Gloomy pension prospects on average salary?

Gloomy pension prospects on average salary?

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Discussion

Sheepshanks

32,531 posts

118 months

Thursday 16th March 2023
quotequote all
Zaichik said:
Even more frustrating was once I was earning big money and could put lots into a pension (2010 onwards) I was earning above the taper level so I could not contribute more than 10k or recently even less a year.
So have now 13 years of great earning but hardly any pension savings because of the weird rules on tapering.
Now I’m nearer my intended semi retirement age I won’t be earning any where near as much so will not be saving anything significant. The whole model is wrong and seems to be designed to max the govt take and appeal to the socialists who want the rich to pay more.
Surely that’s wrong - you can contribute as much as you like. It’s just that you gradually lose the tax savings. But so what? You’re earning a fortune.

deja.vu

456 posts

15 months

Thursday 16th March 2023
quotequote all
Sheepshanks said:
Zaichik said:
Even more frustrating was once I was earning big money and could put lots into a pension (2010 onwards) I was earning above the taper level so I could not contribute more than 10k or recently even less a year.
So have now 13 years of great earning but hardly any pension savings because of the weird rules on tapering.
Now I’m nearer my intended semi retirement age I won’t be earning any where near as much so will not be saving anything significant. The whole model is wrong and seems to be designed to max the govt take and appeal to the socialists who want the rich to pay more.
Surely that’s wrong - you can contribute as much as you like. It’s just that you gradually lose the tax savings. But so what? You’re earning a fortune.
Makes no sense at all.
I’ve been over the tapering limit since it was introduced (2016 not 2010) and have saved st loads, just haven’t got pension relief.
My mistake was rushing to pay the mortgage off, which I did in 2017.
Hindsight and all that…

vulture1

12,127 posts

178 months

Thursday 16th March 2023
quotequote all
rossub said:
DickP said:
Hi,

The web based pension forecast tools I have used paint a very gloomy pension income picture even with 5% employer and 6% employee contribution. Employer is capped at 50k though which seems to be HMRC thing?
6% is too low IMO.

Ok I’m public sector, but my contribution is set at 12.7% and I add a further voluntary 3%. It stings, but the higher rate tax relief helps soften the blow.

I’m just over £70k.
You get 12.7% non contribution? jesus thats pretty good.

geeks

9,121 posts

138 months

Friday 17th March 2023
quotequote all
u-boat said:
geeks said:
alock said:
Up your contributions so you stop paying 40% tax
I keep seeing this but I will be significantly worse off (in the here and now) in this scenario, I still don't understand what it means.
Just ignore it and enjoy yourself, I expect you’ll be earning loads in your 50s and 60s and that’s when you’ll be making the big savings after your kids have left home etc.

Judging by the PH retired lot, when you’re really old you’ll likely just be in the NPandE complaining about immigration and wokeness or whatever so being well off will be the least of your worries.
rolleyes

craigjm

17,909 posts

199 months

Friday 17th March 2023
quotequote all
EVOTECH3BELL said:
Don't stress.
Might die before then.
Was just gonna say this. Of course you should have a pension but it’s also a gamble that you will make it to the age where you can enjoy it

Zaichik

84 posts

35 months

Friday 17th March 2023
quotequote all
deja.vu said:
Makes no sense at all.
I’ve been over the tapering limit since it was introduced (2016 not 2010) and have saved st loads, just haven’t got pension relief.
My mistake was rushing to pay the mortgage off, which I did in 2017.
Hindsight and all that…
Still been saving outside of a pension and as much as possible just very little into a pension due to tapering. (And yes 2016 not 2010). Also paid off mortgage which does not seem like a mistake to me.
Even now with the new changes I see labor have said they would reverse them when elected, so hard to trust a pension - though the tax benefits had they been available when I could save would have been worthwhile.
If I could talk to 25 year old me I would say spend the money on a more valuable house as an investment and into a pension rather than cars, bikes and computers. Though if I could talk to 25 year old me I am sure there are more creative ways of making a fortune.

Super Sonic

4,518 posts

53 months

Friday 17th March 2023
quotequote all
bhstewie said:
Earning > £60K in your early 30's = Gloomy pension prospects on average salary.

Christ this place sometimes laugh
Thinks he's on average salary too!

Terzo123

4,309 posts

207 months

Friday 17th March 2023
quotequote all
vulture1 said:
rossub said:
DickP said:
Hi,

The web based pension forecast tools I have used paint a very gloomy pension income picture even with 5% employer and 6% employee contribution. Employer is capped at 50k though which seems to be HMRC thing?
6% is too low IMO.

Ok I’m public sector, but my contribution is set at 12.7% and I add a further voluntary 3%. It stings, but the higher rate tax relief helps soften the blow.

I’m just over £70k.
You get 12.7% non contribution? jesus thats pretty good.
I read it that he contributes 15.7%.





jules_s

4,237 posts

232 months

Friday 17th March 2023
quotequote all
geeks said:
u-boat said:
geeks said:
alock said:
Up your contributions so you stop paying 40% tax
I keep seeing this but I will be significantly worse off (in the here and now) in this scenario, I still don't understand what it means.
Just ignore it and enjoy yourself, I expect you’ll be earning loads in your 50s and 60s and that’s when you’ll be making the big savings after your kids have left home etc.

Judging by the PH retired lot, when you’re really old you’ll likely just be in the NPandE complaining about immigration and wokeness or whatever so being well off will be the least of your worries.
rolleyes
Well, tbh, I'm in my 50's and enquired what would be the result of me over paying into my pension (no fancy high rate tax here)

The answer was the pension raised exactly what I put in. Yes inflation (blah blah) but given my age/circumstances I'd rather have the disposable income now.

ChrisNic

592 posts

145 months

Friday 17th March 2023
quotequote all
I hope OP doesn’t have any kids either.

The marginal rate for people earning £50-60k and not putting it into a pension (or other sal sacrifice) is terrifying. So many of my colleagues appear oblivious of this fact and are literally throwing money at HMRC.

I’m caught in an odd first world trap because of this and can no longer take any pay rises as cash.

worsy

5,776 posts

174 months

Friday 17th March 2023
quotequote all
You must remember that retirement is not solely based on your pot of SIPP cash. You can diversify into saving ISAs, climbing the property ladder and eventually downsizing.

I suspect a 12%ish contribution in early 30s on 60k is waaaaay more than most people contributed. In fact up to recently that was my contribution on a higher salary in my 50s.

Edited to say.
You have to live your life too. No point in saving like crazy, living like a pauper and dropping dead at 55. Make sure you are balanced!

rossub

4,400 posts

189 months

Friday 17th March 2023
quotequote all
Terzo123 said:
I read it that he contributes 15.7%.
Yup.

Rob_125

1,420 posts

147 months

Friday 17th March 2023
quotequote all
If you're worried about your pension, up the contributions. And as others have said diversify. Similar age, my salary is a fair bit less, although my overall earnings around around the same.

Currently putting in 15% of my salary, with 8% company contributions. So 23% total.

Then diversification with £150/month into company shares scheme via salary sacrifice and £400/month into vanguard s&s isa.

I also see as it leaving meat on the bones if circumstances change, if I require more cash on a monthly basis - I can just lower some of the contributions/savings to unlock some extra cash every month (not ideal, but it gives me options).

As well as this I try to maximise salary sacrifice in other aspect, by buying back a weeks paid leave and cycle to work scheme.

Edited by Rob_125 on Friday 17th March 08:24

nickfrog

20,872 posts

216 months

Friday 17th March 2023
quotequote all
alock said:
Up your contributions so you stop paying 40% tax
This!!

deebs

555 posts

59 months

Friday 17th March 2023
quotequote all
Also have a look at what the calculators are setting your expectations as. It'll likely say something along the lines of "people usually want 2/3rds of their current salary" . So for you that's 40k a year. And then the expectation is you'll need this to the rest of your life. So your target pot becomes some ludicrous amount, especially as it'll recommend you take 25% lump sum out and then treat that as if you're going to buy a McLaren with it rather than use it to live.

Have a think about your own assumptions, what are you really likely to need to live. Mortgage should be paid off etc . How much will that change as you age. Are you likely to drawdown rather than buy annuity. State pension currently 68 for our age to be tacked on.

The aviva calculator is a half decent one it'll let you set your target income, then show pot size and how long that'll last /what age you'll be when /if it runs out.

Honestly don't think retirement for most people in future is going to be what it is today. I'm similar to yourself, earning similar and similar pot size as it stands.

Review where the money is invested, especially for fees and charges. If you've old pensions that you can move then find a low cost platform you can invest through ie vanguard if you have vanguard funds.

Phooey

12,574 posts

168 months

Friday 17th March 2023
quotequote all
Super Sonic said:
bhstewie said:
Earning > £60K in your early 30's = Gloomy pension prospects on average salary.

Christ this place sometimes laugh
Thinks he's on average salary too!
Made me chuckle too. Some people are dangerously out of touch with reality that they have absolutely no idea of the real world wobble


DoubleSix

11,691 posts

175 months

Friday 17th March 2023
quotequote all
Phooey said:
Super Sonic said:
bhstewie said:
Earning > £60K in your early 30's = Gloomy pension prospects on average salary.

Christ this place sometimes laugh
Thinks he's on average salary too!
Made me chuckle too. Some people are dangerously out of touch with reality that they have absolutely no idea of the real world wobble
There is average in the technical, national sense. And “average” in the sense of ones peer group and personal aspirations.

I don’t think the OP should be castigated for his perspective, rather, it says to me he realises he could be earning more and has a sense of self worth that is commendable.

To flip that, those who believe they are “achieving” by earning above the national average have set themselves a very low bar.


jgrewal

730 posts

46 months

Friday 17th March 2023
quotequote all
I am always weary of posting in threads such as this and I think I posted in haste earlier. I think the opening poster is just saying it doesn't feel like there is going to expected or suitable pot being projected with his current earnings and contributions.

Personally with our country totally messed up financially I have no trust in a state pension being around - I think we'll get to a point where it is means tested by 2040. You don't need to be giving 10k a year to a person who has 500k plus in their private pot!

nickfrog

20,872 posts

216 months

Friday 17th March 2023
quotequote all
jgrewal said:
Personally with our country totally messed up financially I have no trust in a state pension being around - I think we'll get to a point where it is means tested by 2040. You don't need to be giving 10k a year to a person who has 500k plus in their private pot!
I think if you have saved £500k for your retirement by being sensible you should get your £10k in priority to those who haven't. Besides, you have probably and proportionally contributed more than many of those who haven't saved for their retirement.
Besides, a £500k pension pot should give you a decent and comfortable retirement but not a particularly extravagant one.

Edited by nickfrog on Friday 17th March 11:25

gotoPzero

17,122 posts

188 months

Friday 17th March 2023
quotequote all
Few things OP.

First thing you need to do is estimate just how much you need in retirement.
A lot of people overestimate.
The expense that traps most people is a mortgage. Its usually easier to pay off a mortgage than build a pension, both in terms of sum of money and also as a psychological game. You can see the gains each month. You can see the house. Its tangible.

Second.
Most pension estimates are based on pretty low annuity rates or very low draw down and 25% max lump.
So read the fine print.

Also bear in mind most people don't take an annuity these days they draw down out of their SIPP like a savings account.