I Have No Idea If I Am Saving Enough

ossian

Hi!

I have no idea if I am saving enough into my pension and would appreciate some guidance.

I started paying into pensions in my late 20s, lost money with Equitable Life, didn't do to well with my Standard Life funds, and haven't paid AVCs consistently during my working life.

I am 38 and have a pension fund value of around £130,000 (this includes the "value" of my final salary pension fund). Looking forward I accrue final salary pension in 1/75ths now and have started paying AVCs and am concerned that I may have to work to an old age rather than retire early.

I have started paying AVCs this year but don't know how much is enough to be able to retire before I loose my marbles.

I have seen rules of thumb of investing a percentage of half your starting age each year into a pension however how do I work out what I need to do from this starting point also these rules of thumb seam to work better with money purchase schemes, for final salary should I include my payments plus employers in the calculation? Is there some simple maths that tells me what I should do if I want to retire earlyish?

Thanks,
Ossian

dunstonh

rule of thumbs dont work for occupation final salary schemes.

Your occupational scheme should send you projections periodically of what you will get if you stay until retirement. That will be in todays money. So it should be quite clear what you will be getting from that.

AVCs are largely obsolete nowadays. Only a few schemes offer incentives or benfits for using an AVC. Most occ schemes are now killing their AVCs for new applications. Stakeholder/personal pensions or SIPPs can offer larger benefits a lot of the time as can stocks and share ISAs. It all depends on what you want from your money as to which is best.

Retired_I.F.A.

1..At what age do you want to retire at?
2..What gross income p.a in todays terms will you want?
3..What average rate of return do you envisage making on your non final salary scheme pension plans in your lifetime?
4..What average rate do you expect inflation to be during that time?
5.. What average rate do you expect pay rises to be duing that time?
6.. What will the final salary scheme fund be worth at your prefered retirement date Assuming you stay in that job and dont get promoted?

Answer those and the rest is just maths. (You'll need to use a spreadsheet to calculate compound interest with escalating contributions.) All in all if your good with a spreadsheet it'll take you say 3 o 4 hours to come up with a calculator and come to a figure you need to put away now say on a monthly basis but when you have done all that and you alter just one of the answers by a little bit ie rpi by 1% you'll come up with a far different contribution. Play around with it for an hour answering all your own what if questions and you'll conclude the real answer is to put in what you can comfortably afford because there is no accurate answer without Dr Who's tardis.

Such calculations if they are done over a short term where you can predict future rates more accurately have merit and they are great for answering what if questions but you will always come up with the same conclusion.