Yet another Pension Question
Discussion
I'm hoping the more financially astute among you might be able to give me a rough idea if I'm on track when it comes to pension planning.
I'll be completely honest now in saying that although I have been contributing since I was 18 to pensions I'm not entirely sure if I am doing enough to make for a semi comfortable retirement.
To give a rough idea, I'm 38, with a salary of £68K per year, paying 5% contribution to my pension, its provided via my employer who match the 5%, current value according to scottish widows is £60K (pension has been in place 7 years). My employer also does this on a salary sacrifice scheme so the NI savings are returned in full to me which I think means an additional 2.5% but I may be wrong on that figure.
On top of this I have 11 years of contributions to the NHS Superannuation pension which I have been told should return around 6K per annum on retirement.
Having looked a lot of online calculators all with fairly different predication's I'm more lost than ever!
In a perfect world I'd like to retire at 60 if I could draw down say £25K p/a (in todays money) per year from my private pension, then come the age I can recieve my NHS pension and state pension (assuming it still exists then) possibly reduce my drawdown. Assume as well no other income from investments etc to make this relatively simpler.
Am i way off the mark with my contributions to get close to having enough built up? Some calculators have my pot projected at around £300K others significantly more.
I'll be completely honest now in saying that although I have been contributing since I was 18 to pensions I'm not entirely sure if I am doing enough to make for a semi comfortable retirement.
To give a rough idea, I'm 38, with a salary of £68K per year, paying 5% contribution to my pension, its provided via my employer who match the 5%, current value according to scottish widows is £60K (pension has been in place 7 years). My employer also does this on a salary sacrifice scheme so the NI savings are returned in full to me which I think means an additional 2.5% but I may be wrong on that figure.
On top of this I have 11 years of contributions to the NHS Superannuation pension which I have been told should return around 6K per annum on retirement.
Having looked a lot of online calculators all with fairly different predication's I'm more lost than ever!
In a perfect world I'd like to retire at 60 if I could draw down say £25K p/a (in todays money) per year from my private pension, then come the age I can recieve my NHS pension and state pension (assuming it still exists then) possibly reduce my drawdown. Assume as well no other income from investments etc to make this relatively simpler.
Am i way off the mark with my contributions to get close to having enough built up? Some calculators have my pot projected at around £300K others significantly more.
Annuity rates at 60 are, around, 5.5% for a bloke I think at present. That’s a secured income for life, so top end of your income scales as it were. So a pot of £300k would get you £16.5k roughly.
When you can draw state pension depends on your age, 65 currently, but going up over the next few years. I think that’s presently about £8.5k, assuming you’re getting the full new flat rate version. NHS, I think is 65, although you can go early in certain circumstances, but at a penalty if I recall?
Sounds like a bit more saving at first read if you do want to go at 60 with £25k.
When you can draw state pension depends on your age, 65 currently, but going up over the next few years. I think that’s presently about £8.5k, assuming you’re getting the full new flat rate version. NHS, I think is 65, although you can go early in certain circumstances, but at a penalty if I recall?
Sounds like a bit more saving at first read if you do want to go at 60 with £25k.
Edited by ellroy on Saturday 11th August 22:37
If in doubt, save more!
I haven’t done any sums, but my gut feeling is that 5% + 5% is rarely going to be enough for a decent retirement. If you’re accustomed to the lifestyle that a £68k salary gives you, I’d be surprised if you’d be truly happy on a retirement income of £25k (in today’s terms).
If you can afford to increase your contributions to 10% while maintaining a decent amount of fun in your life, then do it. Remember that the more you put into your pension the less you’re exposed to the higher rate of income tax. And if you can afford 15%, then do that. If you find in 10 years’ time that you’ve been overdoing the pension contributions then you can always reduce, and it’s always better to “front load” any investment by saving more in the early years.
I doubt there are many people approaching retirement age wishing they’d saved less!
I haven’t done any sums, but my gut feeling is that 5% + 5% is rarely going to be enough for a decent retirement. If you’re accustomed to the lifestyle that a £68k salary gives you, I’d be surprised if you’d be truly happy on a retirement income of £25k (in today’s terms).
If you can afford to increase your contributions to 10% while maintaining a decent amount of fun in your life, then do it. Remember that the more you put into your pension the less you’re exposed to the higher rate of income tax. And if you can afford 15%, then do that. If you find in 10 years’ time that you’ve been overdoing the pension contributions then you can always reduce, and it’s always better to “front load” any investment by saving more in the early years.
I doubt there are many people approaching retirement age wishing they’d saved less!
RTaylor2208 said:
I'm hoping the more financially astute among you might be able to give me a rough idea if I'm on track when it comes to pension planning.
I'll be completely honest now in saying that although I have been contributing since I was 18 to pensions I'm not entirely sure if I am doing enough to make for a semi comfortable retirement.
To give a rough idea, I'm 38, with a salary of £68K per year, paying 5% contribution to my pension, its provided via my employer who match the 5%, current value according to scottish widows is £60K (pension has been in place 7 years). My employer also does this on a salary sacrifice scheme so the NI savings are returned in full to me which I think means an additional 2.5% but I may be wrong on that figure.
On top of this I have 11 years of contributions to the NHS Superannuation pension which I have been told should return around 6K per annum on retirement.
Having looked a lot of online calculators all with fairly different predication's I'm more lost than ever!
In a perfect world I'd like to retire at 60 if I could draw down say £25K p/a (in todays money) per year from my private pension, then come the age I can recieve my NHS pension and state pension (assuming it still exists then) possibly reduce my drawdown. Assume as well no other income from investments etc to make this relatively simpler.
Am i way off the mark with my contributions to get close to having enough built up? Some calculators have my pot projected at around £300K others significantly more.
Depends entirely on a number of factors you haven’t mentioned, and others which are beyond our scope of comprehension at the moment I’m afraid. I’ll assume your NHS scheme pays out at 60? Year one income, theoretically, provided by NHS income and tax free cash, plus a little bit more. Year two to state retirement age (and assuming you have no estate planning pretensions for your D.C. scheme), you need to find 19k per annum from your D.C. scheme. At state retirement age, that need drops to somewhere just north of 10k per annum.I'll be completely honest now in saying that although I have been contributing since I was 18 to pensions I'm not entirely sure if I am doing enough to make for a semi comfortable retirement.
To give a rough idea, I'm 38, with a salary of £68K per year, paying 5% contribution to my pension, its provided via my employer who match the 5%, current value according to scottish widows is £60K (pension has been in place 7 years). My employer also does this on a salary sacrifice scheme so the NI savings are returned in full to me which I think means an additional 2.5% but I may be wrong on that figure.
On top of this I have 11 years of contributions to the NHS Superannuation pension which I have been told should return around 6K per annum on retirement.
Having looked a lot of online calculators all with fairly different predication's I'm more lost than ever!
In a perfect world I'd like to retire at 60 if I could draw down say £25K p/a (in todays money) per year from my private pension, then come the age I can recieve my NHS pension and state pension (assuming it still exists then) possibly reduce my drawdown. Assume as well no other income from investments etc to make this relatively simpler.
Am i way off the mark with my contributions to get close to having enough built up? Some calculators have my pot projected at around £300K others significantly more.
What is your income going to be like later in life. I have very recently seen some fascinating data from a leading actuary which suggests when you reach your early seventies, it drops off a cliff edge. Do you have a partner to supplement things, what will the state retirement age be, what will the tax situation be (almost certainly not as kind as it is now - we have become used to low tax, low inflation).. the list goes on.
Stay light on your feet, remain agile, be as flexible as possible and as Mike suggests, just as no one dies thinking “Jeez, I wish I had worked harder and spent less time with the family”, no one wishes “.. damn, I wish I had saved just a little bit less”, either. Just don’t forget to smell the roses along the way.
Thanks for the feedback folks, putting in more of a personal contribution is part of the plan once both kids are at school, nursery fees (part funded with childcare vouchers) are putting a stop to that for now. That should free up around £1K per month to be split between over paying the mortgage and additional pension contributions.
Future earnings are a bit of an unknown, my wage growth has been decent the last 8 years since leaving the NHS due to promotions rather than yearly percentage increases so there is not necessarily the yearly 3% or so to count on.
The Mrs is a couple of years younger than me and all going well will most likely stay with the NHS till retirement, she is an NHS employee with 14 years service and super contributions.
As mentioned keeping spending down so we can save more without sacrificing having a life is a bit of a balancing act, we don't have particularly flash or expensive cars (2008 9-5 Aero Wagon \ 2014 Abarth 595 competizione) and family holidays are pretty much a week on Arran, A few days at the Edinburgh Fringe, some camping trips and every few years a week or 2 in the sun.
Future earnings are a bit of an unknown, my wage growth has been decent the last 8 years since leaving the NHS due to promotions rather than yearly percentage increases so there is not necessarily the yearly 3% or so to count on.
The Mrs is a couple of years younger than me and all going well will most likely stay with the NHS till retirement, she is an NHS employee with 14 years service and super contributions.
As mentioned keeping spending down so we can save more without sacrificing having a life is a bit of a balancing act, we don't have particularly flash or expensive cars (2008 9-5 Aero Wagon \ 2014 Abarth 595 competizione) and family holidays are pretty much a week on Arran, A few days at the Edinburgh Fringe, some camping trips and every few years a week or 2 in the sun.
P.S. I'll most likely be targeting draw down rather than an annuity, whilst there is no reason it will happen to me men on my side of the family haven't got a track record for longevity Grandfather passed at 58, father at 69.
I'd prefer to leave behind a pot rather than spouse 50% benefit of an annuity in the event I popped my clogs. I completely understand the issues that would bring if I lived to 100 but its a chance I would happily take.
I'd prefer to leave behind a pot rather than spouse 50% benefit of an annuity in the event I popped my clogs. I completely understand the issues that would bring if I lived to 100 but its a chance I would happily take.
I am now retired but I guess we never thought about pensions etc while we had kids in education and all the usual family expenditure. The advice had always been that the earlier you start your pension planning the better but we didn't take much heed of it. I am just a bit wary of pension schemes as you effectively lock your money away and who knows if the government is going to be able to continue to fund the current NHS (and other public sector) pensions in the future. Pension pots have also been a target for raising extra revenue for the government . Add to this the issue that we are all living longer and I think your aspiration to retire at 60 a bit optimistic. As an aside, I assume you have thought about some sort of regular saving into an ISA account? Good luck!
RTaylor2208 said:
P.S. I'll most likely be targeting draw down rather than an annuity, whilst there is no reason it will happen to me men on my side of the family haven't got a track record for longevity Grandfather passed at 58, father at 69.
I'd prefer to leave behind a pot rather than spouse 50% benefit of an annuity in the event I popped my clogs. I completely understand the issues that would bring if I lived to 100 but its a chance I would happily take.
Don't dismiss the idea of an annuity forever. In your seventies, etc, you might want to be alleviated of investment hassle, cost, risk etc.I'd prefer to leave behind a pot rather than spouse 50% benefit of an annuity in the event I popped my clogs. I completely understand the issues that would bring if I lived to 100 but its a chance I would happily take.
There is a general rule of thumb that suggests an individual should be saving half of their age as a percentage of income.
http://citywire.co.uk/money/are-you-paying-half-yo... talks about it.
So for instance a 40-year-old should be saving 20% of their salary into a pension, and a 20-year-old should save 10%.
I would agree you perhaps should look to raise your contributions if you can....but then, we could all do that, eh, if only life/fun/family didn't keep getting in the way!
I quite like https://i.imgur.com/BfHzwr9.png as a general guide to money. Interactive version starts at https://marcusmichaels.github.io/personal-finance-...
The more you can put in earlier, the better the fabulously magical effects of compounding can work...
http://citywire.co.uk/money/are-you-paying-half-yo... talks about it.
So for instance a 40-year-old should be saving 20% of their salary into a pension, and a 20-year-old should save 10%.
I would agree you perhaps should look to raise your contributions if you can....but then, we could all do that, eh, if only life/fun/family didn't keep getting in the way!
I quite like https://i.imgur.com/BfHzwr9.png as a general guide to money. Interactive version starts at https://marcusmichaels.github.io/personal-finance-...
The more you can put in earlier, the better the fabulously magical effects of compounding can work...
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