Pension

[moneymanagement]

I'm early 40's with a pension of approx £25k. I need to increase it rapidly. If I were to pay £600 a month to my pension what kind of figure would that give me at retirement age at 60/65 or 70? Is it enough to get a decent return?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pension-calculator

That’s a good link, but given that OP is asking on here instead of googling pension websites, they might need to read up on some basics first. That link assumes the purchase of an annuity, and the calculators for those are generally on the low side. It’s definitely a useful start though.

Also you have to say whether your regular contribution is gross or net. If £600 there’s quite a difference. Also, if OP can afford £600 a month to a pension they might be a higher rate tax payer, so that’s going to impact the tax relief.

I'm definitely not a higher rate tax payer!

What’s your current salary? Most calculators say aim for 2/3rd of that for your target retirement income. Don’t forget the state pension in your calculations.

Is the £600 a gross contribution, so no tax relief, or from net pay, so tax relief would be added, making it £800? Are there any employer contributions, there should be.

Have you worked out how much income you would need when you stop working full time? Without that you don’t know what target you are aiming for

I'm self employed and take home about £2k on average a month (I don't know what I earn annually). So there are no employer contributions, just me.

The £600 would be taken from my current account and put into the pension account. I don't know what that makes it?

Tax relief is explained here www.which.co.uk/money/pensions-and-retirement/personal-pensions/contributing-to-a-private-pension-explained/tax-relief-on-pension-contributions-explained-a27f53z7qg3f

It depends on the kind of pension that you have but it's likely to be the case that you are paying out of your net income and the provider will then claim the tax relief. So if you want the total contribution (including tax relief) to be £600 you only need to put £480 in. If you want to put £600 our of your net income into the scheme then you should get a top up of £150, so taking it to £750 overall. That's all assuming you are a basic rate tax payer.

£600 net, would be £800 gross in your pension, so just under £10k a year. How old are you now, and when do you want to stop working? You should check your state pension forecast, that will give you an idea of what you will get. You do that by setting up an online account with Government Gateway, you may already have one if you file online annual tax returns. If so, you can look on it for your forecast.

Assuming you are mid 40s, and pay c£10k a year in to your pension, and are entitled to a full state pension, and using the pension forecast tool in a previous post, I would guess that your gross income will be in the region of £20k, including state pension.

There are lots of variables, so don’t take that as gospel. You need to look in detail at where you invest your pension, what the costs, etc..

I'm early 40's. It would be Amazing if I could retire at 60 but not expecting to.

It says my state pension age is 68.

Have you checked your state pension forecast?

@Residentnumber1 £600 net would gross up to £750 as @Mia85 put, not £800.

OP, are you a higher rate tax payer? The lower rate tax relief is added automatically by the pension provider - so for example you set up your own private personal pension with Aviva, and pay in £600 from your account, they will add the £150 to make it £750. That’s because when you earned the £750 it’s assumed that 20% tax was paid on it - £150 - leaving you with £600. So you’re ‘getting your tax back’. Aviva - or other pension company sort all that out directly with HMRC. It’s great, pay in £600, log in same day and see £750!

If you’re a higher rate tax payer, the rest of the tax relief isn’t automatic - you can ask HMRC to adjust your tax code to allow for it, or claim it back via self assessment.

I'm not Higher rate tax payer no.

@moneymanagement

I'm not Higher rate tax payer no.

I'm not Higher rate tax payer no - thanks everyone for the links and explanations.

There you go @moneymanagement - fixed it for you.

I know the @financielle account on instagram did a few days dedicated to pensions and women especially as there is a growing gender wealth gap here.

I opened a pension bee account through them. They have a community where they talk through that type of thing

community.financielle.co.uk

I find the content really helpful and useful.

Good luck!

Thank you I'll take a look.