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Original poster

How much - pension

15 replies

whatugonnado · 23/10/2021 18:42

Situation : Mid 40's, self employed. On track for state pension (although not the top amount) if it still exists when I retire. Mortgage will be paid off at the latest by age 50 (hopefully before). I Earn circa £20k. How much should I be putting in my pension each month when my pot currently sits at £20k (the grand total). I realise I'm behind but how much should I be putting away to catch up?

OP posts:
Original poster
whatugonnado · 23/10/2021 19:01

Actually I am on track to get full state pension it seems.

OP posts:
didireallysaythat · 23/10/2021 19:05

Not sure if there's anything special to think about as you're self employed, but I've heard several people say half you age as a percentage of your income. And if that's easy (!) more...

nannynick · 23/10/2021 19:08

As much as possible. How much could you do?
Are you invested in a pension with low costs, good fund selection? One thing that can hurt a pension are the costs. I had one with fees of 1%, which I transferred to a different provider and now my fees are 0.37%.

BarbaraofSeville · 24/10/2021 05:44

I agree, as much as possible. As much as you can afford, plus possibly a little extra if you can manage it. Be honest about what are necessities and luxuries.

Saving for retirement should be higher priority than things like daily coffees, clothes, beauty treatments etc that you don't really need, eating out and takeaways.

I'm not saying live like a nun and save every penny you have, but a lot of people spend a lot of money on little daily luxuries like the above and then think they 'never have anything nice' and also 'can't afford a pension' so are going to have a big shock when their income drops on retirement or they have to keep working longer than they want to and are capable of to maintain their lifestyle. You have to try and find the right balance.

What is your financial/living situation? If you live with a partner and can easily cover the essentials between you, it's obviously very different to if you are a single parent and your £20k has to cover all your bills, food and clothes for the whole family.

Rayna37 · 24/10/2021 06:01

At least 20%. If you're a high earner who has just spent a lot rather than saved so far, considerably more.

You would be much better at mid forties with a small pension pot to put any extra into that so it has time to grow rather than to overpay on the mortgage at all.

Rayna37 · 24/10/2021 06:06

Apologies you put your income in your OP! Would £300 a month be affordable? The difficulty is as self-employed there's obviously no employer contribution it's all got to come from you!

Superstar22 · 24/10/2021 06:07

From the Guardian;

A popular way to estimate this figure is the '70 per cent rule', which states you will need 70 per cent of your working income to maintain the lifestyle you want in retirement. So if you retire on a salary of £50,000 you would be looking at achieving an income of around £35,000.

Another way is to think about living 10/20/25/30 years after you retire. Share the money you have in the pot over these years & consider if it’s enough.

If you live for 20 years after you retire you currently have £1k more per year than the state pension with a pot of £20k.

I’d like to retire on about £30k. I currently have a pot which will pay £7k per year plus my full state pension of £9k so I’m a way off yet. I’m mid 30s & have paid into pension since 22.

LivingLaVidaBabyShower · 24/10/2021 06:12

Personally i'd aim to put everything over your basic tax allowance into ypur pension that way your whole salary is basically tax free.
That is perhaps only possible if you live in a cheaper part of the uk and have a partner

LivingLaVidaBabyShower · 24/10/2021 06:14

Personal tax allowance, not basic

MavisMonkey · 24/10/2021 06:23

Prioritise paying into your pension over paying your mortgage. Your payments into your pension over the next 5 years will have 15-20 years of growth assuming a rate of 5%, hopefully more, whereas you can fix a mortgage rate at 2%, plus your pension contributions are free of tax.
Waiting to pay into your pension once the mortgage is clear doesn't maximise your cash / tax benefits. You would be better extending your mortgage term and getting the cash into your pension now.

KeyboardWorriers · 24/10/2021 08:55

It's hard for us to say without knowing how much you earn/how much spare cash you have.

KeyboardWorriers · 24/10/2021 08:56

Sorry just re read and it says how much you earn.
I agree with others, I would prioritise pension over mortgage overpayments

Original poster
whatugonnado · 24/10/2021 16:31

I'm thinking I can put in £500 a month (from me) then that gets tax relief on top doesn't it? Where would that put me???

OP posts:
Original poster
whatugonnado · 24/10/2021 16:32

I'm not prioritising my mortgage it's just naturally going to paid off by age 50.

OP posts:
ChocolateHelps · 24/10/2021 16:46

Vanguard have very low fees for their very good mixed pots with their SIPPs

If you are a company director then you can pay directly into your pension and this will reduce your profits so reduce your corporate tax. You don't get tax relief on this as well but you can then pay in from your income for tax relied as well

If you have unused tax relief you can back date it for the previous 3 years

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