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?

25k in my pot and same age and worked full time more or less since I was 17.
Poor decision making but like others said could be dead next week.

The State pension is about £10K per year, so I guess that your savings of £100K would buy you anywhere between 8-10 years if you wanted to retire early?

@BellePeppa - Exactly. On another thread people are saying 16-18year old should be taught about pensions and mortgages, yet here people are being shutdown for daring to talk about a pension. I despair, MN is awful at times.

Yeah. Financial literacy standards in this country are appalling if people don't accept £60K is a fantastic salary no matter what, and that some people don't even earn £20K a year let alone have the ability to save that much into a pension.
A little empathy goes a long way. And people would be far better off speaking to a financial adviser, so all their circumstances can be taken into account, rather than asking here.

Would have preferred to put the money into property. Set up a limited company, put the 60k inheritance for a deposit on a 200k buy to let 12 years ago, in the last 12 years, a lot of properties would have gone up by at least 50k if not more close to 100k.

You could over pay - employers offer incentives sometimes. I pay 10% additional contributions on top of what my employer pays and my mandatory contribution.

I have a bit of a patch work of pension provision so far - I have a DB pension and 2 DC pension pots (I did have a very small third DC pot but used that to buy extra contributions for the DB pension). At some point I need to look at whether I combine the 2 DC penson pots.

I'm 38, have about 20k in my pension. I know I need to up my contributions asap and wish I had started younger. I hope I live many heathy years after retirement but nothing is guaranteed so I'm not going without too much to pump everything into a pension.

Pensions work on compound interest and the stock market it is for the long term so temporary fluctuations on stocks and shares do not matter too much, 100k invested 20 years ago would have more than kept up with inflation

people genuinely understanding pensions would be better than studying maths till 18
someone mentioned up thread they had a pot of approx 100-120 K which would be about 4000 a year and questioning was it worth it, well state pension is about 10K per year so an extra 4000 makes you 40% richer straight away so I would say definitely worth it; also if they keep contribtuing until 60-65 that pot is likely to be 200K which would give 7-800 ie a total of 17k instead of 10k which is even more worth it. most pensions are index linked

I’ve been paying into a pension since 21 (defined contribution so like a savings account). I have earned a decent wage since late 20s and upped my total contribution at that time (including employer) to 20%. I now have a pot of circa £200k possibly a bit more.
I appreciate I’m lucky but I do and have always worked bloody hard.

All workers (including civil servants) need to start taking their whole benefits into account - not just salary. I turned down a job on a 20% payrise because the total package including pension was worse.

If you’re worried about ‘what might happen in the future’ like others have mentioned, perhaps put some in an ISA too that’s more easily accessed?

I can’t believe people are so naive about retirement - there won’t be as much state help when we retire because the population shape has changed so you’re in for a crappy old age if you’ve chosen not to do anything about it….

You have to remember that if you're 40ish then you could have another 25+ years work (depressing!) but that means salary increases and compound interest on your amount - so it has lots of time to grow.

Indeed. Another one to look for is employer pension contributions. One job I had, on top of the employer contribution they matched additional contributons up to 3% (Up to 5 % if you were over 40) it was pretty sweet.

hlu2 ·
And I appreciate that other people are struggling. I was only trying to be an adult and actually try to figure out what a pension is. For those who are pissed off - my 100k pot was made up of an inheritance that was 60k put into a put that made it up to 72k so in the last 12 years I've only added about 3 grand per year into my pot which was topped up by my employer.

Is adding 3k per year into a pension really that much? I actually thought it wasnt enough

No, £3k is not much when you are earning £60k. If you want to retire early then definitely up the amount and bear in mind the tax benefit for the contributions you make . Its a no brainer if you can afford to.

I retired early at 57, I did pay as much as I could afford to enable this. I live a very modest lifestyle but I had so many stress related issues with my work that I could not carry on and was extremely thankful I had been so thrifty.

It is not showing off, you are asking for advice and being prepared. Times are hard for a lot of people however, things change and when you get to retirement age you will be glad you have saved.

Isn't it funny how there's three different conversations happening on one thread?

Convo A is all "how big a slice of my cake should I put aside for tomorrow, and how much should I eat today"?

Convo B is all "it all depends on how hungry you are right now, and if you're a greedy gobble gannet you've not got any leftover cake so it doesn't make any difference anyway".

Convo C is all "my cake is only this big, your cake is so much bigger, no fair, wah wah"

And the thread goes round in circles (as do all the similar threads highlighted below).

Could really do with a filter button, so I only read one conversation at a time.

So my employed doesnt really match my contributions beyond what they are legally required to do. Which is a bit rubbish.

We just never discussed it in the home - because my parents had a final salary pension and made over a million by simply living in their family home in London. So they don believe in private pensions and think that it's all a con. There was very little financial information passed on to us. Then I was a student for most of my 20s and despte having quite a good education - clearly dont know enough about this stuff.

Exactlly a good reference point

Assuming Steve lives to the age of 85, how big would his pension pot have to be to generate that kind of income?

Suppose Steve has saved a pot of £250,000. His financial adviser finds him a drawdown scheme which achieves a steady 4 per cent growth. Steve draws £25,000 a year for three years, followed by £16,454 for each subsequent year (once he starts receiving his state pension). Assuming nothing else changes, the pot will run out towards the end of the 20th year.

This could be almost spot-on as far as Steve is concerned. However, this example depends on his pot growing by a steady 4 per cent. If growth is lower (particularly in the early years) or if Steve takes out more, his pot will run out much sooner. Furthermore, Steve may live to be a lot older than 85.

General rule of thumb I was told is that for every £5k per year of pension income you want you need £100k in the pot. So to get £10k per year you need £200k, etc.

I’m nearly 42, my pot is about the same as yours. I started it when I was 21 with a 10% employer contribution but I’ve been part-time for the last 9 years after having kids. I’m finally in a position to increase my personal contributions so am now making up the difference between what my employer puts in and what it would be if I were working full time.

In a few years I will look to go back to full time work and hopefully find a higher paying job to boost my contributions!

There’s some good tools to help you consider what you want your lifestyle to be when you retire, and I think Loughborough Uni has done a new paper on retirement/pension plans? worth looking at.

For example, a pension pot that allows you about £30k a year drawdown is enough for a bang average life - e.g. £50/w groceries and a two week holiday in Europe each year - that’s what Aviva suggested as kind of “middle of the road” retirement.

My pension contributions (me + employer) come to about £11k/year at the moment. Employer pays lion’s share. Once I’m out of the woods childcare-wise I will increase my contribution.

my FIL said when he was 36 a finance advisor told him to put as much money as possible into his pension (I think he’d ignored it for some time) and he said it was the best advice he’d ever been given. He retired fairly early and he lives a very comfortable life on the back of it tbf to him.

There’s a cost of living crisis right now. So I would assume is lots and lots of people

The crucial thing is how much pension your pension pot will provide you with.

An earlier poster had a pot of £150k and said they have just bought an index linked annuity for just under £4k per year.

People need to realise, that although pension pots might sound like they have large value (£100k) it still doesn’t get you much over year of retirement.

Lots of people won’t buy an annuity but draw down their pension pot, perhaps at a rate of 4% to make it sustainable for around 20-25 years. That £100k is only going to provide £4-5k and isn’t inflation proofed so will be drippping in its spending power.

Most people who’ve worked through their lives will get some state pension too. People who’ve built up full contributions (many women won’t have) can get about £10k per year from that. It’s a really good start, but not enough for most people. Everyone should logonto the government website and see how many years of contributions they have got so far, and how many more years they need to work to get the full amount.

Yes, loads of people are struggling financially at the moment. That doesn’t mean people should bury their heads in the sand and not consider the future or position they might be in. Op has a good salary and her pension pot is in better shape than for many, but she still isn’t contributing as much as she should be probably. Looking into it will help her find that out and consider if she can contribute more. She might decide she can or can’t, but knowing is important.

Knowledge is power and financial knowledge gives more choices. People need to gain knowledge of their finances and implications, even if the picture isn’t very rosy. Most people, even those struggling can make some different choices that will out them in a stronger position in retirement……but if you don’t know, you can’t.

I am currently paying around 10% - how much do most people pay?

But if you earn £60k and pay in £3k a year, that's only 5%.

I pay in 8%, as does my employer. In a few months I'll have been there long enough to qualify for them matching more of my contributions so I'll pay in 10% and I think they'll pay in 12%.

if you're earning 40k a year the legal minimum which is what most will be on is 8% contribution (5 from you, 3 from the company). so around £3200 a year. After 12 years as you say - from 30-42, you'd have about £40k saved up.

That seems to tally with your 100k as you said 60 of that was from an inheritance?

if you started at 25, perhaps on a lower wage, maybe you'd be on a bit more.

so you shoudl expect most will be on less than that at your point

There are some great financial advisor videos on YouTube called Meaningful Money. He also has a website and fb group. Watch the ones about pensions, ISAs, savings, mortgages.

I would not pay to see a financial advisor in your shoes- you say you don't know what an ISA is, you don't want to end up paying for somebody to explain that to you! Watch the videos, read around the options, see if you can make a plan yourself. If you have specific questions you can then approach a financial advisor, but you will probably be able to do it all yourself. Financial advisors who don't charge a fee will take commissions from products they refer you to.

You also need to think about what your pension is invested in, not just how much you are putting in (assuming you get a choice about this). Different pension investments will produce very different outcomes over decades.

If your emergency savings are in a current account, there are probably better options that will earn some interest.

It is good to talk about finances. We would benefit from doing this more!

Whether your pension pot is "enough" is a very individual question that depends upon your plans for retirement, what type of pension you have, and your other financial commitments and priorities. So it's hard for anybody to answer yes or no!

This thread is fascinating. I think OP has been given a hard time by some. I appreciate many are struggling right now, but that doesn't mean we shouldn't be aware of our pensions.

For what it's worth, I have about £25k at 35. It's nowhere near enough but I upped my contributions in the past year (10% going in - 5% me and 5% employer) and I plan to start increasing contributions by 1% with each pay rise, plus once my student loan is gone (later this year) putting half of what I was paying off on that into the pension.

I’m astounded that a lot of people on this thread think the op is boasting.
It is actually scary to realise how many people are under pensioned at middle age.

Most pension advisors say you should aim to target 1 million in the pot to have a comfortable retirement and the sooner you start obviously the better for greater growth.
100k is ok, but you need to try to save more way than 3k a year from now on.

As a rule of thumb, you need about £300k to generate £10k per annum of income, so the poster above who said a friend with a £1.2m pension pot gets an annuity of £40k sounds about right.

it’s enormous- much more than most people can ever save, but everything you save is worthwhile. Save as much as you can now because the compound impact of investment returns are more powerful earlier on. are you maxing out on employer contributions? £3k pa is only 5% of your income which seems very low - the default for auto enrolment is 8% total and at your earning level I’d expect higher company contributions.