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?

This thread has made me check, I don't really fully understand the pension system in my country. I had a look, there's no pot but it says I've collected 137e per month and then on the predict future pension page says I will get 871e a month if I retire at the latest age (71), and less if I retire earlier. I assume that must be the pension I've earned from working plus state pension then if I've only accumulated 137 per month.

Salary sacrifice - so before tax.

My employer puts in 15% and I put in 10%, both amounts are off my gross salaried amount not my net.

When do you plan on retiring and what is your pension invested in? This is really important as it will impact long-term returns. I am around your age, so you likely have another 20+ years in the markets, this is a long time for compound interest to work (and thereby diminishing the eroding effects of inflation).

Don't forget that when you're retired and if you stay invested, your pot is still growing. 100K is nice, but not enough, you'll have to contribute more than your 3%. Can you change jobs for better pension benefits? Do you have pensions from elsewhere? Every time I change jobs I transfer my pension to my SIPP and manage it myself (I stick it in an index fund. The majority of fund managers don't outperform index funds in the long term, so I'm not paying them a dime in fees).

Ignore all the people saying you are boasting, ridiculous comments, and good for you for asking. More women need to be on top of their pensions and investments.

I’m 47 and have around £120k across my pots. I didn’t qualify into my profession until 29 and the company that I worked for at that time required you to work for them for two years before you could join the pension scheme (I am aware that the law has now changed on this.) So I started paying at 31. Every company I have worked for has been 5% max employer contribution matching 5% employee contribution. Over those 16 years, my salary has been 50k max except for the past year as I moved company and now work full time and earn £80k. I have made some additional payments though over the 16 years.

I am conscious that it’s not going to be enough for a comfortable retirement so I have increased my employee contribution and plan to increase this further every time I get a pay rise.

However, when compared to the stats for average pension pots per age group, I know mine isn’t bad. I think it’s an average of £100k for someone in their 60’s.

It’s also an interesting topic of discussion for public sector pensions. I read on another thread about the headteacher of a primary school “only” getting a pension of £26k. Given that you need a pension pot of over £500k at retirement age to get that amount of pension, a £26k per year pension is a pipe dream for most private sector employees.

I've met a few people, generally older generations, that have strongly held views that non-final-salary pensions are a con. None of them have ever been able to justify their opinion though. Some have stated that the government can just change the law and pilfer our pensions. Aside from that being political suicide, they could do that with any savings/investments if they wanted to try. Another flawed justification is that you get a terrible income from money purchase pensions. That comes from people who don't even realise that the mandated requirement to buy an annuity was withdrawn many years ago and it's now much more common for people to drawdown from their pension pot. A final salary pension is the ideal but they are becoming much less common and money purchase pensions are still a very good way of saving for retirement.

A few thoughts that might help you.

1. Yes, inflation will reduce the value of your current pot over time but that should be countered by the returns gained through the various funds/assets your pension is invested in. Obviously there are no guarantees and investments can go down as well as up but long term they generally go up more than inflation.
2. 100k is not bad given your age and salary but it is far from great. I would be trying to put more in if you can manage and if you think you can't manage I would find a way to. Pensions are a marathon not a sprint. They can mount up substantially over time as long as you're making reasonable and regular contributions. On the flipside, if you get near retirement age and then realise you don't have sufficient funds for retirement it will likely be too late to do any meaningful to correct that.
3. As a higher rate tax payer, pension contributions are probably the most tax efficient means of saving/investing as you get tax relief at your highest rate of tax. If your employer's scheme allows you to pay in by salary sacrifice then you also benefit from reduced national insurance and can potentially reduce your earnings below the level at which child benefit starts to get tapered out for higher earners.
4. Pensions are a long term investment so you need to be happy that you are locking money away and won't be able to access it. In saying that, the rules are more flexible than they used to be and currently you can access your pension (assuming it's not final salary) from 55 years of age onwards. This applies even if you are still in paid employment, though anything you take out of your pension (barring the 25% that is tax free) would be classed as taxable income.
5. Unlike final salary pensions, which generally only pass a percentage of the pension to spouse/dependent children on your death, Money pension pots become part of your estate.

I appreciate that there are people on the bottom who have very few options when it comes to their future needs as their current needs already outstrip their income. That's the background I came from.

What does annoy me though is where people make different choices in life but expect the same outcome. I'm talking here about people with the luxury of choice. So, one person may have prioritised spending their income on things such as extended mat leave, holidays, take away etc and another on a similar income may have prioritised property, another their pension etc etc. Which is all fine, we all want different things out of life and who knows what the future holds. But then you get people unhappy that they have less income or pension pot than someone who prioritised that. You rarely can have your cake and eat it.

I also agree that in the past it's also been down to luck with your employer etc and not necessarily a reflection of how hard (or not) you've worked in your life. People nowadays need to be more aware of their total package and also be aware that companies often reduce the level of their pension schemes whilst you are an employee and there is rarely anything you can do about it.

People shouldn’t be too interested in what the average person has in their pot. Most are woefully inadequately prepared and will have to work into their 70s and many will have a retirement if struggle and dependence on benefits. Bench-marking against an average pot of perhaps £80k at retirement isn’t a good place to get your ‘comfort’ that you’re doing similarly to most or slightly better.

The key is understanding what you will need, and what your current rates of putting into pension will give you at retirement and what state pension you’ll get.

Yes, there is a limit to what anyone can put into their pension and life being hard makes that harder. But, there are also choices people can make to improve their situation. Choices made in 30s and 40s can make a big difference even if small. Simply ignoring the issue until 50s or 60s is quite simply foolish.

Before tax will be what almost everyone is talking about.

I agree that people need to be aware of their complete rewards package at work. Pension is a vital part of it, but lots only look at the salary when deciding if to apply or not.

Someone once told me they recommended those with decent jobs but limited pension provision spend their last 10 years working in the public sector. Someone earning £60k like OP, would accrue more than £10k pension per year of retirement in that time. It’s all index linked and has spouse benefits. A similar annuity would cost over £350k and most won’t put that into a pension in a 10 year period.

The negative comments on this thread are shocking, don’t understand why people aren’t scroll past. In this day and age it is essential to understand your pension.

Have you tried asking the person responsible for pensions at your work?

At my work they did a whole presentation where they explain the different schemes. People that joined at different types had different ones.

For me personally I’m younger they told me if I paid 20% into my pension plus my employers contribution at the scale I am in the business for 30 years, I’d walk away with 80% of my salary yearly for a pension. Had a private meeting with them and they ran though it. The pension provider I’m with also offers free financial advise and they have taken the money from my other pots into that and also confirmed the advise.

I have 100k mid 40s. Currently adding as much as I can afford.
I will never get to a huge pot, salary unlikely to increase. I will be a home owner at retirement.

This money will most likely keep me above any state benifits. But will soon be eroded particularly when you factor in house maintenance.

Sometimes I wonder if I'm doing it wrong, spend the money, have holidays, botox, heating....
And when it runs out be eligible for benifits. The mone i have saved isn't going to give me a luxurious retirement
(Lighthearted)

£100k is the pension “pot”.
you then buy a pension with that pot at retirement and that draws an income from that pot

it used to be that you handed over the entire sum of £100k say, and that bought you an “annuity” for life. The annuity would pay you a sum per year . If you think that it may have to last up to 23-25 plus years on average, it means it would buy you nominally around £4k income,e per year. But it should be higher, as the company you buy your annuity from can invest your money still for that 23-25 years,and therefore could afford to pay more. Issue is that annuities rates (h9me much your pot will buy) are pants, and have been for last 20 years

the government deregulated pension some years ago. You can now do pretty much whatever you want, but will have tax implication. Most people now buy a draw down pension. This keeps your pot in your name and 0wnership. It continues to be invested and grow over your retirement, and you take out of that pot x amount per month or year. There are some products that are f
Flexible and you can choose how much you need to take each year. Obviously if you run out of money, that is on your own head?

if you don’t understand pensions, get your 1 hour free consultation with Pension wise. This is your legal entitlement as part of deregulation to help you understand how your personal pension works. If you look on line for government free pension advice you can book one near you - usually at a citizen advice bureau or council building.

Massively insensitive and tone deaf.

No idea why people are being so rude.
I think my total pot is about 60k and I’m 38 last time I looked that wasn’t much for retirement. There are some good online calcs around to show how much you should put away each year depending on your age

Yes, that’s what scares me.

I also won’t be leaving my children anything to inherit just in case.

I’ll be selling up and taking out wads of cash each week to give to them. If I have to go into a care home and the local authority want to know where all my money went, I’ll say I had a massive coke habit to fund each week and dealers don’t take bank transfers.

I know it sounds glib, but my dad did nothing in his life. Never a day of fun. Never went on a single holiday. Are the cheapest, shit food you could buy. Saved for a future and to give me something to inherit that dementia robbed him of and all that money he could have used for living a fulfilling life went to a care home owner in the end.

He still sometimes talks about his pension (he thinks he’s at work most of the time). How he’s glad he’s got that. I don’t have the heart to tell him that he’s only allowed to keep £25 of it a week, the rest is going on a care home that he thinks is a prison.

42 only £70k in there
Same as was at this time last year despite the thousands that have been paid into it in the last 12 months

Agreed. A bit tone deaf.

Please note: if you does before 75, any “uncrystalised “ pension pot (eg money you haven’t yet converted into a pension you’re drawing) can be passed on to your children without any tax to put into their pension

as long as you have children, it means someone will always benefit from that pot if you die young before starting your pension.

ot is one of ways government tries to incentivise people to save for a pension who, like you are sceptical that they’ll never be able to access their pension.

My dad is passed that point.

My husband works for a local authority so he has a good ish pension.

But after the life I have lived, I can’t live for tomorrow myself. I’ve just wanted to stay at home, enjoy my children while I can after my mum died young and with the lovely genes that i’ve inherited, there’s a good chance that I won’t make an old lady either, despite all the tests.

We are all different and life changes us all in different ways.

It's gross income (before tax).

It's total contribution - both your own and your employer's combined.

It's a rule of thumb - not a rigid formula.

To get best value for money, you should always:
a) maximise your employer's contribution - they usually have a matching scheme up to a limit. Put in whatever maximises their contribution - it's free money
b) if (a) doesn't already add up to your maximum annual allowance (£40k), then consider putting in even more. Usually this is via additional voluntary contributions (AVCs). This is especially valuable if you are a higher rate tax payer.

You shouldn't judge the performance of your pension in the short term. The past year has been bad for stock markets and pensions reflect that. Look at how your pension performed in previous years. Mine was pretty much flat last year as well despite my contribution but for the 5 previous years the investment growth alone was:

2017 - 8.53
2018 - 1.27
2019 -13.86
2020 - 15.16
2021 - 4.42

Dont forget pension income is taxable once you go over the uk personal allowance

I am 46 this year and have an NHS pension which I have been paying into since I qualified in 1998. I am fortunate enough to be in the old scheme which means I will get a final salary pension which I can take most of at 60 and then another pot with reductions if I take it before I am state pension age. My DH is 10 years older than me and that means I really want to go at 60 and have started to make plans now. I contribute 12.5% of my salary and DH has a house that we will be renting out in the coming years so we will be able to sell that and keep the equity, he also has a good lump sum which he can take now but has chosen to leave it in and keep working until he is state retirement age. I intend to keep working full time until I am 60. My biggest issue is my mortgage is still large as I got divorced and had to take on a large mortgage to keep the kids in the area they were at school but this will take me beyond 60 so I will probably move and downsize in the coming years. I feel it is very important to plan now and not when I am in my mid 50s.

I’m 40 and have £15k in a personal pension pot and also have an occupational pot. My occupational pension is non-contributory (all employer contributions) and I have some legacy final salary and some career average - the pot is currently worth nearly £500k.

Oh stop! Does that mean a person who has a pension or savings should never ask for advice in case someone takes offense? What a contrary way to see the world.

'You've got a car and I take the bus, therefore I never want to hear about your car'
'You've been out for dinner and I can only afford a jacket potato so I find it offensive if you tell me about your chocolate pudding'

Insert facepalm emoji here.