What is the correct level of pension contributions? How much is too much?

Mark_d

From my first job, I've been paying in at least 5% contributions.  Typically the employer has double-matched this, paying in 10-12%.

15 years ago I did some calculation that I should be paying-in 20% (plus employed contribution of 12%).

Since then, due to concern about what lies ahead for me, especially in retirement I have been increasing my pension contribution rate.  Now, at the age of 45, I am currently paying in 40% (plus 12% from employer).

Being self-sufficient is important to me.  I want to be in a position that I can afford my healthcare and support costs if I go blind, suffer liver failure, get cancer and diabetes.  Am I paying the optimum amount into my pension?

Pensions advise I generally see talks about having enough money to change your car every x years, or buying a new kitchen every y years.  I'm not interested in these things.  It's the healthcare/support costs which most concern me.

Thanks

Roger175

You are paying in way above the normal, but that's not a bad thing. One piece of advice I would however offer is don't necessarily put it all into a pension. Consider keeping a chunk in a S&S Isa, since you will be able to access this earlier if you opt for early retirement and given the % you are currently contributing, I would say that is a very likely option. Obviously pensions are more efficient from a tax perspective, but have restrictions if you want to retire early.

Also, I'm assuming you aren't paying into your pension at this sort of level at the expense of enjoying life in the meantime, obviously you need to get that balance right and if you're suffering any form of hardship to achieve this level, then maybe you need to re-evaluate things. After all, there's no guaranty you will get to retirement age and live a long and happy lifetime.

Marcon

Mark_d said:

From my first job, I've been paying in at least 5% contributions.  Typically the employer has double-matched this, paying in 10-12%.

15 years ago I did some calculation that I should be paying-in 20% (plus employed contribution of 12%).

Since then, due to concern about what lies ahead for me, especially in retirement I have been increasing my pension contribution rate.  Now, at the age of 45, I am currently paying in 40% (plus 12% from employer).

Being self-sufficient is important to me.  I want to be in a position that I can afford my healthcare and support costs if I go blind, suffer liver failure, get cancer and diabetes.  Am I paying the optimum amount into my pension?

Pensions advise I generally see talks about having enough money to change your car every x years, or buying a new kitchen every y years.  I'm not interested in these things.  It's the healthcare/support costs which most concern me.

Thanks

What sort of protection insurances do you have - eg critical health, private health...?

Hoenir

The earlier and the more you pay in. The better chance of hitting your goal. As compounding does the heavy lifting. 

Though worth maintaining a balance. In life taking opportunities when they arise is important. Age ultimately catches up with us all. 

Mark_d

Thanks @Roger175 That gives me some confidence in my current plan for our finances.

My S&S ISA has already surpassed the money needed to pay off our mortgage (for various reasons I don't want to pay off our mortgage early).  However, I plan to remortgage to an interest-only mortgage next year, freeing up more cash which we can put into ISAs.  I do love my job as a consultant so, as long as health permits, I would like to keep working even if only part time.

My partner and I are from working class backgrounds, so we're used to life without the latest iPhones, Playstations or Sky TV etc.  One long haul holiday per year is all we currently do, but that's due to my partner's phobia of flying as much as our finances.

Mark_d

Marcon said:

Mark_d said:

From my first job, I've been paying in at least 5% contributions.  Typically the employer has double-matched this, paying in 10-12%.

15 years ago I did some calculation that I should be paying-in 20% (plus employed contribution of 12%).

Since then, due to concern about what lies ahead for me, especially in retirement I have been increasing my pension contribution rate.  Now, at the age of 45, I am currently paying in 40% (plus 12% from employer).

Being self-sufficient is important to me.  I want to be in a position that I can afford my healthcare and support costs if I go blind, suffer liver failure, get cancer and diabetes.  Am I paying the optimum amount into my pension?

Pensions advise I generally see talks about having enough money to change your car every x years, or buying a new kitchen every y years.  I'm not interested in these things.  It's the healthcare/support costs which most concern me.

Thanks

What sort of protection insurances do you have - eg critical health, private health...?

Private health insurance and life assurance are through my employer but that's all I have.  If I was to get diagnosed with a critical illness, a nice payout might make me feel better but I don't feel it's necessary.  But maybe I need a different perspective?

Linton

The more you pay into a pension the richer you become in the future and the poorer now and vice versa.  ISTM that the correct level of pension is the one that allows you to retire at your desired age with the same standard of living before and after.

Marcon

Mark_d said:

Marcon said:

Mark_d said:

From my first job, I've been paying in at least 5% contributions.  Typically the employer has double-matched this, paying in 10-12%.

15 years ago I did some calculation that I should be paying-in 20% (plus employed contribution of 12%).

Since then, due to concern about what lies ahead for me, especially in retirement I have been increasing my pension contribution rate.  Now, at the age of 45, I am currently paying in 40% (plus 12% from employer).

Being self-sufficient is important to me.  I want to be in a position that I can afford my healthcare and support costs if I go blind, suffer liver failure, get cancer and diabetes.  Am I paying the optimum amount into my pension?

Pensions advise I generally see talks about having enough money to change your car every x years, or buying a new kitchen every y years.  I'm not interested in these things.  It's the healthcare/support costs which most concern me.

Thanks

What sort of protection insurances do you have - eg critical health, private health...?

Private health insurance and life assurance are through my employer but that's all I have.  If I was to get diagnosed with a critical illness, a nice payout might make me feel better but I don't feel it's necessary.  But maybe I need a different perspective?

Given the number of references you've made in your post to the various critical illnesses which would be covered by such a policy, you might need to have a think about whether such insurance (taken out personally so you can continue indefinitely, even if you change jobs) would give you a level of comfort high enough to warrant the premium. Maybe get some quotes and have a think? Easy enough to do on line - eg https://www.comparethemarket.com/ps/life-insurance/critical-illness-cover/?AFFCLIE=FG29&SRC=FG29&cmpid=PC-_-GOG-_-LI-_-GEN-_-chFC948Ju3Xrmr7&gad_source=1&gbraid=0AAAAAD9KMP_VsMDIQC1S2DA_4P6h404-Q&gclid=Cj0KCQjwh7K1BhCZARIsAKOrVqH6DuSJEtI_rxYkdBm78o2HDY2U5PWeklfGB6ULFnen7jK6qa4UU5oaAnILEALw_wcB&gclsrc=aw.ds

Albermarle

Mark_d said:

Marcon said:

Mark_d said:

From my first job, I've been paying in at least 5% contributions.  Typically the employer has double-matched this, paying in 10-12%.

15 years ago I did some calculation that I should be paying-in 20% (plus employed contribution of 12%).

Since then, due to concern about what lies ahead for me, especially in retirement I have been increasing my pension contribution rate.  Now, at the age of 45, I am currently paying in 40% (plus 12% from employer).

Being self-sufficient is important to me.  I want to be in a position that I can afford my healthcare and support costs if I go blind, suffer liver failure, get cancer and diabetes.  Am I paying the optimum amount into my pension?

Pensions advise I generally see talks about having enough money to change your car every x years, or buying a new kitchen every y years.  I'm not interested in these things.  It's the healthcare/support costs which most concern me.

Thanks

What sort of protection insurances do you have - eg critical health, private health...?

Private health insurance and life assurance are through my employer but that's all I have.  If I was to get diagnosed with a critical illness, a nice payout might make me feel better but I don't feel it's necessary.  But maybe I need a different perspective?

You do seem a bit overfocused on thinking about getting serious illnesses in the future.
Although good that you have not got your head in the sand on this issue ( like many) you do not want to ruin today by worrying about tomorrow, which most likely will not turn out as expected anyway .

barnstar2077

Mark_d said:

From my first job, I've been paying in at least 5% contributions.  Typically the employer has double-matched this, paying in 10-12%.

15 years ago I did some calculation that I should be paying-in 20% (plus employed contribution of 12%).

Since then, due to concern about what lies ahead for me, especially in retirement I have been increasing my pension contribution rate.  Now, at the age of 45, I am currently paying in 40% (plus 12% from employer).

Being self-sufficient is important to me.  I want to be in a position that I can afford my healthcare and support costs if I go blind, suffer liver failure, get cancer and diabetes.  Am I paying the optimum amount into my pension?

Pensions advise I generally see talks about having enough money to change your car every x years, or buying a new kitchen every y years.  I'm not interested in these things.  It's the healthcare/support costs which most concern me.

Thanks

Have you made a spreadsheet, or run your numbers through any kind of retirement software?  It might help you to sleep a bit easier at night.

I made a spreadsheet with my age running down the left hand side up to 60, with columns for my combined pensions and ISA.  For every year going down it adds x amount of growth (I'm currently using 5%) and what I am currently contributing to each per year.  It doesn't take into consideration pay rises or inflation, but it gives me a pretty good idea where I will stand in eight to ten years and it becomes more accurate every year I get closer to D-Day.

As you are putting in 40% I think you may be pleasantly surprised!

squirrelpie

Mark_d said:

I want to be in a position that I can afford my healthcare and support costs if I go blind, suffer liver failure, get cancer and diabetes.  Am I paying the optimum amount into my pension?

I don't know whether you are worried about those specific medical problems or whether they are just examples of more general worry. But in terms of expense then any condition that puts you in a care home, or more particularly a nursing home, for a length of time is likely to be the most expensive. Dementia or some type of physical trauma are the most likely causes. Diabetes is largely avoidable or at least controllable if you manage your body well. Cancer survivability is all about early diagnosis. Most deaths from liver failure are from cirrhosis, which is self-inflicted. Going blind is probably not hugely expensive, although a major upset in life.

Do you have private medical insurance yourself or just through an employer? If I were very worried about medical problems I'd be maximising my insurance rather than my pension. I'd also make sure I lived near a good hospital or hospitals.

edit to add: The purpose of medical insurance is to improve access to diagnosis and treatment, not pay out on death. You probably want to budget for continuing it when you leave your employer.