Pension Pot

eskbanker

10% was a good start in your 20s, but with age and watching pot growth increasing contributions for the decades leads to more post work fundings. For those in their 40s one of the rules of thumbs is half your age as %age of your gross salary so 10% might be a bit short.

The generally cited rule of thumb is to use half your age at the time of starting a pension to establish a percentage to be used from then on, so those starting in their twenties could use 10% from then on, while those starting at 40 ought to be thinking more about 20%. Obviously it's just a rule of thumb and the more one can contribute the better though…

Crescent1980

@Brie My wife isn't currently in the same head space as me when it comes to pensions but we've agreed to sit down and hopefully have a productive pension chat and go through her plans and contributions. She's just turned 40 and like me has been contributing 10% for some time.

Honestly up to a week or so ago we have had our heads in the sand when it came to our pensions due to lack of understanding and honestly having a 'pensions are boring' mentality!!

artyboy

https://forums.moneysavingexpert.com/discussion/comment/82178449#Comment_82178449

You absolutely cannot backdate in terms of claiming prior year tax back. You can carry forward unused pension annual allowance, but only if you have already used the full £60k for the current year, and even then, any tax relief is based on your current year earnings, not that of prior years.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/82178449#Comment_82178449

You haven't been able to backdate pension contributions for a very long time now, at least 20 years I think.

Brie

https://forums.moneysavingexpert.com/discussion/comment/82178469#Comment_82178469

I'm glad she's been contributing a fair chunk as well. I ask about her because (stating the obvious) historically women have lower pay, disrupted employment and so have lower amounts paid into pensions and then also tend to live longer then men (I'm assuming you may be male). Net result is less money in old age.

It's great if there's other assets to fall back on, including the prospect of inheriting your pension in some way. But I've been in too many conversations where the husband has dismissively said "oh she'll be fine" and then she discovers much too late that she isn't.

ch3shirecat4

Surprising how easy it is to put pensions off when retirement feels so far away!

Crescent1980

@Brie Thank you for raising that. Yes, I'm male, and I completely agree with the point around disrupted employment due to maternity leave and the impact that historically lower pay can have on pension provision.

Fortunately, my wife is in a good position financially. Following her two years of maternity leave, she was able to return to a role that's close to full-time. We've always approached our finances as a team, but if I'm honest, while we've generally been good with money, we've probably been more reactive than proactive when it comes to planning for retirement and reviewing our pensions.

What really prompted me to take a closer look was a recent holiday when we were celebrating my wife's 40th birthday. We spent time chatting to a number of retirees and were genuinely impressed by the lifestyle many of them were enjoying. They seemed to have the freedom to travel regularly, take extended holidays, and make the most of their retirement years. It certainly made me reflect on whether we're doing enough now to achieve something similar in the future, although I suspect many of them may have benefited from final salary pension schemes that are far less common today!

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82178450#Comment_82178450

May be worth checking also if any of the schemes are defined benefit schemes (eg the old one with paper records). Such a scheme may not look like it is "performing" but it can provide a very useful base for your retirement income.

Crescent1980

@DRS1 Thanks, I've not come across defined benefit schemes before, but I'll definitely do some research into them and dig out the paperwork from that particular pension. As it's over 20 years old, it's entirely possible I've overlooked some valuable details, so it's well worth me spending some time understanding exactly what benefits it provides.

kermchem

Is either of you a higher rate tax payer, and the other not? If so, the higher rate payer should be stuffing their pension. If not now, then this might be coming in a few years (pay rises and frozen tax thresholds).

Do you (plural) receive child benefit, or is it being lost due to a salary that is too high? Again, if one salary is too high then that person should increase pension contributions - and perhaps the other reduce if affordability is an issue.

Your employer also pays into your "pot". If you pay in more will they match or half-match it (free salary)?

What are the charges on those five pots? If merged into fewer would the charges be less? No rush, but you have woken up to your pensions and so you should check.

What are you investing each pot in? Equities, bonds, global tracker? What is your risk appetite? Five pots investing in their default funds may not be right at your age.

And, I have recently taken redundancy and retired. We are living on my lump sums and pension, and meanwhile my younger spouse, who has the smaller pension provision and is still working, is making correction by putting just about their entire salary for 2 years into their pot.