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?

I have found I need little to live on. Retired at 55 on final salary CS pension (equivalent pot of 132k, gave 6k pa reduced from 8.somethingk for going early. Mortgage paid off, don't drive. That 6k pays basic living, so I got a very pt job that pays about the same... for the extras...

@SwimBaby

It was a finally salary that started at 60, we asked for a valuation every 18 months and it kept getting higher. Then the last one offered a bonus of 60k if he accepted the offer. I read a good article in Which was saying the cash amounts being offered at the moment id higher than it’s ever been. A relative of mine got nearly a million for a 16k a year at 60 final salary pension.

How is that mathematically a good deal for whoever offered it, when the annuity rate is around 4% for a 60 year old? I.e. 100k pot buys you 4k income till u die.

I don't get these final salary pensions, having never had the luck to have one. I suspect many are funded by current taxpayers.

www.dailymail.co.uk/money/pensions/article-9640827/Couples-need-26k-single-people-19k-year-happy-retirement.html

Interesting article - I think to aim for a £19k retirement "salary" is realistic really especially if you have your mortgage paid off? Which would be around £1,300 a month take home - assuming no rent/mortgage this is more than enough to live on and have enough left over for nice things

I haven’t read the whole thread abs so someone might have already told you this but to have a pension income of 30k you need a pot of around a million quid.

You have an element of final salary pension and that is very valuable so you’re probably in a better position than you think

I don't get these final salary pensions, having never had the luck to have one. I suspect many are funded by current taxpayers.

Yes, as I said above public sector pensions are currently 1.6% of total government spending, or £470 a year per household which is why the government is trying to reduce them, people without pensions of their own are funding these very good public sector pensions out of their taxes.

However, some middle aged and older people will have company final salary pensions which are paid for entirely by the pension fund of the company they work for. After the government raided the pension funds in the 90s a lot of them ended up not having enough money to fund their pensions so they were closed to new employees (much cheaper to have defined contributions) and some of the pension funds were sold to external pension suppliers to minimise risk further.

Tbh I don't think many people are going to be getting £30k a year in retirement in the future. Everyone is having to spend so much on housing themselves now

Correct. That is the flip side of high house prices, which require mortgages of 30, 35 and 40 years. All of that extra interest and capital could have gone into pensions. Madness.

After the government raided the pension funds in the 90s a lot of them ended up not having enough money to fund their pensions so they were closed to new employees

The Labour government didn’t ‘raid’ the pension funds. They removed the dividend tax credit, which meant that the funds could reclaim less tax.

Fair enough, in my view: if you had to choose between prioritising investment in the NHS and building new schools, or allowing pension funds to continue to benefit from a generous tax perk, which would you go for?

The main things that sunk the private sector final salary funds were (1) people living much longer (2) dodgy actuarial assumptions in the past (3) funds taking ill advised contribution holidays when times were good (4) fiscal policy holding down interest rates (5) reductions in dividends by the companies in which the fund invested and (6) some fund trustees being asleep on the job: see the BHS and Arcadia pension schemes.

With an ISA you always own the investment so will at least get back whatever you put in ( though inflation will reduce its value).

NO NO NO!

It is perfectly possible to lose everything in an ISA. An ISA is simply a wrapper for investments. It doesn’t guarantee that your investment is protected. If you had invested all of your funds in a stocks and shares ISA in HBOS shares in 2007, how much do you think that you would have left now?

@Manycupsoftea - The maths is based on the multiple factor.
A million pound sale of a £16k p.a pot is equivalent to drawing 62.5 years of income from the pot (ignoring indexing)

So in theory, they would have to live to 122 to get the value of the pot back.

The one advantage is the flexibility in drawing the income. In an annuity or FS you receive a set amount of money each month. In a drawdown pot, it is possible to tax lump sums (taxed at your marginal rate above the tax free cash entitlement). So you can vary the income and tax adhoc lump sums out

Just on the mechanics of tracking down the old pensions etc. Have you tried asking on the MSE pensions board? There are some very knowledgeable people there who might be able to give you some good suggestions forums.moneysavingexpert.com/categories/pensions-annuities-retirement-planning

My concern about that daily Mail report is that includes state pension in calculations. I’ve no idea what that will look like in 30 years or when I would be able to access it. Really feel like I need to plan without it- is that overly cautious?

Companies now have to offer their employees the opportunity to pay into a company pension ( which they didn't all do in the past)
(Back further in the past, some companies only offered pensions to males)

However, people can still choose to opt out of paying into a pension

Some pensions also offer a payment for death whilst employed too

I am glad that I started paying into a pension in my 20s, they grow over time

[quote fromdownwest]@Manycupsoftea - The maths is based on the multiple factor.
A million pound sale of a £16k p.a pot is equivalent to drawing 62.5 years of income from the pot (ignoring indexing)

So in theory, they would have to live to 122 to get the value of the pot back.

The one advantage is the flexibility in drawing the income. In an annuity or FS you receive a set amount of money each month. In a drawdown pot, it is possible to tax lump sums (taxed at your marginal rate above the tax free cash entitlement). So you can vary the income and tax adhoc lump sums out[/quote]
Do you mean the 16k p.a. is inflation-linked till death?

still, if you buy out today you would discount back to present value?

anyway...

The escalation rates depend on the underlying fund and dates, they could be CPI, 2.5% etc

The cash value would have an element of the future indexing built in.

The benefits for some are significant, however, for some / many people. The benefits of an index linked, guaranteed income not related to invest risk, means that even with the felxibility of drawdown, staying the in the DB scheme is deemed the best advice

people without pensions of their own are funding these very good public sector pensions out of their taxes.

i guess private final salary pensions don't affect others, and they're mostly closed these days.

public sector pensions, on the other hand, if funded out of current private sector taxpayer monies on top of national insurance contributions, instead of more schools, healthcare etc... is highly infuriating and unfair, especially if there is no security of state pensions.

You have an element of final salary pension and that is very valuable so you’re probably in a better position than you think

I'm still confused by what the benefits of a final salary pension are. What do they base your final salary on? Is it your final salary at the employer who offered the scheme (if you have now left that employer), or is it final salary before retirement?

If the scheme had stopped (changed into a Defined Contributions for example) or you left that employment then it will be your Final Salary at the date these scenarios happened. This is then indexed each year by an 'inflation' % decided by the Scene Trustees according to the rules.

@hyperbole001

You have an element of final salary pension and that is very valuable so you’re probably in a better position than you think

I'm still confused by what the benefits of a final salary pension are. What do they base your final salary on? Is it your final salary at the employer who offered the scheme (if you have now left that employer), or is it final salary before retirement?

It's the final salary of the latest year(s) you worked there. There is usually some sort of index linking for those that left donkeys years ago. If pensions worry you is finding a public sector job (usually have defined benefit schemes) a possibility?

It’s the final salary at the point you left if the scheme was still operating. If this wasn’t your best salary year though you are able in some schemes to choose a different year to work from (but there are limits). If the scheme had changed either to a career average scheme or a defined contribution scheme then the final salary element is calculated at the point at which that scheme stopped.

You don’t get that salary though. The calculation will be something like final salary x years of being in the scheme / 80

@Iamthewombat

With an ISA you always own the investment so will at least get back whatever you put in ( though inflation will reduce its value).

NO NO NO!

It is perfectly possible to lose everything in an ISA. An ISA is simply a wrapper for investments. It doesn’t guarantee that your investment is protected. If you had invested all of your funds in a stocks and shares ISA in HBOS shares in 2007, how much do you think that you would have left now?

To make clear, a cash isa (or Lisa), u get back what you put in. Stocks and shares ISA (or Lisa), you could lose it.

@Manycupsoftea are you aware of how low public sector salaries are in comparison to private sector. I think we need to look at public vs private sectors packages as a whole before you decide whether or not the pension element is unfair.

[quote Mumski45]@Manycupsoftea are you aware of how low public sector salaries are in comparison to private sector. I think we need to look at public vs private sectors packages as a whole before you decide whether or not the pension element is unfair.[/quote]
Are you aware @Manycupsoftea?

That argument is well out of date now

Upper skilled occupation in smaller firms people earn 32% in the private than in the public sector. That is a fact from ONS.

If you ignore age and occupation, then on average pay alone public sector workers earn 13% more than private sector workers.

So, that argument is dated and flawed

@Iamthewombat

With an ISA you always own the investment so will at least get back whatever you put in ( though inflation will reduce its value).

NO NO NO!

It is perfectly possible to lose everything in an ISA. An ISA is simply a wrapper for investments. It doesn’t guarantee that your investment is protected. If you had invested all of your funds in a stocks and shares ISA in HBOS shares in 2007, how much do you think that you would have left now?

www.isa.co.uk/isa-blog/posts/2020/november/14/is-my-stocks-and-shares-isa-protected-/

Public sector salaries are no longer out of kilter with the private sector. In fact in some areas they are significantly better, particularly so when you factor in pension

Final salary pensions were stopped because they were costing too much to provide. Nice for those that have them.

I'm 45 and I have just over £100k currently. I'm aiming for 3 times that in order to afford myself what I hope will be a comfortable retirement.

OP, any final salary element i.e. a guaranteed income of £x per year when you stop work, is very valuable. because a) current interest rates are so low, £100k buys you an annuity of c.£4k a year b) most defined benefit schemes have some indexation for £4k + inflation each year. In 25 years time, you may need £8k to pay for what £4k pays for today. If you have a private pension you then need £200k pot to generate £8k.

@Mumski45 i didn't say public sector pensions element is unfair. i said they should be funded rather than a endless ponzi scheme

"Most occupation groups in the public sector on average earn more than similarly skilled occupations in the private sector across most firm sizes" - quote from ONS statistics

i'd guess these are likely not teachers, counsellors, nurses, emergency services, rather the armies of well-paid middle managers and fat cats...

off to look for a civil service job!