Concerned that my pension pot is on the lower end of what it should be...

[hyperbole001]

I'm 36 and have to be honest, I haven't given a great deal of thought to my pension. I probably started paying into one from 2009 onwards, but have had various jobs over the course of my employment history, and until recently hadn't put any effort into trying to track them down. Naively, I had assumed that the govt would be able to do this by simply using my NI number but doesn't seem to be a straightforward as that.

Anyway, from those I've been able to track down and have contacted, I've estimated that my pot is currently sat at around £26k. Does this see on the low side for my age, and should I be consciously trying to increase my contributions?

Out of interest, how much of the 35k is taxed?

Just as with salaries, at the moment the first £12k per year is tax free. The remaining £33k would be taxed at 20% for income tax. No NI is paid by pensioners.

@SantaMonicaPier

More than 35% of my salary is going into my pension between me and my employer. I honestly don't consider a public sector pension a big gamble.

If your scheme is fully funded then it isn't. Unfortunately lots are not and are topped up by taxpayers out of current tax receipts. That's the part that isn't sustainable.

@hyperbole001

Out of interest, how much of the 35k is taxed?

At present you can take 25% tax free. There are various ways that you can structure this so you can take it up front or in stages. The remainder is subject to ordinary tax rules as MagentaSunset sets out. At present you don't pay NI and presumably you won't be making pension payments so £35k gross pension will be greater 'take home' than it would be as a salary.

35k/year completely untaxed (which it wouldn’t be) is less than 3k/month, so I’m not sure why people are so incredulous that someone would hope to live on that amount. It’s not exactly a champagne-and-yachting budget. Experts say that you need to be able to replace roughly 80% of your final net salary in order to maintain the lifestyle you have. Bearing that in mind, 35k/year in retirement will seem astronomical to some but a major downgrade in lifestyle to others, depending on what they are used to and hope to maintain.

@Linguaphile

35k/year completely untaxed (which it wouldn’t be) is less than 3k/month, so I’m not sure why people are so incredulous that someone would hope to live on that amount. It’s not exactly a champagne-and-yachting budget. Experts say that you need to be able to replace roughly 80% of your final net salary in order to maintain the lifestyle you have. Bearing that in mind, 35k/year in retirement will seem astronomical to some but a major downgrade in lifestyle to others, depending on what they are used to and hope to maintain.

Agreed, it is not a champage lifestyle. However if you take out costs such as mortgages, child care, child costs etc nearly £700 a week gross is not an impoverished existence.

Two person house hold, would equate to £1,400 a week Gross. I am not sure about you, but I could live pretty well on that.

Experts say that you need to be able to replace roughly 80% of your final net salary in order to maintain the lifestyle you have

Would you mind linking to the research? I've not come across that before.

Is it this US article? www.fidelity.com/viewpoints/retirement/spending-in-retirement

@Mia85 Yes, that’s the one. There’s also this one with CNN money where they talk about how 80% is more realistic than 70% based on real world numbers. money.cnn.com/2017/11/29/retirement/retirement-income/index.html

They’re American studies, but I’d expect the percentages are not so very different.

Thanks Linguaphile The big difference between the UK and USA for retirement planning is probably healthcare spending. Though sadly I wouldn't be surprised if that becomes a bigger issue for UK pensioners over the coming decades

@fromdownwest Indeed, 1400/week would be much better, but then we’re talking about a 70k retirement. I got the impression people were talking about 35k total household income. A couple could exist quite comfortably and have money for a few getaways and extras, but it’s not ‘travel the world in style’ money, especially if you get boomerang children who you end up partially supporting into your 70s.

@Mia85 Yes, but in the US people have always had to budget for healthcare, so the spending as a part of the budget remains constant in the transition from youth to old age just like it does in the UK.

That's not what the article says. It says that healthcare costs go up and many US retirees underestimate healthcare costs. I would have thought a lot of US retirees will have had health insurance as part of their employment benefits and will then lose that.

TBH I think it is much safer to use research on the jurisdiction you are based in such as the Which report above and then keep reviewing as the world changes.

We certainly don't need 80% of our net income to have a comfortable retirement.

That is because we are saving huge amounts to retire early. We have already budgeted and will have saved for our final cars by the time we retire. Petrol will be much lower as no long commutes. Food shopping will decrease because we spend lots on convenience due to being time poor. And in being time poor that usually means we don't save as much as we could on bills as it takes time which sometimes we think isn't worth it.

I think aiming for 75-80% of your final salary is extreme.

@hyperbole001

I think aiming for 75-80% of your final salary is extreme.

I think that is what scares people into thinking they can never afford to retire.

If I waited until I had 75% then I would never retire and die having worked all my life. So many things don't actually cost that much. Just spent a lovely day walking the coast. Parking was free and took snacks and a flask of tea. The only thing that cost money was petrol. This is what I plan to do more of in retirement.

I have no idea what my pot is but I've contributed at least £100k so far (public sector). I'm a similar age.

Sorry if it's already been mentioned, but in relation to the comments further up the thread about being able to see your pensions all in one place I believe the pensions regulator is working on this idea at the moment, the Pensions Dashboard, I think it's still at a really early stage though

@Treeballarae

Sorry if it's already been mentioned, but in relation to the comments further up the thread about being able to see your pensions all in one place I believe the pensions regulator is working on this idea at the moment, the Pensions Dashboard, I think it's still at a really early stage though

This is good news and clearly needed!!

£19.4b in unclaimed pots according to the article I found!

@Stuffin Couldn't agree more!

@Baxdream

I have no idea what my pot is but I've contributed at least £100k so far (public sector). I'm a similar age.

Public sector pensions are calculated based on accrual rates and pensionable salary, not how much is contributed.

@hyperbole001

I think aiming for 75-80% of your final salary is extreme.

Agree.

I think a lot will depend on whether you rent or have a mortgage that will be paid off.

My mortgage is over 30% of my salary (and isn't due to be paid off until retirement) Pension contributions are another 8% ish. So I could lose 40% of my salary with no impact at all. Plus the saving I would make from not supporting my children as they will be grown up.

Whereas if you took someone who had paid off mortgage younger and wasn't saving that additional but blowing it on luxuries then yes they would need more!. Same as if you rent where you still need to continue to pay that.

we all just have to save as much as we can, diversified as much as we can to hedge the risk as much as an individual can

This is what it all comes down to. Putting in young helps purely because if you are saving from a young age you are putting in money for a long time. But all the predictions about 'if you had put in £100 50 years ago it would be worth X' never mention that 50 years ago £100 would buy you a lot more than £100 would now (my Mum's Kenwood mixer cost £30 in the 1960s, a top of the range one now costs £1300). Inflation erodes what you make on compound interest. The longer you work the more time you have to save and the less you will need for retirement (someone who retires at 55 will need to fund on average 30 years of retirement from ~35 years of work, if you retire at 70 it's 15 years of retirement from ~50 years of work so easier to save for). People who have a high income while working can save more than those on a low income and will both have more money in retirement and want more money to sustain their lifestyle.

It's not just because you are saving for a long time. It's because the money contributed earlier has more time to generate compound interest. The investments obviously aim to generate interest in excess of inflation otherwise there would be no point in them.

In response to PP, I’d like 35k a year as I have a couple of expensive hobbies-skiing & cycling. Also want to do a lot of travel, cruises etc.

Hopefully I could survive on less, but would rather have too much than not enough.

Several PPs also mentioned how two pensions combined equals a good household income. Single people need to save even harder. The costs of couples are very far from doubled in retirement as they are not during working life. So while single people have more expenses while working age (especially single parents) they also have an even greater need to save if they want to be comfortable in their later years.