To be worried it’s just not possible to save for a decent pension if you’re on a normal salary, have a mortgage and kids/DC?

[Onegingerhead]

Seeing all these pension threads lately has got me properly worried. I’m mid-late 40s, been paying into a workplace pension for about 15 years and my pot’s around £70K.
From what I’ve read, you need roughly £250K to get the equivalent of the state pension. So if I manage another 20 years of work (big if), I might get there… but that still only gives you about £12K a year. Enough for bills, food, and maybe new underwear twice a year when the old ones give up 😅
The thing is — how are people managing to save more? Someone on another thread said they’re putting in £2.5K a month and I thought, wow, that’s incredible… but totally out of reach for most of us. My job doesn’t pay badly but it’s not great either, and I am professionally qualified. How do I do this?
For context: roughly £100K in your pension pot gives you around £4K a year in retirement income. So £250K = £10–12K. Not much to live on if there’s no state pension left.

So what’s the answer?

AIBU — you can build a good pension even on an average income, just got to be smart?
AINBU — realistically, unless you’re on a high wage, it’s almost impossible to save enough for a comfortable retirement?

Not much to live on if there’s no state pension left.

Why wouldn’t there be a state pension left?
(Sorry, not in the UK, so not up to speed.)

You need to take responsibility for your pension - the default funds generally offer very poor returns, as they are generally the least risky options. Make sure you take advantage of your employer's contributions - some will match any additional contributions you make. You need to understand that this is investing, not saving, and you have a long timescale to grow your capital and make up any losses.

Head over to the ukpersonalfinance subreddit and follow their flowchart and advice.

There is a lot of scaremongering everywhere at the moment.

I’ve also seen the threads where people are putting loads into their pensions. I assume either they or their DP earn a lot more than I do, don’t have a mortgage or childcare costs, or there is some creative writing going on.

You can only do what you can do.

Your figures are a bit low. According to Legal and General annuity calculator, £100k pot will give you a lump sum of £25k then around £5250 a year as a pension. I think most people find it hard when they are in the thick of child rearing but I intend to massively increase my pension contributions when the kids leave home. Also, we are probably planning to downside later on, freeing up some cash that way. I have also had a private pension since I was 25 (on top of workplace ones). Even paying in £50 a month adds up (slowly!)

the default funds generally offer very poor returns, as they are generally the least risky option

This is not true

Head over to the ukpersonalfinance subreddit and follow their flowchart and advice.

Reddit is often wrong about personal finance and it’s generally a bad idea to be taking financial advice from unregulated individuals on the internet anyway

How old are your children. I started paying additional voluntary contributions when my kids were no longer dependent on me and I had more disposable income. I also paid extra on my mortgage too so that it ended earlier

Compound interest/investment earnings helps a lot - your £70k, even without additional contributions, could be worth £185k in 20 years assuming 5% returns per annum above inflation. That of course depends on how it’s invested and how high inflation runs. My husbands old pension fund (no new contributions) increased by 20% last year, but of course it could decrease if badly invested too. All you can do is pay in as much as you can, as early as you can, and you’ll be better off than if you don’t. Lots of people work part time in an ‘easy’ job in early retirement - has the benefit of a bit of extra income and keeping the mind active.

Depends on:
when you start - you only started in your early 30s, which is later than would be ideal.
what you prioritise - I don’t mean that in a snide “why don’t you just prioritise” way, I just mean that with any spare money some people prioritise overpaying mortgage, some people prioritise saving for their children, some people pay extra into pensions, some people go on holiday (and each of those have good reasons for doing them, I’m not criticising any choice), and of course I’m aware plenty of people can do none of those.
What your employer pays - I don’t have a big salary, but pay in 8% and my employer pays in 12%. With the figures you’ve given for your pension and how long you’ve been saving, plus what you say about your salary being alright, I’m assuming your employer is not paying in that much?

But you will have your state pension + your pension pot

I’m a few years older at 52 and was stressing about this yesterday. However I think for our age we will still get the state pension. To phase it out would need to start with younger generations. To be honest when I looked at what hopefully finances will look like- no mortgage, no dependant children - life will be much cheaper and so I’m now much less pessimistic. I can’t afford fortunes into a pension but I’m hopeful it’ll be decent enough with my SP on top that I won’t be destitute after what will have been over 40 years of private contributions!

Reddit is a brilliant place for financial advice and I would rate their communities 1000x higher than mumsnet for financial advice.

Genuinely excellent resource.

My pension provider has an app which has some really useful info about what it could be worth at retirement age, how to up contributions, what my employer has paid in etc. I keep an eye on it the same as any other bank account and tweak my contributions if I get pay rises etc (not that that happens these days!) I’ve also previously put bonus payments straight into pension to save tax. My friend is 40 and mortgage free(!) but has only just started paying into her pension because they prioritised the mortgage.
That approach would be way too risky for us so we’ve always balanced pensions, savings, mortgage overpayments, we will take longer to pay off our mortgage but at the moment both pensions and savings are earning more interest than the mortgage costs so it feels right.

I have virtually nothing in mine and at 52 I have decided that I will just have to carry on working a couple of days a week unless something unexpected happens. I'm not really bothered about that as I'll still have plenty of time to do what I want.
The amount I do have in my pot is so small that I'm just going to take it all out in a couple of years and spend it on something I need and wouldn't be able to afford otherwise.

IME the advice by UKPF has been streets ahead of that offered by financial advisors. Plenty of regulated and qualified financial advisors have reccommended people putting funds into St James' Place, which has poor growth and appalling fees.

Reddit and Moneysavingexpert is one of the few places where people are cautioned about the real damage that fund fees can do to your investments.

My assumption is generally that there will be some kind of state pension left, particularly for those who will have decades of contributions made and an expectation of it.

You still have plenty of working years left, and for compound interest to work its magic. It is not the case that workplace defaults are the least risky - it will depend on your provider and where in the life cycle you are (growth or pre-retirement etc). Defaults are a good place to start as that is where your scheme trustees will spend most governance time and energy.

You need to think about when you want to retire and what kind of lifestyle you want in retirement. Pensions UK Retirement Living Standards are a good place to start on the latter. This will then help you think about how much risk you want or can take, and whether what you are currently invested in is appropriate.

First off all do the Rebel Finance School course - free on YouTube. It will help you understand how to make sure you're pension is properly invested and not in a scheme with poor growth/high fees.

Then look at James Shack's video "Why the five years before retirement are so important."

He shows how, once you've paid off your mortgage, you can start salary sacrificing part of your salary so that your pension pot doubles.

What I will say is this… to each and everyone of you with children … insist that they start investing AS SOON AS THEY START WORK. The power of compound interest is huge. Teach them to take responsibility for their own future, take early advice, invest as much as they can - more than they think. It is unlikely that their generation will have state funding and the sooner they prioritise their own long term financial health the better it will be for them. It will give them choices age 50+ otherwise they will work until they drop.

What’s great about Reddit is that people vote on the submissions - so the genuinely good advice appears prioritised above the bad.

And - it’s a big community, so there’s a lot of input.

I wouldn’t say anything radical is suggested, or risky (‘I’d bet on these stocks’ kind of advice) - it’s more consistent feedback on the info in the flowchart.

Unless you have really a huge amount to invest, you can get the advice you need online.

Mumsnet seems to lean towards ‘investment strategies’ like buying premium bonds or paying off your mortgage, which have a place / purpose but aren’t the best ways to grow your money.

My generally approach has been:

a) pay into pension no matter what, even when I could argue the money was worth it now, I have always utilised whatever scheme I was in and viewed it as compulsory (by utilise I mean for example if my company matched to 6%, I went to 6%).

b) recognise my career as a whole and when I will need to pay in more, the child rearing years have not been the time for me to pay additionally into my pension or mortgage, but I have a plan for when I need to pay in more (this is more relevant for my mortgage tbh due to point c)

c) let pension heavily persuade my career choice. My pensions are predominantly public sector, I am currently civil service, I am not saying pension is the only or even driving factor, but it is a very important factor as to why I am in the CS. As it happens I am paid well for my role, plus flexible working etc so the whole package works well for me. But it has been fairly considered for DH and I to be in the public sector to not only have a strong pension, but also I like the fact I don’t really have to think about too much. It’s not accidental that we are in the public sector (but equally, we wouldn’t stay if we hated it!)

Yes, I think lots of people do prioritise overpaying their mortgage. Partly because those who have memories of the 90s recession when lots of people lost their homes and also because of people like Martin Lewis who I think devotes a disproportionate amount of time to it. It's become this sort of accepted wisdom that it's the smart thing to do with any excess income. While it's clearly not a bad thing to do, it's probably not the most financially advantageous thing to do when compared with long term investments like S&S ISAs/pensions.

(And as a PP says I will say the same to my children, not so much about striving for public sector, but viewing pension as compulsory and paying in from day 1- but to also consider overall package carefully when job hunting).

I was worried at your age and stage; I’m retired now.

Astonishingly, for the most part it all works out pretty fine.

Over time your day to day expenses reduce - no childcare costs/compromises, just the adults to feed, mortgage paid off/downsize, flexibility to do things like holidays when it’s cheap, no work costs. This happens when you’re still working, so you can put more in your savings/pension, and it carries on when you’re retired.

If there are two of you that’s two state pensions and two private pensions - two tax free allowances, no NI to pay. And likely a bit of a lump sum to upgrade the car/kitchen. But even if you’re single the basic principles still apply.

Early retirement can be expensive if you want to do some big holidays, but as you age and can do less it gets cheaper. Care can make it more expensive at the end but most people don’t end up in care homes, and if you run out of money at that stage the state will step in.

Well, yes, but I wouldn’t be taking financial (or legal or medical) advice from Mumsnet either.

I think it also depends on your employee contributions, the public sector contributions tend to be very generous compared to private sector. I also figure the more you put into pension the more you're saving on tax. If you're close to the a tax band then you can save yourself a chunk of tax by putting more into your pension so you're necessarily taking that much less home each month.

Just quickly jumping in (I’ll try to reply to everyone properly after work) — I finished watching it yesterday! What an amazing couple, Katie and Ala, I’m so grateful for their free course, learned so much.
I do realise now I need to open a SIPP and invest in stocks and shares, ideally an index fund, global, no cap :) My workplace pension is mostly in bonds and, as far as I understand, I can’t move it without losing my employer contributions.
The problem is… I don’t really have a gap. I went through my finances last weekend and honestly can’t squeeze out more than £50–£100 a month for the SIPP. Which, at my age, feels like a pittance 😅