@Whydoiwearsomuchleopardprint
2k per month! Absolutely ridiculous, stop it now! Even well off/rich people wouldn’t be doing that, if they had that much spare cash it would be invested properly! With 2k spare each month you would be investing that appropriately and hopefully being advised by your financial advisor!
Why on Earth do you think putting it into a pension is not investing it "properly"?
For starters, op said she's putting in £1200 and her employer is putting in £800. That means that she is getting 66% returns every month through employer contributions alone.
Furthermore she is getting tax relief from the government at her marginal rate.
Then (assuming DC) she is ALSO getting investment returns on top.
At the same time, workplace pensions are subject to a charges cap, which mean they're some of the cheapest investment options possible.
They're also subject to really stringent governance conditions to ensure money is managed well.
Any IFA worth her (or his) salt would suggest that maxing pension contributions is an excellent use of money and she's unlikely to get returns elsewhere that would make up for even the employer contributions.
- more generally these thread responses are hateful and bonkers. We hear about people paying massive childcare costs and no one blinks. Because childcare is seen as essential. But pension saving is essential too, and it is deeply worrying that it's somehow seen as a luxury.
Yes, many people will struggle to save what OP does, but they also won't NEED to. A general rule of thumb is that you probably want a pot big enough to give you an income worth 50% of your salary to feel comfortable in retirement (although opinions are shifting towards 66%).
That means op needs a pot that will generate a £30k - £45k income - which she is on track to do.
Someone on the National Living Wage will earn approx £18k per year, so to replace 50% of their income the state pension at £9k per year is enough. Once you factor in benefits such as warm homes, winter fuel, bus pass, pensions credit and so on, many will actually take home more than they used to per month. Coupled with fewer costs around commuting etc.
There is a huge crisis around women in retirement, and it's largely facing middle earners who are not saving enough (or anything) to top up their retirement income. Many will suddenly drop from earning £50k a year to having (say) £12k and will struggle massively.
People
should be saving more. And one thing to consider is as soon as childcare costs drop, funnelling the extra into a pension. Likewise when mortgages are paid off, then paying that into a pension.
We think nothing of people spending over a grand a month on mortgages because having somewhere to live is essential. Many people stretch themselves to buy a house at the absolute top of their budget (which we also understand). Many people pay childcare which is also essential and understood and costs thousands. The thing is a pension is also essential. Having an income for possibly 35 years in retirement is important. And saving for it should be encouraged as much as possible.
Cumulative interest is powerful. As PP said, if you start in your 20s and save 10% of your income, you should be fine by the end. If you start in your 30s, you need to save 20%, if your 40s it raises even more sharply. Men typically retire with substantially more than women. Education and encouraging people to save early, and seeing pensions as necessary not luxury is critical!