Pensions. How much should we realistically need?

[Reallyyyyyy]

I'm 33 and only just started saving into a private pension with my bank (I'm self employed and have been for the last 12 years)

I'm aware I'm very behind with saving. At the moment i out in '120 a month and get the tax back which is £30 a month. So £150 a month.

I am hoping to up it to £300 a month as my contribution by the end of the year as I will have finished paying off some debts.

Do you think this would be enough plus government pension on top?

I wish they taught these things when we where at school. I was a bit naive!

I live in the south east. So living costs are high. Might potentially move more north before retiring age if need be. But would rather not.

Dh is 49 and I have just found out he doesn't have any pension. What so ever. So we are sorting that out this weekend. By the end of the ywar he can pay a higher amount monthly. Probably £500 a month.

I think we have majorly cocked up. But also just didn't have the spare funds to do so before hand!

We rent and don't have a mortgage either. So no assets to use.

https://www.retirementlivingstandards.org.uk/

This will.give a good starting point.

Thank you @Leafy74

At least i know to educate my kids on this when they start working!

General rule is 25 x your anticipated outgoings at retirement, this allows for 4% drawdown per year.

Thank you @Mum2Fergus

Oh gosh so I'm looking at needing £800k if we carry on and that's with halving the rent for a smaller place!

I wander if it would be wiser to work harder at getting a small mortgage instead of ploughing money going forward into a pension?

OP take a deep breath - you have plenty of time to build wealth, you just have to do it properly.

Be back in a bit!

Have you looked at Martin Lewis advice?
https://www.moneysavingexpert.com/savings/discount-pensions/
For a comfortable retirement, he advises:
Take the age you start a pension and halve it. Then aim to put this % of your pre-tax salary into your pension each year until you retire.

Obviously lots of people won't be able to do that, but putting a few grand a year towards it sounds like a very good start. Only you two know whether a mortgage is doable; I'd try to seek some financial advice on this. Either way it sounds as if you're now looking to put away much more money each month for the future, which will be positive whether you end up putting it into pension or putting it into saving for a mortgage.

Slightly off the point but the - ‘I wish they taught this in schools.’ Things drives me nuts. To students at school retirement feels totally unreal they would not take any notice. There are far more pressing things to engage with.

It depends on so many things, main one though, do you rent or own?

If you own your home then pension isn’t as much of a disaster because worst case scenario you won’t have rent to pay in retirement if mortgage paid off, or you could sell and downsize to free up some cash as well as obviously still not having any rent to pay.

Home owning is the other way to plan for retirement really as a way of minimising outgoings, whereas rent you’re paying monthly until the day you die.

The best time to start a pension was 20 years ago but the second best time is now!

You have time to improve things. Look at Martin Lewis and also Meaningful Money. Good luck.

so you can work out how much you will have saved by the time you retire - hqk much you save times the number of months left ( you may save more later but this is a start)

DH 500 a month and 18 years is 108k

for a first approximation assume that the gains in interest and the effect of inflation balance - not true but a safe starting point

then use a rule of thumb and assume you can take 4% a year - so if you have 108k saved you will get just over 4k a year

then add that to the state pension to see what you will have a year - about 16k ( check that you are fully paid up )

pop it into a salary calculator to see what that would be monthly after tax ( assuming it’s more than the allowance) £1250 a month for DH

then compare that to what you spend now - do you rent or will you have paid off mortgage? Do you have huge commuting costs ?

yes compound interest on pensions often helps the pot grow faster than inflation and other things but I think this would give you a reasonable feel

Bear in mind your husband is going to struggle to get a mortgage the older he gets, particularly with no projected retirement income. You need to seek proper financial advice really.

Why are you pension saving with your bank? Have you tried vanguard or other SIPP providers?

Does this make sense - it doesn’t seem to, to me, as the later you’d plan to retire the bigger percentage it says to put away, surely the opposite would be true? Am I being thick?

Oh sorry - start as in start saving into one, not plan to start drawing down on one. Got it! 😅

I think it possibly would be.

Still insanely unrealistic given average wages and COL, tbh.

It means the age you start paying into the pension, not the age you start taking a pension

Have a look at Rebel Finance School on FB/YouTube…Alan and Katy are incredible and their course is totally free…real game change for me when I discovered them a few years ago. I retire at the end of May…I’ll be 57 - it’s totally doable if you’re committed to it.

It's not a later retirement age...it's more the later you start saving into a pension.

So if you start at 20 you can put 10% until retirement, because that money has a long time to grow.

If you start at 50, you need to put 25% in until you retire because you were late starting and have catching up to do.

Thank you everyone. I will take a look at everything suggested!

We rent. Dh is older, yes. But i could get a mortgage with just my name. He would be fine with that as we talked about it in the past. We have 4 kids together and youngest is 6 so still a lot of expenses on child rearing ahead. I'm not unhappy about renting. A mortgage isn't guaranteed anyway.

But I will get some.advice and see what would be better for us.

Thanks again everyone.

I actually thought I was going to get my head bitten off for not being better prepared! So thank you for being kind!

Have a look at Rebel Finance School on FB/YouTube…Alan and Katy are incredible and their course is totally free…real game change for me when I discovered them a few years ago.

@Mum2Fergus said what I was coming back to say! Follow Rebel Finance School on FB - lots of very smart people to answer any questions you might have.

Then watch their new course on You Tube starting in June. They break everything down and make finance easy to follow. I wonder if your bank is the best place to have your pension. What fees are they charging? What are they investing your money in?

Also, you could buy Meaningful Money Retirement Guide by Pete Matthews - his podcasts are great.

And your husband could get a mortgage with you at 49!

All the best.

Are you a basic rate taxpayer? If so then a LISA could be even better than a pension. You get a bonus when you pay in and, unlike a pension, there's no tax to pay when you draw it.

You can use it to buy a home or wait till you turn 60 and use for retirement.

Thank you again!

Hang on, you have to pay tax when you withdraw your pension? Well I didn't know that! What's the point in the government adding a contribution which I thought was effectively a tax rebate of they will take it back again!

Anyways, I am going to look into the sources given! Thank you.

Even if I can't do a good job of it for myself, just will be better equipped to educated the DC!

How did he get to 49 with no pension?!
That would come close to being a dealbreaker for me.