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What's the point of increasing my contributions?!

(23 Posts)
clickershed Tue 21-Feb-17 21:49:17

I've just used a pension calculator to see what would happen if I increased my pension contributions & added a lump sum to -slightly- make up for my pathetically small contributions ...

So I have £22k pot & I'm early 40s (yeah I know) I'm a SAHM with a teeny PT job... DH has a £175k pension.

By adding £150 a month and £5k lump sum... it makes a tiny impact! sad

Am I wasting my time?!

JoJoSM2 Wed 22-Feb-17 00:01:51

Every penny will make a difference. You'll need to live on that money for 20+ years. Also, you can't possibly predict the rate at which your pot will grow over the next 20 years so no one can tell you the exact impact for sure.

caroldecker Wed 22-Feb-17 00:27:25

Your husbands pot will get c£10k a year currently - you need more.

clickershed Wed 22-Feb-17 08:07:12

Yes, I can see how the monthly contribution can grow over 25 odd years - but adding the £5k sadly only makes about £15 a year difference.

Should I save into something else other than a pension?

I'm seeing an IFA soon but I'm really wary of getting the wrong advice so trying to get a cross-section of opinions.

JoJoSM2 Wed 22-Feb-17 08:15:00

£15 difference? Are you referring to the annuity you could purchase? Those are at all time lows currently (as far as I know). There are other ways to draw you pension, e.g. a flexible drawdown. A lot of people might go with a mixture of the two. When you look at your pension plan make sure that the fees aren't extortionate as they can really eat into your pot. The IFA will go with you over different investment strategies and options.

Also bear in mind that pension contributions come out of gross income so they are tax efficient and bound to be better then paying tax on it and doing something else with the remainder.

PurpleWithRed Wed 22-Feb-17 08:18:29

If you have a mortgage I'd be considering putting the extra payments into that that rather than raising pension contributions.

clickershed Wed 22-Feb-17 09:26:56

Jojo I'm referring to a £15 annual difference in annual pension pot, (not the drawdown... the Standard Life calculator doesn't cover annuities)... if I add a lump sum £5k payment...

Already maxed out mortgage overpayment.

Thank you for your replies both.

kath6144 Wed 22-Feb-17 12:22:38

But an "annual" pension pot is an annuity? What exactly is the SL calculator showing you? Is this a Defined Contribution/personal pension pot, rather than final salary? I would expect that level of contribution to give more than £15/year.

I found a good pension calculator recently, but cant find it immediately. Will post a link if/when I find it.

As others have said, if your DH only has the 175K, then you both need to be saving more. You can put it in Stocks and Shares ISA instead - not as tax efficient but does allow you to access the money when you want. We have a mixture of both, S&S ISA and SIPP each.

kath6144 Wed 22-Feb-17 12:29:44

www.ageuk.org.uk/money-matters/pensions/pension-calculator/when-will-you-retire/

This is the link I used on ageUK website.

clickershed Wed 22-Feb-17 14:41:30

I'll check out the link Cath

clickershed Wed 22-Feb-17 14:42:31

Sorry Kath!

kath6144 Wed 22-Feb-17 15:14:07

www.moneyadviceservice.org.uk/en/tools/pension-calculator/info

also this one.

wideboy26 Wed 22-Feb-17 17:04:29

My advice would be to put in as much as you can and until you are within, say, 5 years of retirement, invest in equity funds. As you enter those final 5 years, transfer your pot gradually over to less volatile funds such as bonds and government securities. This is what I did from the age of 45, paying 10% of my salary per annum. By the age of 63, taken together with pensions from earlier employment, I had enough for the comfortable retirement I am now enjoying. It was tough and I was repaying a mortgage and I managed to get three sons through university, but I'm glad I made the sacrifice.

GeorgeTheHamster Wed 22-Feb-17 17:14:22

I've just had a play with the calculators. It makes you wonder how much is creamed off in management charges over the years it's invested, doesn't it.

clickershed Wed 22-Feb-17 19:16:07

I will review your comments regards equities etc. Maybe by then I will understand the financial markets a bit more... ?

Right- so a few of you spotted the poor returns on the pension over 25 years and when I re-checked the figures - it's actually a few hundred extra annually - not a few pounds of difference.. I add £150 a month and £5k lump sum.

Still - the amounts are so small... of course I'm annoyed with myself for contributing so patchily and so meagrely but it is what it is.

I'm still wondering if I shouldn't put the extra cash in a stocks and shares ISA then I can get it when I want it, when the time comes.

The pension increased in value by about 12% in the last year. The provider reckons that's below average ?? but my other pension did slightly worse.

Such a bloody minefield.

JoJoSM2 Thu 23-Feb-17 08:26:44

You pay into ISAs out of taxed income so it would only make sense if you're a low earner. Otherwise, you're much better off with a pension.

Mumoftwoyoungkids Thu 23-Feb-17 11:20:24

Are you sure about the £15 a year difference from the £5k lump sum. I would estimate that £5k would give you about £15 a month extra. (Which still doesn't sound very much but at least is more than £15 a year!

clickershed Thu 23-Feb-17 14:47:37

JoJo I am a low earner, and I don't pay tax so that's interesting thank you...

Mum of - yes I made a mistake there. Did explain in a subsequent post but perhaps I wasn't very clear, sorry. A few hundred a year just doesn't seem worthwhile to make sacrifices for on order to save lots. Because I would have to save a hell of a lot to make much difference sad

clickershed Thu 23-Feb-17 14:48:49

But DH is a high earner... if that makes any difference at all...

nannynick Fri 24-Feb-17 06:36:14

12% sounds good to me. Sure some funds will have done better and others worse. If you had S&S ISA would you know which funds to pick to get that return or better?

nannynick Fri 24-Feb-17 06:37:43

As a low earner (£25k ish) I am in the same dilemma. Pay in to pension and Government tops up the contribution. Pay into ISA and the growth is tax free.

paraMN Fri 24-Feb-17 09:10:36

Nannynick - no clue re which S&S to select! That's a very good point...!

... Maybe from that POV a pension is easier?

Unless you can pay someone to manage any ISA's for you, but that eats into profit of course.

paraMN Fri 24-Feb-17 09:37:09

Ah - name change fail :D

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