This is a terrible pension position isn’t it?!

[haengry]

I’m 38. I just got a letter from my private pension with the annual update and it says my pension value is currently 28k. For context I have been paying in since I was 25 and my employer makes a contribution too. We each pay it 4% a year so 8% in total. My starting salary was 30k and I’ve been on 60k the last two years and then in the fifties a few years prior to that. Surely it should be more? Does that literally mean I have 28k to my name if I was to retire tomorrow?!

As you started at 25 then ideally you/your employer need to try and contribute 12.5% of your salary.

I had one with my first employer that I only paid into for a couple of years before I left, and I was on a very low salary at that time.

About 5 years ago, they wrote to me asking if I still wanted to keep it open and I'd receive £16 (sixteen) a year from my retirement age in five years time, or would I take a lump sum payment of £5500 now (5 years ago). Guess which option I took? 😀

The rough rule is to put away half of your age as a %. So if you are 38 you should be paying 19% (you+employer) into your pension. I don't think you've been paying enough.

Im 37 and have no pension at all- I've never earned enough be able to lose the salary and employers contributions are pants. I've got savings and will have no mortgage but to be honest I can't be arsed worrying about it, god knows what state the world will be in in thirty years!

That sounds too low?

1. Can you find out what contributions you made to the fund?
2. Is there another fund somewhere?

Stockmarket plummeted at start of covid, but has recovered now, so you should have seen growth of about 10% over the last year, but that depends on how you invested.

It could be a good idea to spend some time looking into your pensions and finding out what is going on. However, also don't be discouraged - with the right funds and advice you can go quite quickly from a bad position to a good one and you still have youth on your side.

At 41 I had approximately 80k in funds. 7 years later I have over £300k. OK, more money has been paid in, but much of that is growth.

@Itsallabouttea if you can afford to have savings and no mortgage you can afford to pay into a pension. Missing out on the employer contributions is like saying no to free money!

Indexation is an increasing amount that you pay towards your pension depending on stuff like inflation.

Mine was not applied when it was taken over 12 years previous (can't remember who from) We have paid an additional amount to cover this short fall but that was 18 months ago and it's still wrong!
If you look on your pension online you will be able to see if the indexation was applied since it was taken over.

We have complained to the ombudsman about it but they are pretty useless too or at least take ages to investigate and I have come to the conclusion that Aviva know this hence the inaction.

We have actually written to the CEO but this was three weeks ago and still nothing has been done.

We are about to go to watchdog about it and suspect that Aviva are going to be in deep deep shit over it as lots of other people are going to be coming up against the issues we have had with them which is going to cost them an absolute fortune to put right!

The rough rule is to put away half of your age as a %. So if you are 38 you should be paying 19% (you+employer) into your pension. I don't think you've been paying enough.

I thought it was the age you start saving for a pension. So my DS started at 21 and he’s paying 11% etc. I don’t think a 66 year old should be saving 33% of their income.

@NewYear24 yes you are right. I forgot she had been paying some in. I over simplified it!

You mention Scottish Widows - I reckon that you have another pot somewhere with them and that your employer switched to Aviva. So, don't be discouraged.

But find out now, whilst you can plan for a retirement! And check fees - there are some historic pensions which charged appalling fees, but I think that these stopped existing by the time you started paying in.

I'm a similar age and salary OP and don't have a huge fund, mines around £50k at last check, but it lost £10k in one year a couple of years ago, could that have happened to you?

Your contributions sound low. I pay 9% of my salary, and the employer pays 18%. I don't look at the amount I "lose" each month, just the bottom line once all deductions have been made. I've only had my current job/pension for 17 years, but for a previous private pension my employer match funded my contributions. Will your employer match your payments if you increase yours?

I have a 10k pot from just two years work at a £35 k salary 15 years ago, so that sounds v low. I think you should do some more digging.

Public sector work is good if you want to boost your pension.

I dont think scottish widows tends to perform well on pensions. My work one was predicting £5k if i carried on contributing the same. So low i havent even bothered looking at it.

You can also put in sipps. And get the tax added.

But more in work one maybe better if they match it??

Or theres LISAs. Up to 4k and get 25% extra added. However can only start before 40 and pay in to 50.
downside of LISA is it will count as saving for UC so could affect if you lose a job............

my shares have all dropped since i bought them - however i invested in ones with high dividend %.

you can pay into pension lower of 40k or full earnings. and get tax added. So you could build up pretty quickly.

Oh, that’s good to know. I haven’t heard that before.

Indexation refers to pensions in payment.

This is different to the OP's scenario.

The OP's position is that her pot isn't big enough.

OP, you need to increase your contributions. And also track down previous pensions. It sounds like you have another pot with Scottish Widows.

This isn't disastrous, you have time to turn it around.

I suspect that your employer transferred from a different pension fund at some point previously and therefore you have another one elsewhere.

Shouldn't your employers be paying 8 per cent?

My son just got a permanent job after a temporary contract there first. He will be paying 4 % the employers 8%. It is with Fidelity. I think they are good as I used to have them as part of a private pension which did quite well.

Mine is lower than that sadly 😔 I have a much lower salary than you, but I upped my pension contributions by 1% with every annual pay rise I've received over the last few years and now pay 12% (+ employer contribution). It is unlikely you can go from 4% to 50% overnight, but try upping to 6% this year, 7% next year an so on. Good luck 🍀

My guess is they changed provider and you have another find somewhere as that seems very low.

I’ve been working 8 years and had similar salary progression to you although now on £75k and have about £90k in mine.

I think main issue is your contributions are really rather low.

You should be paying in half your age.
ie 20%+
I am your age and pay in 30% of my gross or more! I am still concerned mine is low as I have always had shit private pension schemes defined contributions not a defined benefit. (My employer contributions have been between 3!!! And 8 %)

Agree with pp that Aviva are a bit shit though so your yield might be poor too...but that's a secondary issue.

I'd look at setting up a SIPP (vanguard AJ Bell etc all do them.... Takes 30 mins to set one up) and making private contributions

Have you been working part time or had unpaid maternity leave?

A few things to consider before you even start thinking about how it has been invested.

1. have you always been with the same employer? You mention a Scottish widows one too so could that be with a different employer? Your contributions won't go to the same pot with different employers.
2. as a higher rate tax payer you won't automatically get the higher rate tax relief that you qualify for. If you pay your contributions by a method called salary sacrifice (your payroll can confirm this) then you will be getting the relief. If you don't do salary sacrifice then you need to claim the relief via a tax return and I think you can claim up to 5 years back.
3. ask your provider for your full contribution history to make sure the correct contributions have been paid.
4. once you've got everything sorted and know where all your pension money is you can start looking at where it is invested.

Also, people keep commenting on certain providers not performing well but it doesn't work like that. There will be a range of funds you can invest, some in house with your provider and some external. Your performance will depend on where it is invested so people can't just say Aviva or scottish widows perform badly, it is nowhere near as simple as that.

Thanks everyone!

im never going to be able to pay in 20%, single parent to a young child. I am hoping inheritances will pay off my mortgage and if not I will be very poor!

I will check Scottish windows as suggested, thank you