Twice your salary in your pension pot at 35

[Mushroo]

I saw this headline earlier from the Telegraph. Is it just me or is that crazy?

Do people really have that much saved up in their pension pot at 35?

Im 30 and don’t even have a years salary saved!

I am assuming it's a public sector defined benefit pension?

If so, the thing to look at is the annuity, not the hypothetical cost of purchasing that annuity. They typically work it out as the annual payment being 2% of the hypothetical value, but it's pretty meaningless. The £20k is the number that actually matters to you.

And yes, that's very good. Tbh, you're hitting the threshold for being taxed on your pension now, as I think that's £1m.

Im early 40's and have a private pension of about £60K. It so hard to save with children as they are now at the age of university which is a sickening cost. Even if I just pay for their accommodation, its still £600 a month per child. They are working to pay for food and bills, student loan for tuition fees.

The rule of thumb I was taught is that whatever age you start paying into a pension, you need half that age as a percentage going in.
So if you start at 20 then you need 10% going in (including employer contributions)
If you're 30 when you start then you would ideally have 15% going in (including employer contributions).
At the start of the year I would have been doing well on this telegraph suggestion as I was working part time. Now I've gone back to full time my salary is larger so my pension pot isn't double any more!

That’s not how ‘pots’ are valued for final salary pensions though. HMRC takes a far more generous view than available to most of the private sector. The value , for lifetime allowance purposes, is determined by the pension earned to date. Am guessing 5 60ths of salary, so 1 twelfth of £35k which is £3k in round numbers. Which is then multiplied by 20 as HMRC believe a 5% return is appropriate, and that’d give a ‘pot’ of £60k. Add in variable for nearer 6 years than 5, and maybe it’s not a 60ths scheme and £72k seems entirely believable.

But, that level of pension would cost someone in the private sector more like £100k to achieve…. So current pensions rules mean a public sector employee can achieve an index linked retirement income from their pension LTA (£1.1m) of around £55k when those is DB schemes are unlike to get £30k from the same value ‘pot’ with the same index linking… Thanks Gordon ;)

I'm going to have a pension pot of 500k. Even that is only enough for a 25k salary annually. I don't think a pot of £60k will go anywhere tbh!

I’m 45 and I have about £200k. According to a recent statement that gets me £15k a year…..

@Octomore thank you that is REALLY helpful. Yes it's NHS. Sounds daft but I genuinely didn't realise that about the £1m thing, I know colleagues have hit this threshold but I'm younger so was hoping I wasn't there yet. I will keep an eye on it.

For info, this page shows sample annuity rates based on a £100k pension pot. There are various options available - the best rates are often not index linked and therefore could devalue very rapidly in times of inflation.

www.hl.co.uk/retirement/annuities/best-buy-rates

I hope that’s true because if so I’m just about on target!

BUT I had the pretty good fortune (pension-wise!) to fall into working in annuity policy set up for my first proper job, so I immediately understood very early on the value of saving up!

and I’ve only achieved my current pot by working for a company that seeks to set a good example in the market (seeing as we sell annuities/pensions!) and has made generous employee contributions for years before it was an obligation.

I’m not rich at all btw!!

Very good thing to think about as early as you can, as it’s length of time saving up and being invested that really makes the difference. Start as young as you can and as much as you can afford - that’s the best you can do.

@user1471504747 it’s 15,8% (which is an incredibly high rate) of some form of your earnings - might be all your salary, or it might be anything you earn over a certain threshold. Your employer should be able to give you more info on that

^ Those annuity rates only apply to people purchasing an annuity at retirement using a defined contribution pension pot though.

Ignore them if you're on a defined benefit scheme as the number that matters is the one in your pension statement.

I’m early 40s and have DC in nursery! So even bigger costs plus university costs to look forward to. Basically, I won’t be retiring 😭

Thank you!

I’ll find out - I’m on a mission to be more pension savvy!

You might be surprised.
I was a teacher only for about 2.5 years and I'm currently looking into cashing in the pension. It's worth about 25k.

@Caminante thanks that is reassuring! Hoping it'll be more than I imagine when the time comes.

@Caminante it’s almost never a good idea to cash in a DB pension, keep it intact if you don’t have really good reason to.

Yes I do have this and some but my employer has a decent scheme contributing 10 percent and them matching anything extra up to 7 percent so my total cost is 114 a month and 403 a month goes in and I have worked there 23 years. Its something I have always kept a close eye on and will continue to pay as much as I can afford too into it.

I'm just about there with double my salary by 38.

Started a pension at 23/24. I used to pay in 5% and so did my employer. Moved jobs at 29 and I paid in 7% and they paid in 8%. Moved jobs at 37 and I pay 7% and they pay 11%.

In that time I've bought a place, got married, moved twice and had three maternity leave years.

I've just started to try and get my head round the whole pension thing.

m.youtube.com/watch?v=NHKqzTiJDAI

This guy seems to have some helpful information.

I’m just about double my salary at 34. Was pleased with that until I remembered that DH has next to no pension! We always joke that I’ll be cruising in my retirement and he’ll be camping 😂 although in reality we’ll probably both still be working to pay the utility bills 🤦‍♀️

39 years continuous nhs service, working mainly night shifts and my pension is £9k pa

Nhs pensions are shite cos the wages are shite.

I agree with this. One of the only exceptions would be if you know you don't have long to live. Otherwise, the annual value will almost certainly be worth more than the cash.

Bear in mind the first 25% is tax free and you won't be paying national insurance contributions

Well...I really need money to make essential repairs to my house.

The projected income is around £1k a year so it's not exactly huge.