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?

Ok but presumably most people would buy an annuity which was index linked? The amounts are just examples anyway. Clearly if you're used to pissing money up the wall, you'll need a hefty pension. I was just trying to balance that with the fact that the vast majority of people won't have a huge pension, and that actually £18k is ok for someone to live on quite well. I'm trying to reassure people.

Don't use this thread as an opportunity to show off how clever and rich you are FFS.

@titchy

What’s your idea of “happy and comfortable”? I want to maintain my current standard of living which includes nice food, holidays, day trips etc etc.

The £18k is a average over the entire pension period. At some point you're just not going to be fit enough to be doing holidays and day trips or driving. So that £18k May in reality be £24k for ten years, then £12k for the next ten.

One of the big shocks on retirement, is realising just how much of your (taxed) work income was spent on the cost of going to work and holding down a job. The work clothes, the professional -body fees, commuting costs, the extra mileage and wear and tear on your car, the childcare, the bought sandwiches and coffees, and paying for fast services you hadn't got time to DIY. Taking holiday leave when it suits employer. Suddenly, home and car insurance premiums are cheaper, and you qualify for all sort of pensioner discounts you never noticed. You have the time to compare prices, shop on discount day, and countless businesses are suddenly keen to vie for your Grey Pound custom.

presumably most people would buy an annuity which was index linked

It's only when you see how little you get each year from an annuity, especially an index linked one, that the flaw in that argument are exposed.

One of the first hits on Google

A £500,000 pension pot would buy an annuity worth £25,416.92 per year, or around £2,118 per month.

Not everyone will have £500k in their pot.

I've seen suggestions that spending is heaviest in the early years (that luxury cruise) and in the later years (help in the home as people become increasingly infirm).

One of the big shocks on retirement, is realising just how much of your (taxed) work income was spent on the cost of going to work and holding down a job. The work clothes, the professional -body fees, commuting costs, the extra mileage and wear and tear on your car, the childcare, the bought sandwiches and coffees, and paying for fast services you hadn't got time to DIY. Taking holiday leave when it suits employer. Suddenly, home and car insurance premiums are cheaper, and you qualify for all sort of pensioner discounts you never noticed. You have the time to compare prices, shop on discount day, and countless businesses are suddenly keen to vie for your Grey Pound custom.

Exactly!

The lock down has shown me how this isn't the case for everyone.

Clothes on campus are very casual, I wear the same as at home. Food is highly subsidised, I spend more when we eat three meals at home. There is a saving on fuel,

Our FA told us that we should max out holidays in the first ten years and then after that the spirit might still be willing but the flesh and bones will not be best impressed.

We have a very good retirement figure, more by luck than judgment, DH was in a final salary scheme for about fifteen years, thankfully it was a habit before he met me, because the younger me would have been saying manana manana.

That ended and by that time I had caught up in the be sensible with money stakes, and we joined the pension at the company he has been at for the last twenty years, we put in 10% and his employer put in 13%.

The one thing I did hear repeatedly on here down the years is that annuities are to be swerved, that may have changed.

We were lucky that FS were a thing, we know we were lucky and we are grateful.

@titchy

Ok but presumably most people would buy an annuity which was index linked? The amounts are just examples anyway. Clearly if you're used to pissing money up the wall, you'll need a hefty pension. I was just trying to balance that with the fact that the vast majority of people won't have a huge pension, and that actually £18k is ok for someone to live on quite well. I'm trying to reassure people.

Don't use this thread as an opportunity to show off how clever and rich you are FFS.

One can of course buy an annuity that's index linked, but it will be a considerably smaller annual income than the same pot invested into a straight annuity with no IL.

So before making that choice you have to weigh up, how many years are you likely to survive; to make index-linking worth while,(Remember, the annuity company actuary is doing exactly the same thing, and they are not running a charity). But nor do they know what other assets, investments, liabilities, and expectations you have.

@ChairOnToast

Well, childcare costs, for most people, will have stopped long before retirement age so that won’t make any difference to the cost of living.

I get your point that there are costs associated with working but for most people, aside from commuting, they aren’t significant. And I don’t personally have any commuting costs.

If anything, when I’m not working I spend more money. More time for days out, lunch out, holidays etc. Work fills up most of the week and means I’m not out spending money. This is exactly what I experienced on maternity leave. As soon as I went back to work I started spending less.

Not all childcare costs are related to toddlers.

A generation of parents are leaving parenthood to the last biological minute ; when those older parents reach the age of reducing to part-time work they'll still be supporting teenagers and students at university.

We retired the week our third DC finished uni.

Our FA told us that we should max out holidays in the first ten years and then after that the spirit might still be willing but the flesh and bones will not be best impressed

My MIL is 85. In 2019 she went travelling in South America, Asia and Europe. She has been retired for 20 years and in deference to her age chooses to take very long holidays to visit friends and family, so she e.g. was in Asia for 3 months over Christmas (came back in Feb 2020).

I don't understand this. Why would someone with a final salary scheme care about annuities?

A final salary scheme is an annuity. So before retirement you can either choose to receive the standard annuity offered by your company's pension scheme or you can take your pot and choose to get a better deal from a different supplier.

Or you can take your pot and not buy an annuity.

The rules changed a few ago years

If you have a private pension, you no longer need to buy an annuity

You can blow the lot !

Once your pension FS pot exceeds £30,000 you have to pay for specialist advice to say that you understand that once you have been paid out and it is gone, it is definitely gone.

Annoyingly I have one at about £38k that I would like cash in and spend on holidays and city breaks ,for no reason other than I have not enjoyed good health in the last twenty years may not live long enough to draw it (I am 57) and also we did not expect it to be that large so it genuinely is a Brucie Bonus and we are struggling to find someone to indemnify us.

annuities are to be swerved, that may have changed.

Annuities are expensive, but you can be sure that they never run out.

Drawing down from your pot of money seems better value but there is the risk that you run out of money at some point.

Ideally , have a mix of both. Enough guaranteed income for life to cover basics plus a pot to draw from for luxuries and if the boiler breaks down.

People in final salary / defined benefit schemes don't have this problem , their pension will be for life.

A final salary scheme is an annuity. So before retirement you can either choose to receive the standard annuity offered by your company's pension scheme or you can take your pot and choose to get a better deal from a different supplier.

Surely a final salary ie defined benefit, gives you a pension based on your final salary, regardless of annuity rates? That's kind of the point. My final salary has no annuity. I get a guaranteed fixed portion of my salary paid at 65 every year till I drop dead.

@ivfgottwins

£30k would be nice.

Good luck then!

I've been paying into a pension since 2004 and I earn well above average (higher rate tax payer) and even with the state pension added in I'm realistically aiming for £18k a year

£30k is totally unrealistic unless you are saving huge proportions of your salary each month

I agree.

I’ve got 32 years in a final salary and it will pay between 14-15k a year at 60 (it’s banked now as the scheme is closed)

My salary in 2018 when it closed was just short of 40k a year.

Ive been ploughing 50% of my salary into a defined contribution ever since and will do so for the next five years until 60.

My figures don’t include the state pension at 67.

How do you know how much you have? My on line pension gives me a figure of how much I will get each year when I retire at 67. This goes up slowly, about £500 a year I think.

Someone from the pension scheme explained it to me once and I still don't completely understand

Historically company pensions, defined benefits or defined contributions, will automatically give you a pension that pay out a set amount until you die. But the way that that is paid for is that the company buys an annuity that will give you the amount they promised (unless you are public sector, in which case the taxpayer pays, 1.6% of public spending is public sector pensions). The only difference is that the company knows what its contribution will be for a DC pension, whereas for a DB they have to top up your pot by a variable amount to ensure you get the benefits they have promised to pay for. But at retirement the company limits their risk by buying an annuity to then pay out those benefits for the rest of your life. But anyone can take their pot (whether that has the label of defined contribution or defined benefit) and invest in an annuity or get drawdown or whatever. If you have the size of pot that will is sufficient to pay out the classic 2/3 of your pension that was the default years ago then your company final salary might not be the most generous retirement option, you can probably currently get a more generous drawdown amount without worrying about running out of cash.

@Anordinarymum

OP When I left my job I was encouraged by the company to move my pension elsewhere. They were very insistent that I did and said it was a good move so I did.

It turns out it was a bad idea and too late to do anything about it now but i did try some years ago and got nowhere.

It has £29,000 in the pot, and my husband said it will be fine as he has a really good pension and said we would be OK. Then he left me.

My pension does not even cover my community charge.

I would advice anyone to pay as much as they can possibly can into their pension as you are a long time old with not much money at your disposal.
Luckily for me I have other forms of income or I would be stuffed.

Thank you. I don't plan on moving mine over, just want to gain access to them, but thanks for the heads up and the advice

@FinallyHere

cannot for the life of me remember the names of the other pension providers I've paid into over the years.

How about contacting the employer to ask them who provided pension during the time you were employed there. That should give you a start with finding the pension supplier.

The problem is, not all of my previous employers are still trading. I've worked for a couple of smaller businesses, so again, not sure how to track pension down. Cannot believe that info isn't traceable via our NI number,

It's worth. He king how they are performing before you make the decision not to move them over.

I'm 48 so have recently realised I need to actively keep an eye on them. I have two old pensions and one current. They all have online portal access now so I am checking performance each month before I make the call on whether to transfer them. My concern is if the old ones are not in current funds they could be underperforming compared the my current pension which is in a more active fund. The closed funds equate to 50% of my current pot so just forgetting about them could really impact my overall pension income.

@titchy

A final salary scheme is an annuity. So before retirement you can either choose to receive the standard annuity offered by your company's pension scheme or you can take your pot and choose to get a better deal from a different supplier.

Surely a final salary ie defined benefit, gives you a pension based on your final salary, regardless of annuity rates? That's kind of the point. My final salary has no annuity. I get a guaranteed fixed portion of my salary paid at 65 every year till I drop dead.

Correct. FS pensions have nothing to do with annuities.

@chipsandgin

Well this is depressing

Yep. I’m 50 & no pension to speak of (perhaps 3k from the 90’s). I’ve never really been able to makes ends meet in the past or the present day - so at least the silver lining will be that I’m very used to being broke should I make it that far!

Some of these posts are actually breaking my heart.