Page 8 | So now all I need to do is save up 300K--is this for real?

Coffeetree · 2023-08-30T06:35:17+00:00

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?

prh47bridge · 30/08/2023 11:02

After 20 years as an MP you will have earned a pension equal to 50% of your parlimentary salary - this is an unbelievable return that is absolutely beyond the wildest dreams of anyone else.

To achieve that, they have to contribute 13.75% of their salary - well beyond what most of us put into pensions.

Original poster

Coffeetree · 30/08/2023 11:04

Meatus · 30/08/2023 11:01

Definitely rethink this.

Assuming you’re on a fixed rate mortgage and paying maybe 2.5%, your mortgage is basically a very cheap loan.

So every extra £1,000 you put into your mortgage is saving you £25 in interest.

Let’s just say that your 6% that you contribute amounts to £1,000 (just to keep figures very simple), and your company matches it, you have £2,000 going in to your pot. Then say your mortgage returns 6%, your now have £2,120 from your £1,000 investment.

And, of course, that initial £1,000 isn’t really £1,000 out of your pocket because of the tax free element.

An employer-matched pension is one of the best ways to get free money.

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Great advice, thank you! I have been really fixated on my mortgage and now I'm having another look at my workplace pension.

OP posts:

Chewbecca · 30/08/2023 11:04

Notanotherhousepost · 30/08/2023 10:49

DH worked for the railways for 42 years.

I know when he dies (assuming he goes before me which given the 16 year age gap is likely) I get 2/3 of his pension for the rest of my life. Obviously that will be eroded by inflation

Many DB schemes reduce the survivors pension proportion if there is an age gap, don't know about this one specially. It's usually at the discretion of the trustees.

Movinghouseatlast · 30/08/2023 11:08

I agree. I read one of those articles and felt incredibly disheartened, especially as I have sacrificed quite a lot to save a pension. It's £400k between the two of us and apparently this won't be enough.

VanGoghsDog · 30/08/2023 11:09

DiaNaranja · 30/08/2023 08:22

Op, will you downsize at some point? Me and DH are only in our thirties, and still have a long way to go on our mortgage, but our plan is to pay it off (one day!) And once the kids have flown the nest and got themselves settled, we will downsize from our four bed to a lot smaller two bed, and free up a lot of cash that way. Our house is currently worth about 400k, obviously with house price fluctuations, I can't predict what it will be worth in 30 years time, but I do hope that at some point we can sell, and buy small, and free up at least 50% of the value of our current house. That will make up a huge chunk of our pension. DH earns well, saves hard, and has a good pension scheme at work that he overpays into. I work part time (but as many hours as I can!), while bringing up the children, and don't really have spare money to save. In the current climate, I doubt many families are managing to pay in enough money to make those sorts of figures realistic. Some are barely getting by each month.

Presumably DH pays into a pension for you then?

weirdoboelady · 30/08/2023 11:10

Coffeetree · 30/08/2023 10:06

To answer an earlier question, yes my current employer has an excellent pension plan and matches contributions up to 6%. However I'm putting in the minimum and putting all the money I can spare into overpaying my mortgage. I'm now reconsidering this strategy, so thank you!

This was always clearly wrong. If you're not putting in 6% and getting it matched, you are throwing away free money. PLEASE change to doing at least this as soon as humanly possible.

Saschka · 30/08/2023 11:12

Mikimoto · 30/08/2023 11:01

I don't understand why more people don't do this, instead of funding other people/organisations with pension payments that you might or might not recover.

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To be fair, running a BTL is a massive pain in the arse, and with interest rates going up, the renal income after tax doesn’t cover the mortgage (though the shortfall is probably lower than he’d be paying in monthly pensions contributions).

He isn’t looking to make any money out of it now though, but in 25 years when he’s retired.

TorroFerney · 30/08/2023 11:15

RosaGallica · 30/08/2023 07:41

Sign of the inequality of our times and who the country is run for (clue: not for anyone who works for a living).

But to have a big pension pot you need to have worked for a living. Who are you having a pop at?

Sceptic1234 · 30/08/2023 11:17

prh47bridge · 30/08/2023 11:02

After 20 years as an MP you will have earned a pension equal to 50% of your parlimentary salary - this is an unbelievable return that is absolutely beyond the wildest dreams of anyone else.

To achieve that, they have to contribute 13.75% of their salary - well beyond what most of us put into pensions.

That is true, but it is still extremely generous,

For the last 13 years of my working life I paid 15% of my salary into the University scheme (which is not the same as the teacher's scheme) ....that got me the equivalent of 1.43 years pension for each year worked (so about 3.5% of benefit - at the time you could not accrue more than 40 years service). The rules have changed a lot since then, and the reward for additional contributions is now a lot smaller.

MPs pay 13.75 % and get 5% of total benefits per year .... this is outrageous in this day and age, especially in view of how large an MPs salary is compared to the average wage. £40,000 plus, index linked for the rest of your life after 20 years sounds like a very good deal to me. Well worth 13.75% of your salary.

It is also something which everyone should bear in mind when we hear politicians talk about pensions.

Saschka · 30/08/2023 11:18

prh47bridge · 30/08/2023 11:02

After 20 years as an MP you will have earned a pension equal to 50% of your parlimentary salary - this is an unbelievable return that is absolutely beyond the wildest dreams of anyone else.

To achieve that, they have to contribute 13.75% of their salary - well beyond what most of us put into pensions.

Really? I’ve always put in that amount (I’m in a DB scheme, no option to pay less), and I thought the recommendation was to put about 15-20% in if you are in a DC pension (depending on when you start saving - 15% if under 30, 20% if any older).

Obviously if people are putting 3-6% in from their mid-40s, their pension pot is not going to be big enough…

ArabeIIaScott · 30/08/2023 11:21

DeliciouslyDecadent · 30/08/2023 10:12

Well, you know. People's situations, wants, needs, and satisfactions differ.

I am only talking about necessities not wants or luxury.

Are you living on £9K pa?

My mum lives on a little above the SP, as she has some pension from my late father. I can assure you that the state pension alone does not go far when council tax and fuel bills are eating up around £4K pa, even being careful with heating.

I'm not talking about myself.

But yes, I know people living on just the state pension. Of course I do, do you think nobody does?! See attached article.

'31% of UK adults have no private pension provision and will have to rely entirely on the state in their retirement'

Benefits include CT relief, so if your mum's on a low income she may want to check if she's entitled to that.

https://www.theguardian.com/money/2017/oct/21/uk-retirees-state-pension-financial-future

One in three UK retirees will have to rely solely on state pension

Survey by Financial Conduct Authority finds those aged over 50 are most at risk of a bleak financial future

https://www.theguardian.com/money/2017/oct/21/uk-retirees-state-pension-financial-future

Overthebow · 30/08/2023 11:25

Sceptic1234 · 30/08/2023 11:17

That is true, but it is still extremely generous,

For the last 13 years of my working life I paid 15% of my salary into the University scheme (which is not the same as the teacher's scheme) ....that got me the equivalent of 1.43 years pension for each year worked (so about 3.5% of benefit - at the time you could not accrue more than 40 years service). The rules have changed a lot since then, and the reward for additional contributions is now a lot smaller.

MPs pay 13.75 % and get 5% of total benefits per year .... this is outrageous in this day and age, especially in view of how large an MPs salary is compared to the average wage. £40,000 plus, index linked for the rest of your life after 20 years sounds like a very good deal to me. Well worth 13.75% of your salary.

It is also something which everyone should bear in mind when we hear politicians talk about pensions.

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I only pay in 5% of my salary at the moment, can’t afford much more currently as paying large mortgage and nursery fees, but I am still forecast to get £15k a year on retirement. If I paid in 13.5% I wouldn’t be far off that £40k figure and hopefully will be able to pay in a lot more once nursery has finished. It’s not an unreasonable amount of someone has been paying in that % for a long time.

horseyhorsey17 · 30/08/2023 11:27

I doubt I will make £300K in my pot - I am 48 now and have £100K roughly in three (!) pensions. Hoping to retire at 70 so have another 22 years to work (groan) but don't see myself being able to save huge amounts more than I have already - I didn't start saving until I was 30. I will be lucky to get £250K in the pot. So this worries me, but I'll have paid off my mortgage and will tide myself over with some freelance writing (I'm a journalist) and basically hope for the best.

Sceptic1234 · 30/08/2023 11:28

Overthebow · 30/08/2023 11:25

I only pay in 5% of my salary at the moment, can’t afford much more currently as paying large mortgage and nursery fees, but I am still forecast to get £15k a year on retirement. If I paid in 13.5% I wouldn’t be far off that £40k figure and hopefully will be able to pay in a lot more once nursery has finished. It’s not an unreasonable amount of someone has been paying in that % for a long time.

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MPs get £40 plus after only 20 years though! It's the 20 year figure that is the scandal!

caringcarer · 30/08/2023 11:28

If your mortgage will be paid you will need less in retirement than you do to live now but if you still want to eat out, go on holidays, and enjoy hobbies I don't think you could do that on just state pension and pension credit. Any pension is better than no pension and it's never too late to put money into a pension. The government tops it up by 25 percent too.

TorroFerney · 30/08/2023 11:31

thecatsthecats · 30/08/2023 08:38

Eh?

I'm on track for a 300k pension from my current pot at the age of 34. I'm not super rich, nor am I a landlord, nor were there any family connections involved at any stage of my career. The biggest role my family have played in my financial life is by explaining finances and by demonstrating extreme frugality.

I'm not extremely frugal, but I do live well within my means, and have made sure my career has progressed up til now. Hence significant chunks of my income going into pensions every month.

Just as much as it is important for people like the OP to have advice fitting to their circumstances, it's also hugely important to contradict the narrative that this sort of thing is impossible, unobtainable. Because so many people believe it and then don't try.

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Completely agree. I am 51, have a decent job , salary pot and no mortgage. It can be done. I did not go to university and received no money from parents for house deposit nor did any family connections help with my career, the opposite in fact, my dad used to tell me (when drunk) how the only proper jobs were manual ones and his friends daughters were at home cooking their dads tea (whilst I was studying for my a levels )I am not saying ooh look at me everyone could be like me but let’s not perpetuate the myth that it’s everyone against the super rich or those who have things handed to them on a plate.

and for those saying oh I don’t understand my pension then do something to understand it, ask someone, ask your boss , google.

R4ID · 30/08/2023 11:32

Itsokay2020 · 30/08/2023 08:17

I think the bigger point is that until recently not everyone started paying into a pension from an early age, hence auto enrolment was brought in. I still have a number of friends (mostly female 😔) who have little or no pension provision and are relying on their husband’s pension to fund their retirement. This is risky.

Starting a pension at 24, or earlier if possible, and paying £400-500 per month into it (personal and employer contributions) should yield a decent pension in retirement. It was a sound piece of advice my Dad gave me at 21.

Why is it risky? If you are married you are entitled to your husbands pension.

IvorTheEngineDriver · 30/08/2023 11:34

As a retired pensions consultant, I say these figures are attainable if you start paying in to a pension early. Assuming you don't choose some seriously dodgy investments or rip-off pensions provider, tax relief and compound interest will do the rest.

If you haven't started paying into one by the time you are 30, you have a problem.

Oh, and the projections for a comfortable retirement do not assume £50K for a couple of £25K for a singleton. Good luck getting that from a £300K pension pot.

IvorTheEngineDriver · 30/08/2023 11:37

R4ID · 30/08/2023 11:32

Why is it risky? If you are married you are entitled to your husbands pension.

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That pre-supposes that he is still your husband when he retires/dies. Or, if you divorce that you can get a shre of his pension pot.

These are risky assumptions and I know a large number of women in financial difficulties because they relied on them.

watermeloncougar · 30/08/2023 11:37

I get that it can feel disheartening, but this thread just highlights the importance of starting to pay into your own pension as early as possible. Unfortunately a lot of the inequality is that women tend to work in lower paid jobs, or work only part time for a large chunk of time or assume that their husband having a good pension means they'll be ok.

The best thing I did work wise was return to full time work pretty soon after having kids. I worked part time when they were really tiny but was determined to step back up to full time and go for promotions once the kids were in nursery. I stacked away a lot in my work pension (12.7 of my salary). Too many women don't think about this until it's too late. Or they think that it's enough for their dh to have a good pension. Trouble is, if he pre-deceases you (statistically most likely as women often outlive their partner) then you'll only get a fraction of his pension.

There really is no substitute for making your own decent provision: it's why auto enrolment came in.

OP, can you downsize when you stop working? That sounds like the best solution as obviously you're not going to be able to top your pension pot up hugely at this stage

cheezncrackers · 30/08/2023 11:38

Coffeetree · 30/08/2023 07:42

Yes! Thank you. Every damn time I hunt around for retirement planning advice, I get this foolishness. I mean, fair dues to people with big pension pots, great, enjoy! But I'd like to see retirement advice for the rest of us too.

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So why don't you write in to This is Money and ask for advice about your more modest amount of savings? I'm sure many in a similar position would welcome the advice given, but the person writing the column can only answer the questions asked.

caringcarer · 30/08/2023 11:38

FlatWhiteExtraHot · 30/08/2023 08:38

I don’t have any sort of pension and DH has the one he was auto enrolled on when that first came in. I’ve no idea how much is in it.

It just never occurred to us when we were young and broke and now we’re middle aged and not much better off 😂. The amounts being bandied around here are pie in the sky for either a single person or a couple earning minimum wage or not much more.

I think it’s incredibly important to make young people more aware of the necessity to not opt out of paying in. My DD was very blasé about it, figuring she’d rather have the extra £7 or whatever it was a week. Once I pointed out that her employer would be paying in too, she decided to stay in the scheme.

Your DD needs to be paying in a hell of a lot more than £7 a week. The more she pays into her pension, the less tax and NI she will pay. Tell her this. You pay tax and NI on nett income not gross so paying extra pension means less tax and NI taken out of your wage. Both my son's started paying more into pension just because they hate paying so much tax.

Gingernaut · 30/08/2023 11:40

I do honestly wonder if we're supposed to top ourselves quietly once we retire.

My pensions are a joke - every statement I get tells me that, combined, I won't be able to pay off my current council tax bill.

I am currently eligible for over 55s retirement housing, but I'm expected to work until I'm 67.

Finishing work is an appalling prospect with respect to income and I barely have £50k in savings.

watermeloncougar · 30/08/2023 11:40

@R4ID it's risky to rely on your dh's pension because if he dies first, you'd most likely find yourself getting just the widow's pension, which will be a fraction of it.

Or if the marriage breaks down you would likely only be able to get a proportion of it.

Dh and I both have very good pensions, but whichever of us outlives the other would only be entitled to half of the other ones pension. Hence it's vital to have your own provision as well.

caringcarer · 30/08/2023 11:41

@Secondwindplease, I agree too many people make poor choices in life then blame bad luck. You have made considered choices and they have proved to be wise choices not luck.

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

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