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?

I did the course, finished it just yesterday!
I loved it.

You can access it from 55. But obv that means that you’ll have less to claim, as you’ll have been making contributions for less time. I hope to retire at 60 as DH is a few years older than me and in a profession with a compulsory retirement age of 65 (currently although that might change!).

I’m expecting a circa 65k pension if I didn’t earn any more than I’m currently earning until I retire. Plus the state pension, whatever that is.

Mine is pretty useless. I had no financial knowledge and understanding until the time you were automatically opted in which was when I was late twenties. My current employer only puts 4% in and I'm PT and currently put 8% in so you can imagine how little goes in. At the moment with two young kids each year when I get a pay rise (unionised industry so always get one) I plan to increase my contributions by that much. I'm due to pick up another day in the New Year so I'll up my contributions again when that happens.

She won’t be able to access it from 55 unless there’s a protected pension age - the minimum age is increasing to 57 from 2028 and is expected to track 10 years below State pension age thereafter (although I believe that last bit is yet to go into legislation).

@LaserPumpkin I'm sure by the time she gets there state pension age will be 69 or even 70! Imagine being a teacher at that age!

Although tbf she'll probably be around 55-60 when DH and I pop our clogs and should inherit a decent amount (if the government allows it)

You can access mine from 55 currently but yes anything in pensions it’s difficult to know what might happen in 10/20/30/40 years.

I don’t know about teachers pensions as I’m in the civil service.

I think if you can afford it and your main employee pension doesn’t allow you to retire when you want to, you need to just save to cover yourself for your first few years of retirement. I know I’d want to have the option to retire or reduce hours at 60ish so I’m planning for that.

Remember the government provides tax relief on pension contributions so you pay less tax with a pension than without it. If you are a tax payer especially if higher rate it is mad not to have a pension and just give it away in tax instead

You can access mine from 55 currently but yes anything in pensions it’s difficult to know what might happen in 10/20/30/40 years.

True but we know it’s increasing to 57 in 2028 - I assume you are older so won’t be caught by this but if you were born after 5 April 1971 you should double check as most Civil Service pensions will also be affected by this.

It's not scaremongering, it's truth. People can't afford decent pensions and companies aren't willing to pay for them.

It's impossible, there is not enough leftover from the essentials to make a decent pension.

There must be a reason 'they' make pension planning one of the most complicated and potentially fraught endeavours in anyone's lifetime. Personally, I'll be honest, I don't understand nor trust any of these plans.

Unfortunately, I think that in order to get a private pension that pays out the same amount as the state pension you'd need a great deal more than £250k.

Remember, the state pension goes up every year (with either, inflation, wages or by 2.5%). To have that sort of arrangement costs much more than if you had a simple, flat rate annuity that doesn't increase. Initially, you'd have a larger pension, but it would be eroded over time by inflation. A lot depends on your age and your state of health at the time of retirement.

You could leave the money in a SIPP and draw down on it when necessary, to top up your state pension every month or just on certain occasions, such as to pay for a holiday or a new car.

As you're still young, you have time for your funds to build up and you can take more risks, as you won't be using the funds for about 20 years. Taking more risk does of course mean you can experience big falls in the value of the funds, as well as big gains.

If you're not sure how best to make your pension grow, you might like to consider getting some professional financial advice.

You can start early and pay in a small amount each month or you can start later and pay in more each month and will get the same outcome. I was at University for most of my 20s (I have several degrees) but went straight onto a good wage but now in my 50s I pay more into my pension each month than I was earning each month in my first proper job. Most people don't pay a set amount into their pension every month for their entire career, it varies depending on your stage of life, you can afford more when you are young and have few responsibilities (living at home or in a house share) and then again as you approach retirement, pay off your mortgage and children leave home. Once our youngest graduates we'll be increasing our pension contributions again to reduce our salary down to what we think we'll have to live on in retirement. Most of my colleagues throw money into their pension in their 50s and 60s because they have a high income and have past the most expensive years. It's never too late.

Remember, the best time to start a pension was 20 years ago, the second best time is today. And all savings help.

I think your 70k will start compounding now. I’ve had a personal pension for a long time always putting in a few hundred quid a month. 10 years ago it was worth 99k but last month it was closer to £250k . I ‘ve also got workplace pensions that I pay into and it doesn’t cost that much because of tax. So for example if you have salary sacrifice you could pay £500 a month and it would only cost you £250 or so if you’re a higher rate tax payer.

You need to start early and realistically have 15-20% going in each month BUT that’s your contribution, and your employers and a big chunk of tax relief from HM Treasury which insurers/pension firms add on for you if you’re a basic rate taxpayer.

However, if you can’t manage that amount then put in as much as you can and add in any bonuses, pay rises and extra as and when you can afford it. With compounding it will grow - the thing is to not take breaks and to always keep an eye on it, transfer old pots (really not hard to do) in to one to make it bigger (ask about exit/transfer out charges) and join any workplace pension sessions.

The above is about defined contribution schemes. If you’re a public sector worker on defined benefit then it’s related to length of service and you don’t have a pot in the same way.

If your work pension is a DC pension then you should be able to move part of it to a SIPP - that wouldn’t necessarily stop your employer contributions as you’re not closing it, you’re moving part of the funds to another provider. My current annual return on my SIPP is 14.5% and that includes having part of it in a lower risk money market fund, which offer lower returns. You should also be able to pick different funds within your employer pension, albeit there won’t be anywhere near the choice as with a SIPP - I have half of my employer pension in medium risk and half in high risk.

I may have been the person that you were talking about the £2500 monthly contribution on another thread. I built that up over time as my salary increased. I have moved around for better, higher paid roles. I would encourage you to do that if at all possible whether now or in the future. I did stay in a couple of roles longer than I should because my kids were young. But now they are tween/teens, it’s got easier.