100k pension pot at 42

[hlu2]

I've finally checked my pension pot and age 42 it's currently 100k. Putting into random calculators, it seems ok at current money but with inflation in 25 years time, it seems tiny. And yes I should have been keeping up with this more, but I didnt start working until I was 30 (postgrad degrees and two pregnancies) so have only had 12 years of working and saving and with two kids and a house - pensions just didnt seem all that relevant until now. How much does everyone else have around this age?

you absolutely should get a financial advisor, this is what they are there for! i think you can find. list of them online or find a friend who you trust who will recommend one. the sooner you get savvy the more you can save (or get your employer to save or save the tax!)

Well done saving that amount; it will provide approximately £5k per annum on top of any state pension you may get, assuming you retire at 68 and growth/ inflation are neutral.

As hard as it may be, I would suggest that you increase your contribution to £10k a year for the tax advantages as it all goes in your pot - you’re taxed at the higher rate over 50k. Over twenty years that would be £200k so you’d have a £300k pot (ignoring compound interest etc. ), giving you roughly 15k pa above state pension.

You only get 60% of that income between 50 and 60k, so £6000. So you’d miss out on £500pcm cash but get your child benefit back, unless your DP earns a similar amount. So’lose’340pcm now for a 10 grand gain. Even if you increase your contribution to £5k a year you’ll still reap favourable tax treatment. Good luck!

I don’t think Mark realised that as used in this thread “pension pot” refers to defined contribution workplace pensions which are the norm, and not the rare as hens teeth defined benefit workplace pensions.

Every poster I’ve seen mentioning a DB pension has stated it in terms of current projected retirement income of £ or € per month or per annum. Which is appropriate actually.

also, all the people on here jumping on the OP for showing off??? no no no, we need to help each other out and we do all need to get financially savvy. we really do. no one else is looking after our money for us!

@bumpytrumpy

We all have access to the same information now.
Apparently savings/investment in stocks and shares is a huge class divider, those that do and those that don't.

Passing in that knowledge

Look what happened earlier when I thought this thread maybe a good idea to mention we can all start our down DC pensions so they have a better future!

It's a no brainer.

Possibly, but financial advisors (and make sure that they are an Independent FA if you do use one) want to get you on their books and get you to sign up to their investment vehicles, which they will then charge an ongoing fee for, from then on, for the rest of your life if you stay with them.
It is very unlikely you will find an IFA who will just tell you how much you need to save as anything they say officially is "Advice" which is highly regulated and they won't say anything that might result in them getting sued in the future.

Would a financial adviser be useful at our level? I thought it was mainly for those with large pots of money

What, like £100,000? Or don't you consider £100,000 is a "large pot of money"? Because this sounds just a little bit tone-deaf as well, OP.

500k in pension and the same again in investments. I plan to downsize when the kids have flown the nest so around 300-400k in equity to be released whrn that happens. The amount you need depends on how much you wish to be able to spend. I'll be able to draw down 45k a year from age 58 at current projections.

You can also get a rough value of your DB pension via a transfer value. Most people will never use use up the value they hold in a DB pension. You'd often need to be 100 before you've used up "the pot" which isn't really a pot as such, as the benefits are guaranteed, you wont ever run out or have them stopped other than through death. That said, they offer complete protection for your lifetime and usually have an index linked element. You can transfer them but you need specialist advice. For most it's not a good idea due to the protections offered, however it's a gamble really. You are gambling on how long you and any spouse live. And there is never any benefit received from "the pot" for non dependent children or your estate. When you die (or when an eligible spouse dies, it's gone.

@yetanothercleverusername

Completely agree.

Educate yourself

Im almost 40 and put around £4K per year into my workplace pension. I also have a lifetime isa that I put £4k per year (government tops but by 1k annually) into that I can cash out at 60. I've been paying a pension since I was 21 (apart from 3 years when I did a doctorate). When I checked about 2 years ago my 2 pension pot (both public sector) were worth about 150k in total. I haven't looked at a forecast for my current workplace pension. I currently earn £52k.

@TheShellBeach

Actually I'm not sure she would.

I had to enquire about a similar sum year's ago when DH had an inheritance and yes to many that is a small sum and many wer not interested in talking to me.

Threads like this frustrate me so much.

Women have been on the back foot financially for years. MN should be a space where women can discuss financial issues without the “check your privilege” brigade jumping in.

Message for those being nasty on this thread because they’re in a worse position than OP: her having a pension won’t impact you negatively. In fact, it’ll benefit you as she’ll be less dependent on the state to support her so there’s more there for you.

Yes that’s very true. You used to not be able to “cash out” a DB plan, and now you can. It is a gamble because you take on all the risk that the value won’t be eroded by market crashes and inflation if you transfer out of a DB pension to convert it to a draw down account. If you leave it, the pension provider takes on all the risk and has to pay you the annual income plus index linked annual increases for life no matter what the markets and inflation do.

That's, again, so clueless.

How could £100k possibly be seen as a large pension pot?

If you live for 20 years after retirement it's a massive £5k per year.

Some of you seem to be clueless about what a decent pension pot should look like. Hint: it's more than £5k a year.

This thread really needs to go somewhere that the clueless don't wander into ... like 'investments' or 'money matters'. As it is, it's attracting the wrath of those who think claiming pension credit is an aspirational goal.

It's so interesting how poor the understanding is about pensions ( I count me in that) .

I've worked for the NHS since I was around 18, paying into my pension. My hypothetical annuity is around £550,000 which if I stopped paying in now would give me around 11k a year not a huge amount really! But I'm 45 and have another 15 years hopefully with my salary only going up ( 48k ATM)

Meh not sure a financial advisor will help here any more than some of the online articles/calculators. They typically won't touch an employer pension anyway and the fees they'd charge would be prohibitive (you get economies of scale with employer plans). It's unlikely to be enough money to warrant the charges. I know this as I literally had a call this morning with a wealth manager and their pension person who advised us to not bother moving our pensions to the wealth advisor (I've got £300k pot and DH has £200k pot and we're same age as you OP) as the performance is unlikely to be enough to justify the fees - their pension guy told us this. Financial advisor/wealth manager are better able to help with things like investments, ISAs, etc., but often have minimum capital requirements. I'm similarly educated to you OP and I find this stuff confusing!

I think the best thing to do with all the people posting horrible comments is to ignore them. Let’s carry on the main discussion - it’s very useful

Whilst rules and regulations around pensions can be complex, I would imagine that someone with an academic background and with a high level job should be capable of a bit of research to establish what might be suitable for them without the need to engage a FA at this point. But it really depends on how complex your affairs are.

First point is always to make sure that you have suitable life cover in place before you start looking at short term and longer term investments, you should be maximising the efficiency of using your tax allowances.

Salary sacrificing money in to your pension if you are a high rate tax payer makes sense.

A good FA shouldn't necessarily cost you money as a good FA should be able to help you get the max out of your money and also make income for themselves. I wouldn't grudge paying someone for their expertise any more that I would grudge paying a plumber for his skills. AN FA is selling his knowledge in the same way a tradesman does, why shouldn't they get paid?

...and no, i'm not a Financial adviser or related to one.

I think your pension pot feels on lowish side to me but I’ve really nothing to compare to apart from my own. Mine is about 5x yours but my salary is double yours. I’ve been working for about 25yrs so have had much more time to add to it. I’m also 5 yrs older than you.

My employer adds 10% and I pay in 17% currently but hasn’t always been as much as this. I also try and put a lump sum from my annual bonus into it so I can maximise the amount I add each year and minimise tax bill which is a big driver.

I wish I’d paid more attention to it when I was younger as could probably retire earlier.

I realised exactly that.

There's a million or so people still accruing benefits in active DB schemes. There's nearly 5 million members in deferred schemes ... waiting to draw benefits already accrued at some point in the future. And a further 5 million pensioners drawing benefits already from such schemes. Almost 11 million people altogether. Not what I'd call rare as hen's teeth. There's a lot of people working or who have previously worked in the NHS, Teachers, Armed Forces, Police etc.

The benefits statements from these schemes provide an actuarial valuation of the scheme's projected benefits. This is frequently a six-figure sum, and is commonly used as a proxy for the size of the 'pot' you'd need to deliver an equivalent annual income. But the point I was making was that it is not a pot of money you can spend, and for those who have a pot of money they have lots of choices to make that could significantly influence the amount of income their pot equates to. In a DB scheme, these choices have usually been made for you.

So, it's not apples and apples. And it's ridiculous to compare projected incomes from different schemes where the calculations are based on different assumptions.

A DB pension is better thought of as a hybrid between retirement savings and an insurance product, where the risk you are insuring against is that you outlive your savings; whereas a DC pension is better thought of as a savings vehicle, but one in which you have no protection at all against the risk that you outlive your savings.

*3% sorry - quite the difference!

What's the purpose of your OP @hlu2

You don't think you have enough and want to compare? 100k might be tiny in 20 years if you don't plan to add to it, yes.

I'm not sharing how much I have in pounds in pence. I was always taught that sort of thing should be private; income, savings, pension.

while I'm here - is it generally recommended to consolidate all the little fragments of money purchase schemes into one? feels like it can be easy to lose track if you're not careful

This, in spades.