So now all I need to do is save up 300K--is this for real?

[Coffeetree]

An article from This Is Money showed up on my feed this morning. Basically someone with £290K in pension pots at 50 years old, asking whether they're on the right track for retirement. The rest of the article was various investment advice. Generally the advice was "You're nearly there."

I read these articles and I feel like someone is playing a joke on me. I usually feel very very privileged in that, at 52, I have a mortgage that I'll hopefully be able to pay off in 4 years, plus about £50K in pensions. No inheritances on the horizon. I've worked in charities my whole life, then became single about five years ago, hence not much saved.

So, after paying off my mortgage, I then need to buckle down and save up 300K? That's not going to happen. My plan is to keep working and then go part-time or contract when I reach retirement age.

Am I the only one who thinks these "retirement advice" articles are really out-of-touch?

I think this advice is solid for anyone, not just women!

You can’t compare it in that way. Defined benefit pensions are amazing, and for the sum you contribute you could never hope to get a defined contribution pay out as good. Instead of making misguided comments on here, go and research how they work.

Lots of state sector pensions such as the TPS have changed.

They are still good but new entrants will not find them as generous. Scheme affordability is an issue

Though of us who squeezed in service before 2005 can take a pension from 60 based on a final salary scheme. Those joining from 2015 will have a pension age of 68 and the pension is paid on a career average scheme.

@backinthestoneage

Yes, pension reforms have meant public sector pensions are not as good as they used to be- but still way better than others. My pension contributions have hiked up massively; I was paying below 9% a few years back, and now I'm paying over 12% , for the same pension at the end of it. The pension calculation for people entering my profession will be based on career average, whereas mine is mostly final salary, with just a small proportion based on average.

But reforms had to happen, because the bottom line is; on average we're living much longer past retirement age. Same with the state pension age reforms. We can't really complain about having to wait til 68 or whatever to claim it, when the chances are, we'll be claiming it a lot longer than our grandmothers who got it at 60 would have done.

Added to your pension instead of being sent to the government.

Who has anpendion pot of 300k. That nearli.7.5 times my annual salary🙄

@WolfFoxHare

My employer provides a minimum of 10% then matches up to 3%.

I pay 6% through salary sacrifice and this "saves" both me and my employer NI. The employer puts any NI saving into my pension so in practice they contribute 14% total towards my pension each month.

Not strictly true but it's a useful point that some don't realise. A defined contribution pension is actually not part of your estate or your will so it's free of Inheritance Tax.
As long as the person submits an expression of wish form then the Trustees would normally pay it out to who was nominated whether it's a surviving spouse or their children/next of kin.
This is where it differs from a Defined Benefit pension where some people are their pension die with them hence why they don't think they should contribute. For a Defined Contribution scheme however the money isn't "lost" on death unless it's been converted to an annuity.
Something for people to consider anyway when weighing up where they invest I.E. in ISAs/Savings accounts which are part of the estate Vs a DC pension

If you paid in c£150 a month (including any employer contribution) for a whole career it’d be worth c£300k based on compounding 5% interest which is pretty conservative

I have set up workplace pensions in the past and there is a good (but complex and boring) reason why employers cap what can be paid in under salary sacrifice.

You will probably find you can pay in as much as you like (obvs you have the legal cap of your earnings or £60k, whichever is lower, but your employer doesn't usually police that) but only 10% of your contribution will be by sal sac, the rest will have tax relief only, no NI relief.

I pay 38.5% into mine currently, and my employer pays 15%. I do this to stay under the higher rate tax band. Luckily this current employer doesn't have a cap on sal sac payments so I still get the NI relief for all of it.

Considering so many people on here are on workplace pensions, it would really help if you could explain....

What S&P500 is/are?
What are "managed funds"?
What "fees"?

It looks like you're more financially savy than most so you're probably not aware of how this will be mumbo jumbo to a large majority.

Ah ok I see, thanks! Yeah, mine don’t do that. I do salary sacrifice but my company doesn’t add anything extra to their 10%. Sounds like a good deal!

It the NI on your contribution the pay in, so either 12% or 2% depending on your marginal rate, of the contribution. Not an extra 1% of your salary.

It's miniscule in reality. But every little helps.

I can't stand the scolding of 'well you should have started in your 20s it's way too late now.' I didn't start a pension until I was 47. I'm 54 now and have £300k. I didn't start one as I was self-employed, I didn't trust them and was just ignorant about them in general.

To get £300k you have to put in £240k as you get 20% tax relief. Some of the £240k would be your employer contribution. Salary sacrifice brings it down even more. I put in extra contributions whenever I can, and generally put in the same amount monthly that my mortgage used to be.

It's still a lot to pay in, obviously, and some people just don't have any spare to pay in. I'd paid off my mortgage at 47 so concentrated then on the pension. I'm not a massive earner (I know this is relative), I'm on £50k and some bonuses. I'm also single, no children.

I'd second the advice to not concentrate on the mortgage so much, looking back on it the way I did it didn't make sense (to pay off all mortgage first and then start on pension). And look into salary sacrifice, if your company has it.

Based on this thread I've just increased my contribution by 1%.

Thanks all.

S&P500 is an index, like the London stock exchange (standard and poor). I've no idea why it's been touted so much in this thread, maybe just for comparison purposes. It's a US index, why anyone would want to be fully invested in the US is beyond me. But I do hold an S&P500 fund myself, as a small part of my investment.

Managed funds are groups of shares/stock/equity put together by fund managers who tinker with them all day to try to get better returns. They rarely succeed. Passive (unmanaged) funds perform just as well if not better.

Fees is broad, but it's the costs of holding shares, funds, various wrappers etc. So, if you open a dealing account that's not free, there are charges (fees), if you then buy within that account a fund that will also have a fee (managed fund fees being higher than passive fund fees) and sometimes there is another fee within that as well. When you look at any fund or group of shares you need to look for the total expense ratio (TER) as that consolidates all the fees so you know the overall cost of that fund (but not the platform or wrapper, that's separate).

Hi, thanks for your post. Can I check when you say you have £300k, is that how much you and your employer have contributed so far? Or is that your projected pot?

£300k is what I have right now, not projected.

I disagree. I have friends in the private sector doing the same job as me and their pensions are much better and a lot more flexible. In local government it’s certainly not gold plated anymore. No lump sum, impossible to retire on Ill health, and it’s just not flexible. I might not want a guaranteed monthly sum until the day I die - I might we more in my early retirement and less when im in my 80s but we can’t do that. And when we die there is nothing to hand over to our kids or partners.

@Saverage that's amazing! how do you have 300k after starting at 47 on a 50k salary?

(I'm asking to try and emulate you!)

No mortgage, low outgoings. I also had annual bonuses between £5-£10k which I put in there (and a larger one-off). Got extra tax relief from going over the £50k threshold. And there has been some growth in there as well.

Also, made sure I did a tax return so that I got full tax relief when I earned over £50k.

@IhaveanewTVnow I didn't say that they were perfect. If you have such a fixed idea of what you want, you might be better of with a personal pension, or SIPP or some such where you are much more in control and make more of the decisions yourself.... but then, what you have in retirement is all your own work. You choose!