Retirement planning

[typer0612]

Hi

Currently I work for the Civil Service, 30k a year and I pay 126 pounds a month into my pension, they contribute 485 pound a month.

How the heck do I work out when I can retire with an income of 20k per year? It is confusing, reason I'm asking here is because the more you pay in - the more you get out of it?

[JungleJim]

more info required - how old are you, what length of service, how long you been contributing, is it defined benefits or defined contributions (i assume final salary in civil service?)...etc

[typer0612]

JungleJim said:

more info required - how old are you, what length of service, how long you been contributing, is it defined benefits or defined contributions (i assume final salary in civil service?)...etc

25 years old

2 years service

2 years contribution

Not final salary, an average ? New pension scheme...

[The Leaper]

Do you mean £20,000 pa or the equivalent of that amount at some future date allowing for inflation? Actually, from what you say it looks like you're aiming for 2/3 of your pay immediately before intended retirement...is that so?

R.

[Nigel_O]

With a few assumptions made....

If its a money purchase scheme, you will reach a pension of circa £20k pa (todays terms) at about age 64 - four years before your State retirement age, which will add another £6k-ish to the total

You could retire at age 59 on circa £14k and then slum it for nine years until the State pension kicks in and bumps you up to around £20k total

[oop north]

typer0612 said:

Hi

Currently I work for the Civil Service, 30k a year and I pay 126 pounds a month into my pension, they contribute 485 pound a month.

How the heck do I work out when I can retire with an income of 20k per year? It is confusing, reason I'm asking here is because the more you pay in - the more you get out of it?

Assuming you are in the main scheme (called alpha from April 2015) then you build up pension at 2.32% x your salary each year. You want £20k and are earning £30k, so you are looking for two thirds. That calculates at 28.74 years x 2.32% = 66.67.

But you would get more pension if and when your earnings exceed the current level for promotion (ignore inflation - it should take care of itself) - and you get less pension if you retire before your State Pension Age (don't know how old you are but assuming in your 20s as done two years, so SPA probably around 68 and about 40 years to go?) because early retirement means the annual payments are reduced such that if you have an average lifespan you will get the same amount overall as if you took the pension

So in rough terms provided you work around 30 years and started at the age of 38 you will hit it at 68! I don't thin the reduction factors for early retirement have been published yet for any of the State schemes so I do not know if it is possible to estimate what age you will actually be able to retire at

[typer0612]

oop north said:

Assuming you are in the main scheme (called alpha from April 2015) then you build up pension at 2.32% x your salary each year. You want £20k and are earning £30k, so you are looking for two thirds. That calculates at 28.74 years x 2.32% = 66.67.

But you would get more pension if and when your earnings exceed the current level for promotion (ignore inflation - it should take care of itself) - and you get less pension if you retire before your State Pension Age (don't know how old you are but assuming in your 20s as done two years, so SPA probably around 68 and about 40 years to go?) because early retirement means the annual payments are reduced such that if you have an average lifespan you will get the same amount overall as if you took the pension

So in rough terms provided you work around 30 years and started at the age of 38 you will hit it at 68! I don't thin the reduction factors for early retirement have been published yet for any of the State schemes so I do not know if it is possible to estimate what age you will actually be able to retire at

I'm 25 now, pension started at 23 - makes more sense kinda that you have explained it... If I doubled what I put in it, would it make such a significant difference?

[typer0612]

typer0612 said:

I'm 25 now, pension started at 23 - makes more sense kinda that you have explained it... If I doubled what I put in it, would it make such a significant difference?

I.e the time it would take for me to retire being halved? Or am I being a dimwit?!

[PurpleMoonlight]

typer0612 said:

Hi

Currently I work for the Civil Service, 30k a year and I pay 126 pounds a month into my pension, they contribute 485 pound a month.

How the heck do I work out when I can retire with an income of 20k per year? It is confusing, reason I'm asking here is because the more you pay in - the more you get out of it?

Your plan is scuppered by the Government dictating the earliest you can receive your pension. Currently that is age 55 but it will increase to be 10 years before SPA as SPA increases.

So by the time you get there it will likely be 60 odd.

[SunsetZed]

PurpleMoonlight said:

typer0612 said:

Hi

Currently I work for the Civil Service, 30k a year and I pay 126 pounds a month into my pension, they contribute 485 pound a month.

How the heck do I work out when I can retire with an income of 20k per year? It is confusing, reason I'm asking here is because the more you pay in - the more you get out of it?

Your plan is scuppered by the Government dictating the earliest you can receive your pension. Currently that is age 55 but it will increase to be 10 years before SPA as SPA increases.

So by the time you get there it will likely be 60 odd.

I agree with this completely, which is why instead of paying the extra I'm saving it outside of a pension wrapper so that if I can afford to (and want to!) retire before I'm allowed to take my pension I'll have accessible cash for the period before receiving pension income, might be worth the OP thinking about this.