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Discuss investments with other users on our Investment forum. For more advice read our tips for saving for your child's future.

If you're comfortable how much £ per month goes into your pension?

46 replies

Heatherbell1978 · 15/02/2023 06:44

Firstly, I know we're privileged to be able to contribute a fair amount into a pension, this isn't a stealth boast post.

DH are I are 45, 2 DC, always contributed something into pensions although for a while it wasn't that much. I'm lucky that I did 10 years in a final salary scheme job so I have that pot but been in a contributory scheme for last 10 years. For a while I put in around 10% of salary and DH the minimum...so 5% ish. We had a bit of a wake up in lockdown when we realised that we weren't really on target for the type of retirement we'd like so we ramped it right up. More than doubled our % contributions. So between us we now put in around £3k a month. Roughly 50/50. Great. But that's obviously had an impact on our spend. We have enough for bills, mortgage etc obviously just not the treats like dining out. We're not lavish people but enjoy holidays which we still do but on a pretty tight budget.

We wonder if maybe we're being a big OTT and we should live a little - we suspect our friends in similar paid jobs don't contribute quite what we do (some nothing..) but don't want to have that money chat.

Where is your balance?

OP posts:
puppacup · 15/02/2023 06:49

There needs to be a balance between saving & living for today as you may not get to see a long retirement.

MyFlagMeansIceCream · 15/02/2023 06:53

I'm in the LGPS, my tier is 8.5% of salary plus I put another £100/month into the additional scheme. No idea if it's enough to be honest, but I don't know if I could do much more easily

ReddyBrekk · 15/02/2023 07:01

Finding the right balance means having funds to enjoy life now and over the next 15, 20 years before retirement whilst you have health and mobility. Hopefully, you'll have both in retirement but nothing's guaranteed so enjoy life now. Have some good meals out on a regular basis and lovely holidays.

When is your mortgage due to be fully re-paid?

FitAt50 · 15/02/2023 07:06

Very lucky that I'm in civil service as we have amazing pension. I put in 5.45% each month (£180) and they put in 27.1% (£860).

Tayegete · 15/02/2023 07:08

I have similar thoughts about our mortgage overpayments. We are on track to pay off our mortgage in 3 years, but we are using c.40% of our salary to do so, sacrificing holidays abroad etc. by the time it’s paid off the kids will be much older and not having a mortgage will help with uni etc but I wonder whether we are missing out on enjoying their last few years at home. Sorry that’s not very helpful! We both have public sector pensions so that’s less of a worry- although we still won’t have a lavish retirement. It’s in the back of my mind that by the time my parents were comfortably off and could afford a nice lifestyle- they were both suffering from ill health and couldn’t really go anywhere or do much. Could you compromise and reduce the amount?

Heatherbell1978 · 15/02/2023 07:08

ReddyBrekk · 15/02/2023 07:01

Finding the right balance means having funds to enjoy life now and over the next 15, 20 years before retirement whilst you have health and mobility. Hopefully, you'll have both in retirement but nothing's guaranteed so enjoy life now. Have some good meals out on a regular basis and lovely holidays.

When is your mortgage due to be fully re-paid?

We're looking at another 10 to 15 years on the mortgage, we do try to overpay where we can so in an ideal world that would be 10 but 15 more frugally. Interest rates going up obviously will impact this!

OP posts:
FabbyDab · 15/02/2023 07:24

About 20% of my wage goes to pensions. I am nudging it up, little by little. I do prioritise my pension over certain things (no flashy HP cars, don't do lots of unnecessary house renovations or buy lots of clothes or make up just to be "on-trend" etc), but I do prioritise fun times with the family, being able to go out for an occasional meal, panto at Christmas time, a cheap summer holiday in Europe.

I have had close family members die in their 30's and 50's, and family members live their retirement in poverty, so I've seen both sides of the coin. Like PP said it's about balance.

pbdr · 15/02/2023 07:33

We save heavily into pensions and have since pretty early on, so at this rate we are on track to have a very comfortable retirement. We do make some sacrifices for this - we can't easily afford proper holidays for example- but we can still afford to eat out and take our toddler to her classes and on days out. I wouldn't sacrifice my daughter's quality of life to have a big pension, we are very fortunate that we can do both.

ParentsTrapped · 15/02/2023 09:21

I put the maximum into mine - the tax relief makes it a no brainer though it is a big chunk of my salary.

WombatBombat · 15/02/2023 09:22

I’m 33, put in £450 ish pm and that’s matched by my company.

Once we pay off the mortgage and are out of expensive childcare/nursery years, then I’ll up it.

Lcb123 · 15/02/2023 09:27

I’m on the universities pension scheme it’s mandatory 9.8% employee deduction which is a bit much for me at the moment (you can’t lower the %). Employer puts in 20% tho. It’s about £350 a month. We own a house with mortgage which will be paid off before we retire so will have that as well , can downsize

Orangeradiorabbit · 15/02/2023 09:53

ParentsTrapped · 15/02/2023 09:21

I put the maximum into mine - the tax relief makes it a no brainer though it is a big chunk of my salary.

I recently started to do the same for the same reason. Also, I started saving late and want to retire early, so I need to make up for lost time. My partner is older and a much lower earner, he hasn't saved much at all, so I feel like a lot is on my shoulders. However, getting it right feels like a minefield!

My employer contributions are small (7%). And I do worry that I'm not left with much "fun" money. However, I'm also a very frugal person every day (no car, no makeup, low food and heating costs, no gym, no classes, rarely buy new clothes, no commute costs, no coffee bought out etc), which I'm fine with. This means I can spend on bigger things that are important to me (e.g. Nice holidays, day trips, meals out). Having no children helps. But with inflation I worry about my ability to continue this way. I'm looking for a better paid job to help.

The thing that changed me was working backwards from where I wanted to be, to how much I need to put away each month. Previously, I put away 17% per month, but realised that would not give me the money I need to survive at retirement (I have no inheritance coming my way, and no large house to downsize from, and feel like I can't rely on the state pension). I worked out I could afford a much greater contribution.

@Heatherbell1978 Looking at what others are doing can be useful, but it's also good to think about your own goals: Have you worked backwards from the retirement fund you want to how much you need to put away? Have you considered the age you want to retire and the lifestyle you want to have? Have you considered other streams of income or lump sums you might get to help with your retirement? What outgoings will you have (e.g., helping children with wedding costs, house deposit, childcare or private school costs)? Have you thought about the balance between savings in a pension vs other kinds of savings? Have you talked to a financial advisor- for example, they advised me all of my bonus should go in my pension: that was a game changer.

LinesAndDot · 15/02/2023 09:58

I had the same question - will I have enough money when I retire to live the life I want? Or more specifically, what do I need to save or do now to achieve that?

I don’t think it’s as simple as saying save X% without having worked things out, and a plan.

This is the approach I went though:

  1. I want to live my current life (spending-wise) in retirement (although most retirement info says you only need 75% of your final income). So what are my current expenses? $A/month Therefore I need retirement to earn me the amount of $A x12 months = $B
  2. Can I reduce $B at all? Yes. Deduct savings for retirement. If I pay off my house, I can deduct mortgage payments. Therefore $B - savings - mortgage = $C
  3. Therefore I need to pay off my house AND have enough saved retirement money to pay $C in income each year
  4. Therefore Retirement Money x 5% = $C. So what is the retirement money amount?
  5. I already have $D in retirement. Therefore I need to save $C - $D = $E
  6. I have 15 years left until retirement. Therefore I need to save $E divided by 15 years = $F each year
  7. $F divided by 12 months = amount to be saved each month.

This calculation doesn’t account for interest earnt, nor inflation, and it uses my current income, not my final income (but it can be adjusted each year if/as income changes). So it’s not perfect, but it makes me feel on track and when I spend money enjoying life now, I don’t feel guilty as I know I am ‘on track’.

I should also add, I have an Emergency Fund of 6 months of my expenses, which I think everyone should aim to get (at least 3 months worth).

Hope this helps. There is no point in saving mindlessly. You have to know your goal, so you can know what to save to reach the goal, and then what you are able to spend and enjoy now.

LinesAndDot · 15/02/2023 10:01

I should add - my plan at point 4 assumes the Retirement Money earns 5% interest a year. A conservative figure, and assumes there will be some ‘drawn down’ of that as the retirement years go on.

DoorstoManual · 15/02/2023 10:08

We are retired with an annual income of £49,000, we also have £200,000 invested, we are hoping to ignore that for a good few years.

When we were younger, retirement was as mythical as the proverbial unicorn, but we knuckled down and here we are.

What we thought would be discretionary spending has been swallowed by inflation and fuel bills, we are fairly low maintenance anyway, so no real impact, but as I keep saying, we factored in lots of stuff, but nobody saw this coming rampant inflation, fuel prices and the situation in Ukraine coming.

Hammer everything you can afford at your pension.

Mia85 · 15/02/2023 14:04

Is the £3000 a month your personal contributions or does that include employer's contributions and tax relief?

alwayscheery · 15/02/2023 15:08

I was VERY late to the pension party and wrongly prioritised paying down mortgages.
I currently pay £1000 a month minimum via DD in To my pension and often pay an extra £500 per month by bank transfer. I am old enough to be able to access my tax free 25% but do not intend to . My younger self would not lock money away long term.

Throwmesomechicken · 15/02/2023 15:14

Both DH and I were some of the last people able to sign up to a defined benefits pension scheme in our areas of work. We put in about 9 to 10% and our employers put in double. I have 30 years contributions, DH has about 25 years as younger than me. We have no mortgage and substantial savings and investments.

We had apart from the last three years a holiday overseas every year and sometimes a couple. Those were are only major expense as our main hobby is hiking and we live on the doorstep of the Peak District.

Heatherbell1978 · 15/02/2023 16:50

Mia85 · 15/02/2023 14:04

Is the £3000 a month your personal contributions or does that include employer's contributions and tax relief?

That includes tax relief for me as mine is salary sacrifice but not for DH who pays his £1500 after tax so to be fair it will be more than £3k when tax is added on to his

OP posts:
Heatherbell1978 · 15/02/2023 16:51

Mia85 · 15/02/2023 14:04

Is the £3000 a month your personal contributions or does that include employer's contributions and tax relief?

And that includes employer contribution.

OP posts:
Heatherbell1978 · 15/02/2023 16:54

I should probably add that my final salary scheme pot estates to a salary of about £9.5k a year and I have a pot of £123k too. DHs overall pot from a few jobs is also about £120k at the moment.

OP posts:
Heatherbell1978 · 15/02/2023 16:58

alwayscheery · 15/02/2023 15:08

I was VERY late to the pension party and wrongly prioritised paying down mortgages.
I currently pay £1000 a month minimum via DD in To my pension and often pay an extra £500 per month by bank transfer. I am old enough to be able to access my tax free 25% but do not intend to . My younger self would not lock money away long term.

This is interesting as I always had the mortgage pay off as priority as well until the penny dropped about the tax benefits on pensions. Psychologically paying off the mortgage feels bigger but probably because it is a bit more tangible.

OP posts:
HuntingoftheSnark · 15/02/2023 17:17

I started my pension late due partly to 10 years working overseas. I currently contribute 40% and my employer adds 12%. But I'm 53 and hoping to only work for about 10 more years.

Springintoactions · 15/02/2023 17:17

Interesting discussion

We're higher earners (I earn £160k, DH £150k)

We're prioritising paying down £800k mortgage - overpaying by £4K a month. We're currrntly 39 and aim to clear it by age 45

Have 3 DC age 13/11/9 in state schools - saving £27k each for fees for uni (currently at £20k with £550pcm contrib). Idea to clear mortgage so can heavily support (accomm and living costs maybe £3k a month per child, will have years of 2 kids at uni)

Pensions are £140k each putting in £800 pcm.
Was thinking to clear mortgage age 45, get kids thru uni (we'll be 50 when youngest graduates)

Is this wrong - what do people think about this ?

I don't have great health aiming to stop big career latest of 50ish but DH will continue I'd do more easier less paid job.

Mia85 · 15/02/2023 17:42

Springintoactions · 15/02/2023 17:17

Interesting discussion

We're higher earners (I earn £160k, DH £150k)

We're prioritising paying down £800k mortgage - overpaying by £4K a month. We're currrntly 39 and aim to clear it by age 45

Have 3 DC age 13/11/9 in state schools - saving £27k each for fees for uni (currently at £20k with £550pcm contrib). Idea to clear mortgage so can heavily support (accomm and living costs maybe £3k a month per child, will have years of 2 kids at uni)

Pensions are £140k each putting in £800 pcm.
Was thinking to clear mortgage age 45, get kids thru uni (we'll be 50 when youngest graduates)

Is this wrong - what do people think about this ?

I don't have great health aiming to stop big career latest of 50ish but DH will continue I'd do more easier less paid job.

An alternative model is that you pay as much as you can into pensions, so benefitting from the tax savings, then you take the tax free lump sum when you reach the age to access your pension and you use this to pay off the remaining mortgage/help kids with uni debt or house deposit.

I am not recommending that you do that (I am not qualified to and there's not enough info here anyway) but it's worth exploring. The benefit would be that at your salaries there would be huge tax advantages to doing that. The risks are that pensions might change (age of access, existence/amount of tax free lump sum, tax benefits of the pension) and that your personal circumstances might change, leaving you with a large amount of money you can't access for a while plus a big debt. You could, of course, consider doing a bit of both - slow the mortgage overpayment and up the pension.

Personally I think your pension payments sound a bit low for your salary as you are missing out on a lot of tax benefits, but I am not you and don't know your circumstances.