Does anyone else worry about their future pension?

[NatMoz]

I have 2 pensions. One from my former employer with Legal & General which has a total pot of roughly £21k. Based on predictions this will equate to £363 a year by retirement age . Bearing in mind I contributed for almost 8 years it just seems so low.

My current one is faring a bit better. It's a Civil Service one and over 3 years amounts to £2k (annual statement was from March this year so may be a little more than that now).

Even so, as it stands it all equates to about £200pm pension.

Am I being dumb here? Is there any way I can make my Legal & General pension work harder? You can choose which investment to opt for but they are just names on a page to me.

I feel like pensions are such a minefield. I have no clue what I'm doing. Also don't think there's any point relying on state pension. I'm 32 and have been working since 21.

Does anyone else feel like this? What do you do? I'm considering a stocks and shares ISA such as Vanguard?

[quote nameswap48]@stevalnamechanger because that's what you want, not what you need, so don't try and scaremonger people telling them what they "need" to do particularly when you don't understand their pension. [/quote]
I'm not scaremongering , I'm sharing my opinion that 20k isn't enough - however I suppose that depends on what you're current lifestyle is .

The guidance is that people should aim for 1/3 if their current salary on the Aviva money site however if someone earns 25k now that might not be accurate.

Ultimately there is a huge pension crisis ahead - hardly anyone is saving an adequate amount for retirement outside of DB schemes ( even some of those won't be adequate!)

Based on my view of ;

• Rising cost of living
• The likelihood that we are all going to have to become reliant on private medical care to have the treatment we need in a timely fashion

I worry about not having a pension because I can’t afford one. I worry about not getting a state pension either. Don’t know what’s going to happen to me.

@stevalnamechanger how do you know if £20k isn't enough? CS pensions rise with inflation, Op could have property? You can't make a judgement based on a few lines on a forum, and £20k would be plenty for most people, it's those who are wanting a certain lifestyle who will likely need more and I'm sure they're planning.

Youre saying it's wrong to go purely based on percentage of salary and yet you were the one telling OP she needed to put at least 20% in not understanding she is putting 30% in.

[quote namechanging564]@stevalnamechanger how do you know if £20k isn't enough? CS pensions rise with inflation, Op could have property? You can't make a judgement based on a few lines on a forum, and £20k would be plenty for most people, it's those who are wanting a certain lifestyle who will likely need more and I'm sure they're planning.

Youre saying it's wrong to go purely based on percentage of salary and yet you were the one telling OP she needed to put at least 20% in not understanding she is putting 30% in.[/quote]
You're completely right.

I do also have property, I rent a flat out which I hope long term will be an additional monthly pension contribution and £20k is my current 2/3rds of existing salary.

I will consider an additional vehicle though.

Thanks to this thread I've done some planning which has made me feel less panicked about our situation. I'm probably ok as I have a LGPS defined benefit pension but DH has barely anything and is years ahead of me. Off the back of this I've made a plan to overpay on mortgage sooner so we can increase his SIPP contributions.

The thing people forget is that huge amounts of their working salary go on tax, NI, pension contributions and iften student loans. Most of those outgoings will be gone in retirement. This is why the figures for a comfortable retirement are surprisingly low....plus it is assumed you are mortgage free and not supporting children in a significant way anymore.
That's why £18k can reasonably support a single person and allow for some holidays and leisure beyond a basic existence and £27k will do it for a couple.

On one hand , some people have rather ambitious goals for figures well beyond what they are likely to need, and on the other, those who have pension provision which might supply them with less than £5k per year. Knowledge and balance are needed. Knowledge is power and can allow action which will make retirement workable and sometimes possible far earlier than people think.

By looking into pensions seriously a year ago, I have realised I'm in a good place. I've realised my defined benefits pension which can be taken at 60, plus my full state pension which I will get at 67 will be enough. By working out what we need to live comfortably in retirement,nice been able to work backwards to see exactly when I can retire and when we will have the money in oak E to fund it. In fact, I've realised that the money I have also saved in a private pension and can access from 55 and fact my DH likes work and wants to keep going, means I can stop at 55. His salary and some savings and the small or imate pension we can get from 55 will 'bridge the gap' to 60 when my defined benefit pension will pay out. The fact we are already mortgage free has made much if this possible.

So, previously I thought I would like to retire at 60 but had no idea if it would be possible. Now I know that not only it's possible but I can stop 5 years earlier. That knowledge has been very empowering.

Everyone needs to;
FInd out what their pension pot or defined benefit pension is likely to deliver on a yearly basis at retirement.
Find out what their state pension forecast is.
Work out what they actually need in retirement - ni randomly guessing a figure you fancy but calculating what you soending on bills, holidays etc.
Make any adjustments necessary to bring what is needed and what will be available I to line together. This could be contributing more to a pension or understanding a further off retirement will be necessary.

But everyone beyond 45 and ideally before, should gather thus info and be purposely moving towards retirement, not randomly hoping it's all going to work out, but being clueless abo their own circumstance.

We'll be laughing if we have our public sector pensions and state pensions, but I'm very suspicious of the state pension and worry it'll be means tested before we get our hands on it.

People say this about state pension. There might be adjustments down the line, but it is not going to shift to a position where all their years if contributions you've made, and forecasts of what you could receive are suddenly wiped out and you get nothing unless your income is below a threshold. As others have said, this would be the biggest political suicide possible for any party and will not happen.

There's a difference between some changes being likely (such a s rising ages etc) and it being removed altogether. Yes, don't reply purely on state pension (if that's all you had, you'd struggle anyway) but there's no need to ignore it altogether in your calculations and think you'll get zero.

@WombatChocolate thank you, my DH has been saying they couldn't do it (morally speaking) due to contributions. I think I'm just so skeptical about everything these days. I suppose we are in the fortunate position we could draw down a large sum to enable us to retire earlier if they extend the age, again. Right now just concentrating on the mortgage and committing to civil service.

My defined benefit pension (around a fifth of my employment) is currently under fire which is worrying. Lower benefits and rather than rising with interest rates, interest increases being pegged at something like 2.75%. Many will be tits up if interest rates go higher. Not sure if these changes would have retrospective effect or are only for new entrants to the scheme or if only affect year accrued after the lroposed changes. It’s been nigh on imposissible to find out the answers to these which may really affect whether people’s calculations and planned retirement is even possible. Hmm

Do you mean inflation and index linking if pensions, rather Han interest rates?
Which defined benefit pension is it you’re referring to?
The public sector ones are now linked to CPI not RPI which gives lower uplift for inflation, but importantly still gives it……most annuities don’t include this, unless you pay even more for them, and pension pots and savings are always being eroded by inflation.

Defined benefit pensions (esp public sector ones) might not be quite as good as they were, when final salary, with an end age of 60 and rpi linked, but they are still SIGNIFICANTKY better than defined contribution schemes. Simply the fact there is a defined benefit which means you. An plan with certainty towards retirement, and at least what has been accrued already is protected is worth a lot.

It was indeed inflation not interest rates. Long day here ! Bloody hell back to basics. Thanks for help

Lots of interesting info here:

www.which.co.uk/news/2021/06/the-secret-to-a-happy-retirement-26000-per-year-which-research-reveals/

www.bbc.co.uk/news/business-58883053

This has come out today too, £10,900 is the minimum they recommend in one study apparently (I'm assuming that's for people less high maintenance than me!)

Youre saying it's wrong to go purely based on percentage of salary and yet you were the one telling OP she needed to put at least 20% in not understanding she is putting 30% in.

-> I was recommending she up her contributions to a SIPP not the CS DB pension that it isn't possible to up contributions to....

How do you know if £20k isn't enough? CS pensions rise with inflation, Op could have property?

It was my opinion , and they didn't state that they had property so my comment was on the basis of what is given.

The problem with basing the pensionable future on a couple is that you migh have split before becoming pensioners.
And at some point one if you is going to die
We really need to be able to be able to afford retirement as a single person & that is very hard.
I would love a CS job but I do wonder how much longer the pensions will be as good as they are.

They'd have to make a big change to pay if they wanted to make dramatic changes to the pension, the pension is how they retain much of their staff!

@HandlebarLadyTash

The problem with basing the pensionable future on a couple is that you migh have split before becoming pensioners. And at some point one if you is going to die We really need to be able to be able to afford retirement as a single person & that is very hard. I would love a CS job but I do wonder how much longer the pensions will be as good as they are.

Exactly ! Hence why I'm plotting for a higher retirement income .

I'm also worried about state funded healthcare being unavailable the

@HandlebarLadyTash

The problem with basing the pensionable future on a couple is that you migh have split before becoming pensioners. And at some point one if you is going to die We really need to be able to be able to afford retirement as a single person & that is very hard. I would love a CS job but I do wonder how much longer the pensions will be as good as they are.

This is sadly the most important thing to bear in mind as I have only recently fully grasped.

My H is 66 and has just been diagnosed with a terminal illness. I am 64 and will get the full New State Pension at 66, plus slightly less than £500 per year private pension, so a total (after April's rise) of around £10,000 a year.

If my H dies before I am 66 I will get half his Defined Benefit Pension, which will be approximately £5,500 a year. That is clearly not enough to live on so I will probably have to get a job at a time when I will be seriously grieving and have lots of other practical things to think about too.

If he lives until I am at least 66, so approx another 16 months, I will have an annual income of 10 + 5,500k, which will be taxed, and so the nett amount will be just under £15k. Which I will have to manage on.

I had thought we'd planned our retirement really quite well, with an annual income of around £30k (including 2 full state pensions and good annual increase of 5% to the private pension part) which would have been comfortable for us as a couple. Yet on my own, with household costs (very high council tax and fuel bills) I think I will have to live quite a frugal life with just £1,200 ish per month for everything. And I will have to pay for stuff to be done that my H used to do without thinking - mending things etc, and some gardening if I can't manage it all.

I had thought I might have to manage alone one day in my old age, but in my mind that wasn't until my late 70's / eighties, when my spending would likely be a lot less. Not thinking for a minute I would be in my mid 60s and still feel young and have to get on with life on my own.

So yes, even if you are thinking of your retirement income as a couple, always keep in mind it might be just you in the years ahead. Hope for the best, prepare for the worst is the best plan.

thisgardenlife I am so sorry you are going through this. Obvs you will have checked details of his pension but I do wonder one thing. My defined benefit pension has death in service benefit (if I die whilst still paying in) where any spouse or civil partner would receive 3 times my annual salary as a lump sum plus half of my pension. Also if I die whilst already retired any surviving spouse/civil partner would receive 3 times my annual salary as a lump sum plus the half of my pension.
Those lump sums may not apply to your DH pension but are you sure they don’t ?

Forgive me the second lump sum (if I die after retiring) would be 3 times my annual pension not salary.

@thisgardenlife absolutely, and this is why women (because it's mostly women) need to think so carefully about part time work or being a SAHM when at that stage of their life, it's said so blase on threads "childcare costs more than I earn " etc but few think about the long term impacts, the lack of pension contributions in those years and the long term hit in a career. I'm really sorry you're going through this.

Maybe I wasn't being so dramatic based on this research ...

Hummm not sure about those figures though, i dont spend £94 on food shooping now and very much doubt that we will need 2 cars in retirement.
Apart from that theres zero chance that DH & I will have £49k a year pension fund 🙈

@stevalnamechanger it wasn't that you were being dramatic, it was that you were giving broad advice without taking account of their situation. You were telling people to put more in without even knowing their situation. Without making any overpayments I am on track for more than £36k a year, yes I don't know what will happen in future, but I do know that right now I have childcare bills, a large mortgage and children to raise, so prioritising retirement over current living when I am on track for a comfortable retirement doesn't make sense right now. The OP is in a similar circumstance with young children, property and a very good civil service pension. When we are out of the coal face of child rearing then we may re-evaluate.

Putting more into retirement doesn't make sense for everyone at every point of their lives.