Gross Salary or qualifying earnings

GPKett

Hi,

When the site discusses the % you should add into your pension depending on when you start, is it based on Gross salary amount or qualifying earnings?

I have just moved from a company that gave me 6% of my Gross salary to a company that gives me 3% of qualifying earnings. Trying to work out how much % i should put in.

thanks

Gareth

eskbanker

It's just a rule of thumb, there's no right or wrong answer, but if you want to maintain parity with your contributions under your old employer, why wouldn't you make additional contributions to top up to 6% of gross salary again?

If you've had a salary increase then the MSE guide recommends contributing 25% of the increase, again just as a rule of thumb, i.e. if it's new money that you weren't previously receiving then stash more into a pension before you get used to it.

Marcon

GPKett said:

Hi,

When the site discusses the % you should add into your pension depending on when you start, is it based on Gross salary amount or qualifying earnings?

I have just moved from a company that gave me 6% of my Gross salary to a company that gives me 3% of qualifying earnings. Trying to work out how much % i should put in.

thanks

Gareth

As much as you can comfortably afford. The major determinant of how much you get out of a defined contribution pension is how much you (and your employer) put in.

Are you making contributions by salary sacrifice? If not, time to have a chat with your employer and point out that both you and they would get an NI saving...

dunstonh

When the site discusses the % you should add into your pension depending on when you start, is it based on Gross salary amount or qualifying earnings?

I wouldn't care about that as its not an accurate enough figure for a personalised amount.
Its a quick and dirty way to make sure you are paying in the ballpark expectation.

i.e.   so many people are paying minimum amounts and ticking "done the pension" off their task list.    It tries to get them to realise that they are way out from where they need to be.

I have just moved from a company that gave me 6% of my Gross salary to a company that gives me 3% of qualifying earnings. Trying to work out how much % i should put in.

You should work out when you are going to retire, how much you need, use an appropriate growth rate that ties in with your risk profile and capacity for loss and sensible inflation figure, then calculate it backwards.  That is what should be paid to the pension.

GPKett

thank you for the responses.

topping up the 6% of gross salary is probably more than i can afford at this stage.

i dont believe we are using salary sacrifice, ill mention it and see what they say.

eskbanker

GPKett said:

topping up the 6% of gross salary is probably more than i can afford at this stage.

In which case, you should calibrate your pension contributions to what you can afford, rather than being unduly swayed by arbitrary percentages quoted in rough guides, although there'll always be a trade-off between financial comfort now versus post-retirement....