How are you planning ahead for retirement?

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Every tax year end, I review my pension pot online and scare myself!! I’ve always saved towards my pension, but the calculator showing my predicted annuity at age 65 (just over 20 years away) is no where near where I’d like it to be. Every year I’ve been putting 10% of my gross salary in and my employer also puts 10% in. I think I need to increase this.

I brought the topic up with 6 of my closest friends recently and all of them seem blissfully unaware and unconcerned about their future pensions or retirement. We’re all of a similar age, 3 have been SAHM for the past 10-15 years and don’t work or have anything saved other than state pension. Although even then, I don’t think they know they haven’t put enough NI contributions in the pot to get that full amount.

I’m planning to find an IFA to get some advice. Wondering if you’re planning for your future retirement? Or do you not worry about it?

Also, if anyone has any financial planning books that they’d recommend, I’d be grateful to hear.

I cannot see myself able to justify morally owning 2 properties with 1 for rental .

I’m in Australia, so different statutory schemes, but retirement is still the same, right?!?

My plans are to go into retirement with no debt and little outgoings, plus (hopefully) good savings and an income stream:

1. pay off (my big!) mortgage, especially at the moment whilst interest rates are low and more dollars are going to reducing the principal, rather than interest
2. reducing outgoings, and have no big debts. This means I have a separate savings account for replacing items around the house (air conditioning, car, hot water heater etc), so I set aside money each pay, and I won’t have go into debt to buy them
3. Emergency Fund of 3 months expenses in cash account (by retirement I would like it to be 6 or 12 months)
4. compulsory superannuation here means 9.5% of your pay goes automatically into a retirement account from your first day working, so that has been steadily building
5. my own additional contributions to super to increase to 15% of my pay instead of 9.5%
6. I invest in EFT share packages. I don’t have much here at the moment, as it has made more sense financially to pay extra into super and off my mortgage, but this will increase each year

That’s my plan. I review every year and made change to add an investment property, just to try and diversify and if one thing (say the share market) gets hit when I am in retirement, I have others to diversify the risk.

I now have to keep plugging away at it until retirement!

I’ll add, I don’t anticipate any Government help will be available at retirement, but could be surprised

4. compulsory superannuation here means 9.5% of your pay goes automatically into a retirement account from your first day working, so that has been steadily building

I think the above is brilliant

Out of interest, for anyone who's recently used an IFA, how did you find a good one? I wouldn't know where to start but gave often thought it would be interesting to get an overview from one...

@RandomLondoner

A think a rough rule of thumb is that you need to save a percentage of your earnings that equals the age you started saving. So 20% is right for someone who started saving at 20. If you start saving at 40 you'd need to save 40%.

On the other hand, I get the impression that many people save next-to-nothing and rely on whatever the benefits system gives them.

It's half your age as a percentage - that makes it a little more achievable! And it includes any employer's contribution. themoneyadvantage.co.uk/2018/07/17/how-much-should-you-be-saving-for-retirement-three-rules-of-thumb-analysed/

i was a postgrad student till 30 but have been working since then. however, although i am part of my employer's pension fund, it's actually impossible to figure out what i will get at the end seeing as they keep changing terms and conditions. from next year i will be paying in 11% and my employer 23%....but they keep changing the terms every few years so i actually have no idea whether am wasting lots of money on nothing. very annoying

Worked FT
Paid off mortgage early
Paid into work place pensions
Paid for some other investments, which have grown well over time

I want to retire before my state retirement age

I am on track & hope to retire no later than 60

I could retire earlier, so I may decide to do that

Depends what the future holds

Some of my friends are not in such good circumstances & some became furlough or unemployed during covid

I'm 33 now, only started paying in to a pension at 30. I wish I had started earlier but if I keep going the way I'm going I should have a decent pension at 60 - definitely don't intend on working past that age!

My husband is better organised than I am. He pays in 850 a month, his employer pays the bulk of this by doubling his contribution. He's been doing this since he was 26.

I hope to have more in our retirement plan other than just our pensions by the time we reach that age. We have some investments now that we will continue to expand on. We will hopefully upsize to a bigger house in the next 2 years and probably downsize again in retirement.

Not enough really. I now put a lot more into my pension than I did previously. We'll own our house outright in a few years and it's occurred to me that one retirement plan could be to convert our ground floor into a flat for us and convert upstairs to rent as a large duplex, which would bring in plenty, even on current rates of taxation. - and I have been a landlord before

I'm 38 and have £90k. Paying in £2030 a month. Online calculators look amazing but highly unlikely I'll be working in the city age 50 plus.

Quite worried

Good topic. I have four different pension pots and I am currently putting them all into one place. I have noticed that if you not do this the charges seem to be higher and over time, the quality of the fund management seems to decline for "dormant" policies. I cannot believe how much difference there is between final salary and defined contribution schemes. Having a final salary scheme (which I think now applies only to public sector employees), is a massive benefit and so far as I can see is generally worth hanging on to.

@squeezylizzy

i was a postgrad student till 30 but have been working since then. however, although i am part of my employer's pension fund, it's actually impossible to figure out what i will get at the end seeing as they keep changing terms and conditions. from next year i will be paying in 11% and my employer 23%....but they keep changing the terms every few years so i actually have no idea whether am wasting lots of money on nothing. very annoying

Is that defined benefit squeezylizzy ? Am guessing that if you did postgrad you might be a lecturer as the numbers look quite like those reported for USS. If so the contribution rates quoted above don't apply in the same way as they're not directly related to the benefit you build up.

I'm 34 with an OK but not great pension and have thought about job hunting within the civil service in a couple of years, in order to get 20 years in a final salary scheme.

My knowledge is very sketchy though and is based on my unfocused general googling in the past few months.

From what I understand, if you end on a salary of £40k and have 20 years service, this would be a pension of £10k a year. Can anyone with better knowledge than me say if that's right? Also I'm unclear if there is any additional lump sum if anyone could clarify please?

@Mia85 - precisely......i have no idea what the scheme will look like by the time i retire. what will definited benefit look like in 25years time

@squeezylizzy I'm not a pensions expert in any way but my understanding is that the benefits you've built up are fairly secure because they are guaranteed by all the employers in the scheme (i.e. the whole higher education sector). Even if the whole sector collapsed it would be presumably be protected by the Pension Protection Fund so you would get 90% back. There was a really interesting thread about this on the MSE pensions board recently here

So I would think you could feel reasonably secure on the existing benefits but I wouldn't count on the defined benefits part of the scheme remaining open in the future.

I just started taking this seriously aged 35 and paying in £12k p/y. I’m self employed so pay it from my own LTD co. My IFA said she usually gets very anxious 45-55 year olds in and rarely sees people in their 30s. Her advice to tell all my peer group was to take it seriously as early as you can and don’t bury your head.

@Mia85 thanks will check it out. most of mine - i think all of mine is DB hence my concern. but will look through the three on MSE

Sorry by existing benefits I mean the DB entitlements you've already built up. You should be able to get an accurate figure for what you already have on the scheme's website. I wouldn't underestimate how valuable this is (even if the scheme seems to be constantly getting more expensive for lower benefits)

I’m 38 and this is on my mind. I only started paying in to my pension maybe 5 years ago. Life got in the way and saving for a house was more important. I did work in the NHS (or do until the end of this month) and moving to a private company where I will be paying in total (with employer contributions) 21% into my pension, which is similar, albeit a little lower to what was going into the NHS pension. I will still contribute something to the NHS pension through bank work. How much does financial advice usually cost? I’ve always put it off as assumed it was for super high earners who had lots of money to manage.

This scares me too, looked at our pensions with 15% contributions on alright wages and retiring at 65 was 9k a year and 4K at 55 there was a lump sum bit it wasn’t over 100k. Definitely need to up our contributions in the future / look at some suggestions on here

@50RaiseTheBeastie

I am not sure civil service pension scheme is defined benefit to new comers anymore. I believe employers make a great 27% of earnings contribution ( NHS circa 20% employer contribution and teachers circa 23%) The latter 2 public sectors have moved to career average defined benefit. This should all be online to check 🙂.

Some good advice here. Your pension is important and the longer you ignore the harder it will be.

You can check online to see how much you will potentially get from state pension
www.gov.uk/check-state-pension

@Mia85

OP I had a similar concern a few years ago and have spent quite a bit of time planning. I definitely don't throw everything at the pension but I've got clear goals and a (flexible) plan of how to get there.

I'd start by getting a very clear understanding of your current position. Get your state pension forecast, track down any old pensions, make sure you understand exactly what you have in your current pension (as a PP says you don't need to get an annuity) and what the terms are.
Then I'd think about what you want in retirement - how much and when. I realise that without a crystal ball that's pretty difficult to do accurately but I find which and this helpful in getting a rough idea of what we might need.

Once you've done all that you can have a much better idea of where you are currently and then can plan to get to where you want to be. The MSE retirement board is really helpful as a starting point in thinking about that.

A few PP have suggested doing things like paying down mortgage or getting house deposits for your DC before pension. But the earlier you start on the pension the easier it will be to reach your goals because the tax relief and compound interest will get you there much quicker. I definitely don't throw everything at the pension but paying in alongside other things like tackling the mortgage (rather than waiting till I've achieved them) seems a much better strategy in my circumstances.

Thank you. Those links are really useful. I think based on this my husband and I will need between £25,000 to £30,000 in pension and savings to see us through between 60-67. It helps to have some figures to work towards. Definitely need to up pension contributions for both of us and increase our savings as soon as the mortgage is paid off.

@RandomLondoner

A think a rough rule of thumb is that you need to save a percentage of your earnings that equals the age you started saving. So 20% is right for someone who started saving at 20. If you start saving at 40 you'd need to save 40%.

On the other hand, I get the impression that many people save next-to-nothing and rely on whatever the benefits system gives them.

You need to halve it. So if you started at 20 you (including employer's contributions) need to be putting in 10%.

I started at 25 and it adds up to 20% of my gross pay, most of which is my contributions because my employer only matches my basic, not my overtime.