gov.uk)

Remember, every year you work, you are also building up entitlement to the state pension.  You should check yours here:
Check your State Pension forecast - GOV.UK (www.gov.uk)

With that said, if you can afford to contribute more, it means (1) you would have more to live off in retirement, (2) you might be able to retire younger if desired, (3) you would benefit financially due to the effect of tax relief on pension contributions, even more so if your contributions are made by salary sacrifice and thus save NI.

Edit: amended link to average pension by age as noted by hugheskevi the site originally linked to wasn't suitable

Simon11

At the moment based on the information provided, I would put more lots of focus into putting together a strategy to increase your salary. 

Thus not only increasing take home, but also gives you more breathing room to increase pension %

Nevergonnaretire

For what its worth, I think for your current age and salary you're doing a lot better than most people I know. In fact, at the same age (and actually that salary wouldn't have been far off either) I probably had a bit less than that. Since then I've finished paying the mortgage and upped contributions to 30% and now, at age 51, I'm on about £300+K with a plan to at least double that by age 59/60 when I plan to retire.

I think the key as others have said is to know how much you need, and then have a look at a few retirement calculators and see how much you need to start upping contributions to get to that point.

Good luck!

Hoenir

Being only 40 time is still on your side. Anything you can contribute now will benefit from the power of compounding returns. Some short term sacrifices now will pay dividends in the years to come. When it comes to compounding the heavy lifting is performed in the latter years. There's an old Chinese proverb. A man who wishes to move a mountain starts by moving the smallest stones first. 

hugheskevi

kuratowski said:

I feel the pension provider may not have been entirely impartial

According to these statistics, your pot is higher than the average 40-49 year old:
Average pension pot in the UK: Statistics by age in 2024 (investingintheweb.com)

I don't like stats based on individual pots, as it omits so much data so is usually of little use.

For example, my 46 year old wife only has a pension pot of £48,000. That looks low in isolation, but she also has a £35,000 p/a DB pension.

Similarly someone might have a few £50,000 pension pots across a few different providers - looking at individual pots it may not seem much, but aggregated would be a respectable pension.

The Wealth and Assets Survey assesses all of an individual's pension wealth, which I think is best for comparisons. That suggests the median 35-44 year old has around £30,000 of pension wealth, and £96,300 at the 75% percentile. Which suggests the OP is doing fairly well compared to the general population, although most middle-earners are undersaving into pensions.

Superdude0499

If possible, and it probably is, take a look at what your current workplace pension is invested in. It is likely in the default fund, unless you've actively selected something yourself, which is probably fairly conservative. If you have the stomach for it you may opt for something more adventurous. You have plenty of time to ride out market volatility.