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.

I only started when I was 32. Yes it's long enough. But it's worth taking an interest in what it's invested in. You can't always move it if you're paying into a work pension. But if you leave the job then you can move it. I switched to a lower fee investment with more equity - more volatile but potential for greater returns and seeing as I don't need it for 20 years seemed good to me.

You can use online calculators like Aviva which is a good one and play around with payments and interest rates etc.

Of course you have to pay tax on income.

I take the projected amount saved and then calculate 4% as the annual amount I would withdraw (as wouldn't affect capital) and live off as a rough idea.

Vanguard is very reputable and has plenty of educational material on its site.

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/teaching-your-children-about-the-value-of-money

I have an ISA account i can start paying into.

@TheHerboriste we both work for ourselves in our own company. I can't be angry with him as we work together and I only in the last year set up a pension for myself. He's not educated in finances and came over to the UK many years ago. It's not something you automatically know about.

I asked him, he thinks he has a smal one from when he worked for the NHS when. He first came to the UK. So he will find out. After that we have both been self employed. After paying our staff and everything else involved we have enough to live on. O my now are we In a position to start saving again

If you must know we had very good savings and where just about to buy a house when covid hit. We had to use our savings in the end to keep our business afloat. Which we did and it survived and after bounce back loans and other loans to keep people In employment.... we are starting to come out the other end!

So no, it's not a deal breaker. Especially when you don't actually know the kitty gritty behind our financial situation.

Missed your second post @TheHerboriste thank you for the resource.

Op it's worth opening a LISA if you are under 40. Max out your employer pensions contributions first. Then a LISA - government will add 25% and then its also tax free when you withdraw. Its the only one that is tax free at both ends!

@NCThisOne thank you!

I started paying into my pension aged 34 and have paid in between £900-£1500 a month since then (topped up by employer contributions), increasing as my salary rose. I’m now 49 and only have £300k in the pot, which is way off what I’ll need for a comfortable retirement. I’m looking at significantly increasing contributions over the next 18 years

@NCThisOne so good news. I just checked my email as your post reminded me I set up a LISA a year ago, I think I paid into it a couple of times, changed phones and forgot about it! So I will get back into that!

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!

Because compound interest on the tax relief means the 20% the government will grow considerably over the years until you start taking it out.

Plus you can take 25% of your pension cash free.

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

OP - You're 33 - plenty of time to grow wealth! Stop talking like you're 90!

It's never too late to start now. Everyone's money and retirement planning journey is different.

You can probably easily work out how much (income) you need to fund the lifestyle you want in retirement factoring in your circumstances (e.g. rent to pay if you're still renting).

What I'd do in your situation is to project how much you'll have in your pension pot when you retire and see how much you could potentially take as income from that pot.

There are some calculators out there to do this kind of stuff, but I'd try https://ukpensionbot.com (e.g. ask it "Calculate how much my pension pot could be worth when I retire"). You can ask it to work out different scenarios, e.g. increasing your contributions, using different investment growth and inflation assumptions.

I'd also suggest that you review your investment options with your pension provider... e.g. high annual charges can significantly eat into your growth.

I'd also add that you only pay tax on the taxable income above your personal allowance too

You will have earned interest on the governments contribution.

Where is your pension? Are you paying into a SIPP? I would look at a compound interest calculator to try and work out what your pension is likely to be worth by the time you retire.

As others have asked, how on earth does your husband not have a pension and why has this only just come to light now? He’s going to have to pay into significantly more than £500 per month to make up for those lost decades.

Boring I know, but the rules are that the contributions you make earliest are the most valuable. Stocks and shares weather inflation better than cash savings as long as you don't try to do anything cleverer than matching the market. If you have a lump sum to invest and can raise a mortgage, commercial (not residential) property is worth considering.

You’re earning interest on the top-up that the government gives you for the X years that you’re saving for. So even though you’re taxed on the money you withdraw, you’re still better off overall.

The one thing I would say is look into the services of an independent financial advisor/manager, one who gets paid at a %age of how much your savings are worth.

Often a bank will only sell you their products and services, which often come with high management or transaction fees.

My advisor charges me a flat 0.85% of everything I have saved with them. They are incentivized to maximize my savings. The more I have, the more they make. They are always rebalancing my assets, buying and selling shares based on their knowledge - and the costs for all of this are covered. Also they know how best to save in which tax-efficient vehicles and provide other tax advice.

33 is not too late. Good luck!