Parents think I don’t have enough money in pension

[Helena1985h]

Talking to my mum and dad about pension today. I’m 35 FYI.

They asked me how much I’d put away as were saying they wished they’d focused more on their pensions when young. I logged in and had a look and I have just under 55k.

They seemed to think that was way too small, and they’ve properly freaked me out TBH. Is that really not a lot at my age? I sort of assumed I was doing okay!

@united4ever

Lump sum is the wrong term. So say you have 400k pot and decide to live off 4% so 16k a year (plus state pension). When you die the 400k could be more or less still 400k. This 400k can be passed to kids tax free?

Free of inheritance tax, yes.

However:

"As of April 2015, money left in pensions can be passed on to anyone you like – they do not have to be your spouse or a financial dependant. If you die before your 75th birthday, that money can be passed tax free and if you die after turning 75, income tax only becomes payable when your beneficiaries start to withdraw the money."

www.ii.co.uk/analysis-commentary/why-you-need-will-your-pension-ii512914

Thanks Van Gogh.

That is great. A massive plus over an annuity if you have kids. I can see why they are popular.

@Cupcakeschocolate

Does anyone have a private pension who can point me in the right direction.... After reading this I must be clueless. I have one with work. Bit it's not very good. I don't know how to add to it. So must speak to them about it. Or is it better to have a savings account or isa. I'm 29 and it has really opened my eyes. That sounds stupid I know. But I've been concentrating on my kids and didn't think too much about it! Feeling quite a fool now

Noone can tell you what is best for you, there are so many factors.

I've always taken a balanced approach - put some in savings (ISA) as cash, some in stocks, some in pension and use some to pay off mortgage.

First consideration is always to pay off debt and build an emergency fund. And ensure you are maximising employer contributions to your pension (because they might pay more if you do - mine pays 10% if I pay 2% and if I increase that to 3% they pay 15%. I actually pay 35%, so I get 50% of my salary in my pension).

@united4ever

Thanks Van Gogh.

That is great. A massive plus over an annuity if you have kids. I can see why they are popular.

Exactly. I know several people who have both DB and DC schemes and are planning to just live on the DB scheme and "save" the DC scheme for their kids' inheritance.

@Cupcakeschocolate

I'd be looking at opening a vanguard sipp.
Sipp = self, invested, personal pension.

They have life stragety funds depending on age which buy a little of everything but the have more or less bonds depending on your risk.

I've got 100% equity life stragety funds.

When you open up with vanguard a bit like John Lewis partners you also own vanguard. Very low fees, Google jack boggle.

He set up vanguard.

When you add to your sipp the government also tops it up.

However i would simultaneously also set up at socks and shares isa because there are penalties on taking money out of a sipp.

@Imdreamingofapeacefulxmas

Many index funds are a little of everything or ones that replicate or follow the ftse 100 or s and p (us stock market) are self cleaning.

It's better than buying individual stocks.
Eg marks and Spencer fails it falls out of the fste and is replaced by anther company.

It's self cleaning and in the US only a couple of companies in index now where there 100 years ago.

Buying a little of everything doesn't give instant huge returns but it's steady and fairly stable.
It would take something like an asteroid hitting the world to wipe out fste or s and p 500.
You buy into innovation and creation, through s and p I have exposure to apple, tesla, alphabet and hundreds of other great companies.
But if one fails... I don't loose money it simply drops out.

Simple path to wealth jl Collins. He suggests just investing in one vanguard fund, the same fund Warren buffet has told his wife to put all their money in, if he dies!

It's a huge fund that has a little of everything.
My investments dropped considerably during covid but that would only be an issue if I had to draw on them.

Which is why we all need cash reserves as well or some bonds to balance it out.

They have been hovering around 25% since its been opened.

S&P (Standard and Poor) isn't the US stock market. It's a benchmark and fund provider. I have a couple of their funds.

The US stock market is NYSE or NASDAQ.

Van gogh is that Scottish mortgage?

Mine is up that much as well.

It's my gamble fund.
Otherwise I'm invested in index funds.

S and p is tracking same stocks.

@Imdreamingofapeacefulxmas

Van gogh is that Scottish mortgage?

Mine is up that much as well.

It's my gamble fund.
Otherwise I'm invested in index funds.

Yes!

I didn't take it as a "gamble", at the time it was a good addition to my portfolio. It holds a lot of tech stock, and tech is volatile, subject to trends etc, so I don't really want to hold them individually. Also, many are US based and I don't want US stocks due to withholding tax.

So it was a great addition to my types of stocks. Then Covid hit. And the fund holds Facebook, Amazon, Zoom, Tesla .......and Tesla itself is partly influenced by Bitcoin ......and all of that stuff took off during the pandemic. It was a total fluke for me!

@Imdreamingofapeacefulxmas

S and p is tracking same stocks.

Loads of funds track stock market stocks. But the way you worded it you were saying S&P is the US stock exchange, it's not.

I am 38 and I have a defined benefit scheme from one job that will pay out 9k a year at 65 and then goes up to 13k at state pension age. From new job - I have 15k that took 3 years to accrue . If I work for another 25 years that will have approx 135k in it - enough for maybe 3/4 k per year?

I am not too worried. We have a rental property and my husband has a good military pension of approx 20k per year

My dad reckons I should try and put away 7k per year into pension which would be 20% of salary so a lot!

He's not far off. DH works in a related area and he would always recommend half your age as a percentage, rounded up to the nearest whole number. So at 35 he would say you need to be putting in 18%.

I'm 36 and I put 18% in mine, I will add another 2% of AVCs next year.

It's a gamble for me compared to my safe index trackers.

Even though I did my due diligence on it before investing.

Lots of people are in for a hella rude awakening. Have you not been seeing the news lately?

Retirement age going up to 67 and even then they already making noises that it needs to go up more.

Not to mention the recent news putting feelers out about possibly have retirement ages by life expentancy based on regions, where regions with lower life expentancy those people get their state pension earlier than those in regions where life expentacy is higher have to wait even longer. This isn't decided but they are thinking about it.

A very long time ago there was something I read from a credible medai source that talked about whether state pensions would even be around and that the government is going to have trouble funding them around 2035.

So since then I've been paing down my mortage asap and ensuring im maximising my pension contributions on the basis I have enough to have a good retirement without factoring in the state pension.

And young people today really need to start thinking like that. I'm surem any will think there is no way they would get rid of the state pension - well you don't know and they are already moving goalposts such that most won't even make it to get it.

Scottish mortgage off loaded it's tesla didn't it?

Retirement age going up to 67 and even then they already making noises that it needs to go up more.

The last news I read said it shouldn't go up as the life expectancy gains predicted are not happening.

@Imdreamingofapeacefulxmas

Scottish mortgage off loaded it's tesla didn't it?

It might have done now but it definitely contributed to the rise last year.

Lots of people are in for a hella rude awakening. Have you not been seeing the news lately?

Retirement age going up to 67 and even then they already making noises that it needs to go up more.

Most of us aren't good at planning, and recent collective decisions really haven't helped. For example as a country I think we took the view that covid policy just had cost whatever money it needed - discussing the financial consequences was somehow immoral, and in poor taste. That doesn't mean there aren't financial consequences. And most of us will be paying them one way or another for the rest of our lives.

Similar for the long-term financial damage of brexit.

@DeepaBeesKit

My dad reckons I should try and put away 7k per year into pension which would be 20% of salary so a lot!

He's not far off. DH works in a related area and he would always recommend half your age as a percentage, rounded up to the nearest whole number. So at 35 he would say you need to be putting in 18%.

I'm 36 and I put 18% in mine, I will add another 2% of AVCs next year.

While it's a good "rule of thumb", the half your age advice relates to when you start paying into a pension, not forever.

If you start at twenty, then ten. But it can stay ten forever, it doesn't need to go up to fifteen when you're thirty, and twenty five when you're fifty.

But most people put in far less so it's a good benchmark.

I never understand why people say "if you want x proportion of your salary" because, to me, what I get in retirement is totally separate to my salary while I'm working. I'd never expect, or need, even 50% of my current salary in retirement.

I think you should decide your financial needs in retirement based on what you want to do, not on how much you earn now. Though appreciate if you earn £100k now and only save enough for a £20k pension it's a big drop.

I earn c£80k, but I'm only working towards having a pension of c£20k plus state pension later. It seems enough to me.

My plan is that when I've got enough in the pension for that to be my drawdown, I'll stop doing such a boring high paid job and do something more useful (but probably terribly badly paid) and not pay into the pension any more.

@AuntyBumBum

Doesn't it totally depend on how much income you want to have in retirement? Assuming you retire at 65 and want an RPI indexed-linked income (prudent unless you intend to die soon after retiring) then you need to save £500k to get an income of £13k pa according to this: www.hl.co.uk/retirement/annuities/best-buy-rates

But annuity rates are currently very low, and who knows where we'll be in 30 years.

There's no way I'd buy an annuity for 500k that paid me 13k a year. Even if you just drew down 13k a year and the rest generated no further returns (unlikely) it would last nearly 40 years.

Sorry if someone else has said this - I got to this point only before posting.

@Cupcakeschocolate it depends how much you earn and how proficient you feel investing yourself. I'd probably avoid a Lifetime ISA, but especially if you earn enough to pay more than basic rate tax. Because if you pay the higher rate of tax, you can get a 20% automatic top up from the government, and then claim another 20% back from them also. So a 40% return, before you even take into account any investment returns.

If you're comfortable investing, you can pick your own funds and manage these - this works out cheaper for fees but you do need to do a good bit of work on balancing your portfolio and monitoring it etc. Or if you're not comfortable, I'd really recommend something like Nutmeg. You put your money in, set a risk level (if you're young you'll want a high risk level) and they manage it all for you. It does cost a bit more with a fee of around 0.75% I think. I do a mixture of these but they've both made decent returns

.

The recommendation is you put in half the amount of the age you started your pension. So if you started at 24 you put in 12%.

@bestbl

I'm 40 and have zero

I'm 41 40 too and I have just under £10 k in a poorly performing fund that seems to go down each year, it's pretty pointless when you can't afford to pay in. My debt is massive and this is many average peoples situation. I am a contract employee, but not that highly paid.