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!

@CrimbleCrumble1

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%.

I thought it was your age % each year .. so at 40, 40% salary ?

No it isn’t although obviously you could do that.

How do people know how much pension they've paid in and what they'll get out?

I work for the NHS and pay the default amount each month, also have a student loan.

@polkadotty2

How do people know how much pension they've paid in and what they'll get out?

I work for the NHS and pay the default amount each month, also have a student loan.

With that sort of pension it doesn't matter how much you've paid in, it's a defined benefit.

You know how much you'll get by reading the annual statements they have to send you by law, though it's probably all online

@Imdreamingofapeacefulxmas what fund is that if you don't mind?

@polkadotty2

How do people know how much pension they've paid in and what they'll get out?

I work for the NHS and pay the default amount each month, also have a student loan.

Have you read your statements? Plenty of us can help you to understand them, but would help to know what level to go in at - do you understand that you have a Defined Benefit scheme and what the difference between that and a Defined Contribution scheme is?

Which one, I'm mostly in index trackers.

The one you said with Vanguard or do you have a few with them?

I don't really understand pensions.

For example, say my (non-pension) investments are £500,000 when I retire at 67, couldn't I just split the money between my likely years left (say 25 years) which would be £20,000 per year plus whatever income the investments accrue before I've spent them.

Why can't you just do that? Why do you need a massive pension pot that pays out a crap amount each year?

@Animood

I don't really understand pensions.

For example, say my (non-pension) investments are £500,000 when I retire at 67, couldn't I just split the money between my likely years left (say 25 years) which would be £20,000 per year plus whatever income the investments accrue before I've spent them.

Why can't you just do that? Why do you need a massive pension pot that pays out a crap amount each year?

Of course you can. It's just that there is tax relief on paying into a pension which is valuable.

I would currently be a higher rate tax payer, but I'm not because I fund my pension and bring my income down under the higher rate band, so I get a 40% boost to all the money I put in.

I won't be a higher rate tax payer as a pensioner. So, say I have £100k, I can take £25k tax free (25%) and then with the rest pay myself and keep under the higher rate band, or even keep out of tax at all for a few years by only paying under the personal allowance.

Your £500k you've already, presumably, paid tax on, so while there's no tax drawing and spending it, it's at least 20% less than anything I have saved, not taking into account the tax free lump sum.

But a mixed approach is best, I am aiming for £400k in pensions, plus my small DB scheme, and £100k in non pension investments, plus cash emergency fund.

And pensions don't "pay out a crap amount", you can draw from them in exactly the same way you have said you intend to do with your investment, if you want to.

Pension is just a wrapper for an investment, with specific tax treatment and some other laws around it. ISA is another wrapper for investment with different tax rules and other laws around it. You could have the same actual investments in both - and I do.

@Animood

I don't really understand pensions.

For example, say my (non-pension) investments are £500,000 when I retire at 67, couldn't I just split the money between my likely years left (say 25 years) which would be £20,000 per year plus whatever income the investments accrue before I've spent them.

Why can't you just do that? Why do you need a massive pension pot that pays out a crap amount each year?

You can, but two main observations.

1. Your £500k pot would be more like £600k if you'd saved it via a pension thanks to tax relief. And probably much more still if you had an employer who would chip in. You could still draw the fund in the way that you describe.

2. Predicting how long you think you'll live is a separate issue, and a complete gamble. If you guess 25 years but you live 40 years you'll have problems. And inflation doesn't help. Between 1980 and 2020 if you'd started drawing £13k from your pot you'd have needed to finish up drawing £57k to achieve the same purchasing power at the end due to inflation. Pension pots can be used to buy an annuity which (for a price) transfers that risk to someone else.

Dundee

Yes I have quite a few.

I have their life stragety 100% and also in my sipp I have 80/10 but in going to change that to 100%.
I have their us stock market trackers.
All fste 100.
Japanese one

I have too many and I'm going to prune them down, I have some individual stocks I want to sell and stream line it all, for myself and dc.
There is little point owning individual if you own part of the index they are in anyway.

Anything I wanted to invest in I always Google it, check it agaisnt other websites like morning star, trust...

See what they rate it like

I have the 60%.

Obviously there isn't an 80/10!

Thanks!

i already have the 80 life strategy fund

I've also got their sustainable fund and the S&P 500. Some others in another SIPP, I'll check....

I'm gradually moving into more ethical/sustainable funds. But some are just directly with my broker, AJ Bell.

I've got the 60% and the 80%, not sure why :)

Both accumulating.

I will check out the others