Pension worry…help

[Pensionworry1]

NC’d for this…basically I was a sahm and had a late career change 5 years ago. I’m 40…My current pension is at 33k…projected at 240k. I’m aware this is not enough
now I do have a separate extremely small pension elsewhere and by that I mean about 1.5k per year once retired.

it’s also worth noting that I’m still at the lower end of my career ladder right now and have no intention on stopping here. My wage increases about 4.5%annually, my company pays 10% and I pay 5% (I can’t pay any more than this as I have a mortgage etc) I usually pay some of my bonus into my pension so I might put it all in going forward (usually about 8%)…is there anything else I can do? I suppose that’s it really isn’t it? Should I be worried? I feel like I should be 😩

Open a stocks and shares ISA with a low fee platform such as Vanguard or Interactive Investor. Save what extra you can each month and try to build up the fund.
Watch "The Rebel Finance School" on You Tube for more information about the strategy.

You’re honestly doing a lot right already 👏
Regular contributions, solid employer input, income rising, all great foundations. At 40, there’s still loads of time to make a big difference.

Even small increases to contributions or reviewing where your pension’s invested can have a huge long-term impact. Try not to panic about the headline number, it’s the overall plan that matters most.

You’re on the right track, sometimes it just takes a bit of clarity to turn the worry into confidence 💪

It's all relative to your outgoings and what income you've become accustomed to. You say it was at 25k pa when you last checked. That would comfortably do me with no mortgage to pay. There are expenses that come with work that may be reduced when retired too such as travel costs. If you have DC or a large house, downsizing when you retire could bring in some extra money to add to the pot. You still have 27 years, I wouldn't be worried in your position.

"First world problems" are valid problems. No need to jeer at them.

Everyone at every age should be looking at how to finance their old age needs and wants. You can't recapture the value of time when it comes to investing.

Check what your pension is invested in. The default funds are typically not great in terms of returns. You should be able to choose your own fund. The Meaningul Money podcast is worth a listen. You need to make the money you have work harder.

But broadly if you're not going to retire for 20 plus years and aren't going to freak out about it moving up and down, then a passive global equity tracker is often a good choice. The key is not to look at the value too often as it can be unnerving with market movements, but over a long period it typically gives very good returns. E.g. lots of people were freaking out with the Trump tarrifs as they hit their pension values, but they've generally more than recovered since.

Agree. OP, MN is not the best place to post about things like this.

Try the MoneySavingExpert forums, generally really helpful bunch on there.

I personally wouldn’t be worried.
You tend to find as you get older you get more disposable income and also earn more. When you do start boosting pension then.
ive know people start a pension at 50.
I think you’ll be fine.

You can go on Pension Bee and use their calculators. Ultimately though you’re going to need to start socking away a substantial amount of money each month into your pension. I recommend getting advice from a pensions advisor. Someone who is trained, understands pensions and the options open to you. This is a regulated form of financial advice and the best option.

Almost guaranteed there will be no state pension at some point in the future, except for those with nothing else to live on..

In other words it will be means tested and only those with absolutely no other income will get the full amount. No one with a couple of decades to retirement should expect to receive it.

You have quite a while to go to boost it so I wouldn't be too concerned at this point just keep putting bonuses in and examining it every year with your statements.

As you hope to career progress and salary look at changing the 5% this especially helps with if you fall into the higher rate tax as actually what it costs is way less with the 40% tax relief.

Any pay rises I get I increase my pension contributions by that amount as I am already budgeted to the salary I was on a few years ago so I don't notice it. Its an easy way to boost.

I find this site useful. https://www.retirementlivingstandards.org.uk/

But you know that 240k will barely give me 25k per year WITH the state pension included! It’s not a pension of 240k per year!!

Not sure if anyone has mentioned this but I would highly recommend speaking to a financial advisor. I only found out recently that you should put your pensions into the highest risk you are comfortable with - yes even at 40. You still have 25 years of work and your pot could grow significantly more. As you move closer to retirement age, you reduce the risk. But at the moment things will go up ultimately in 20+ years. A financial advisor for pensions is worth their weight in gold seriously!

The only rager person on the thread is you. No trace of it from the OP. What chip do you have on your shoulder because it’s clearly weighing you down.

Look at what your pension is invested in and see if that is the best one for you.
There should be a selection of portfolios your pension provider offers and you should be able to pick between them. Typically they invest in something that earns them a bit more but not necessarily the best one for you so look at all the options.

If you have multiple pensions lying around from old workplaces, open a SIPP account (pension that you manage) and get them all transferred into that. Here you can pick what to invest in. You will need to do your research or get professional advice but something like an index tracker should be simple enough. (For example FTSE 500 ).

£25K a year is extremely generous. You know the State Pension is only around £12K (about £1K a month) which is what most people have.

There’s some great advice on here, and you’ll be ok OP because you are thinking about it now.

We are headed for a real shitshow though, where public sector workers with DB pensions will be rolling in it, those who have been investing in their pension for decades will be ok, and those who have been just getting by in their working will be impoverished in their retired years.

I’m in the middle category- have been really abstemious while we work so that we can build up a decent pension pot. It’s really hard to feel that we have ‘enough’ put by in a pension, even though we have a lot as it was a priority even in first jobs. The cost of living shooting up makes you feel like you can’t trust the money to hold out.

https://www.gov.uk/find-pension-contact-details
This might help you to start tracing them

OP I'm sorry there has been some hijacking of your thread by people who seem to want to rant about something else; but there has also been a lot of useful and constructive advice on here, so at least you can separate the wheat from the chaff 😉

I recommend creeping up your contributions each year. Even if it’s only 1% at time.

i would assume your contributions are from your gross pay (pay before tax is taken) so you should find that you don’t actually lose that much from your take home (net) pay as you’ll pay less tax on what is actually going into your bank account.

also look at what the risk level is that your investing in through your pension. You can change it to a higher risk level. At your age you’ve enough time to take a longer term view of things.

What do posters like you get out of this sort of thing? Is it some kind of skewed bitterness? Or just basic boredom? Someone asks for advice about their pension and you want to "shame" them in some way for not flaggelating themselves before you and society in general for not being in a position others might be in. Why? How absolutely pitiful.

@Greylakemiragewhat do you mean 33k DB is 33k a year? Do you understand that the public sector has phased out final salary to career average and you would need service to an equivalent of around a 700,000 nominal ‘pot’ to achieve that level of benefit per year?

Loads of good advice already. Another vote for Pete Matthews and his books and podcast. His first book Meaningful Money is probably the one you want.

You definitely need to be paying in more!

But good news is 40 is still quite young and with career switch and hopefully future promotions you could still boost your income a lot. So I wouldn’t worry about increasing contributions right now so much as resolving to our future pay rises etc into it.

FWIW I had ZERO pension at your age and just 10 or so years later have a pot of over £300k. I managed to move into a very good career, higher rate tax, but rather than increase our lifestyle we kept our modest standard of living and put a massive % of my earning into my pension.

Putting in your bonus is a great start. Also the person who suggested putting in any above cost of living pay rise - so if you get a promotion and your pay goes up 10%, increase your contributions by that amount rather than getting the take home.

because you get tax relief on the contributions this will put A LOT more into your pension than you would have had in your pocket anyway . For example if you tip into higher rate tax , you’ll get £1,000 in your pension, where you’d only get about £500-600 of that take home after tax and NI. So it really is a no brainer unless you need the cash.

also def check your state pension . You’ve got plenty of time to make up years there now you’r working, and you should get credit for any years you were SAHM if you were getting child benefit.

Hi OP, you are not going mad, you are completely right to take notice of this. So many people blindly buy into the trope that we will all have nothing in retirement so just do nothing about it. The main thing is you have looked into it now and can start making choices based on what you need in future. I know some have mentioned Martin Lewis. I would also suggest looking up Rebel Finance School. It’s a course in YouTube and really helps you to understand your pension, investing and how to prepare for retirement. The couple who run it (for free) do a great job of explaining the basics and beyond. A general rule of thumb is that your pension pot, at retirement, should be 25 times your annual expenses. Then you will never run out. I’m simplifying, but that’s the basic premise. Bear in mind, no one really buys an annuity anymore, most just drawn down what they need and leave the rest invested.
Good luck!

Scanning for a sensible response. Finally!

Pensions are relative. I don’t care what anyone else thinks is decent or not. £25k is not enough for me!

So it depends on the life style you want in your retirement years. This would not be enough for me, I am aiming for a pension that is double this, along with zero mortgage and debt.I want to travel, I want to visit my kids if they move away from home and I want to live part of my time oversees. All you can do is try and work out your projections and save as much possible, to ensure decent pension and access to a lump sum. Save, save & save some more