Pension query

[Pammela]

Hi, I work in the public sector so have a salary sacrifice pension- about 9% contribution.

my husband has been offered a new job and we are currently looking through it all to decide what’s best.

His new employer contributes (I think) 5% towards a pension.

What is the normal amount to contribute yourself?

This is a higher salary, but we are trying to weigh up how much higher as we would also lose all child benefits and have to use more childcare aswell as paying quite a bit more in tax! thanks

My employer contributes 5% into my pension and I salary sacrifice at the moment 25% into it, but would like to increase that by another 5% at my next pay rise.

Can he use salary sacrifice to put more into his pension so that you keep child benefit etc?

There is no right amount - it is what ever you can afford.
If the new employer offers salary sacrifice you can put in more in the pension and get you just below the threshold, if you are close.

No, the salary is too much to be close to keeping child benefits. Obviously we could put a fair bit into a pension but we’d also like to enjoy/need the increase in salary.

25% sounds very high- we absolutely wouldn’t put this in. I’m just wondering if people match their employers contribution or try and go a fair bit more.

Matching your employers contribution should be the minimum.

Mathematically and therefore financially the “best” option for your future self is to put in the maximum you can.

Yes I do understand mathematically why it would be for the best but I do want a bit of a balance with living now too- so we could actually use the money to improve our quality of life. We have other methods to aid towards retirement too- so hopefully won’t be solely reliant upon pension.

Just looking for a balanced perspective of people who have a decent lifestyle and what people contribute to pensions.

Martin Lewis suggests the percentage should be half your age.

Everyone will have a different answer to this question because of their individual situation and priorities. Maybe start by looking at your lifestyle now, and how much it costs. Then think of how much more money you need for the lifestyle you want, and see what is left to invest in a pension. Look at your projected income at retirement too, and what lifestyle you’ll want then.

I have an NHS pension so my contribution isn't relevant. But my husband has a standard DC pension with a 5% employer contribution and he puts in 25%.

Most people don’t put in 25%, don’t worry Op!

In my experience of well paying private sector pensions, 5% as a maximum contribution by the employer is low. For context, my current employer puts in 10% if we contribute 5%. Others have put in 7/8%.

Are you sure they don’t put in minimum 5% but more if you contribute more?

The stat I have always heard is that you should be putting in (in total - employer and employee combined) half the age you were when you started your pension. So if you start it at 30, you should be putting in a combined 15% cor the rest of your career.

Therefore, how much you put in depends in part on (a) what the employer puts in, (b) the minimum amount you need to put in to get the most from your employer, (c) how long you have had a pension and what you have already paid in / what’s in the pot already.

There are a number of online calculators that help you decide how much you need to put in to then have the lifestyle you want at retirement age.

For what it’s worth, I started my pension at 22 but I put in a total of 17% (10% employer, 7% me) now

Everyone pays in different amounts depending on their circumstances.
My employer would match your own contribution up to 11% but many of us paid in more as it is very tax efficient and for some of my colleagues it kept them below the higher tax threshold.
20, 30 & 40%+ were not uncommon (we are talking people in the latter end of their careers here).

Most companies I've worked with the employee element is about half the employer. It's usually at least 10% from the employer though so would be 5% for the employee.

If I were only getting 5% from my employer then I'd want to do 10% employee to bring it up to 15%. Depending on age though if I were close to or over 50 I'd want to put more away.

5% is not generous.
Hopefully he is receiving significantly higher pay to compensate and should just earmark a chunk of it as 'never seen' income.
Employer I recently left put in 16% and I put in 8%, so 24 in total.
Don't forget pension contributions are tax efficient.

Ok, thanks. I just double checked and it is 5%..
there’s private healthcare (which I think is relatively standard?) and a car allowance which is about 7k.

The salary is sitting at 92k atm. I will sit down with him and calculate something that seems ok.

Like I said, we actually have something else that’s pin pointed for retirement, and I have a public sector pension. So, we’re not solely reliant on this.

I think 5-6% is low for employer contribution, but quite common unfortunately.

My employer also gives 6% and I add in 10% - I'm about 30 and only really got started paying properly into my pension this past year so have gone with the 50% of age rule.

Setting aside the pension contributions, if the current pension is a public sector pension I assume it is a final salary / DB pension scheme?

and I assume he'd be moving into a private DC pension scheme?

If you've not already done this then I think it's worth you getting comfortable that you're happy with the difference because outcomes could be materially different under the two schemes.

Assuming he takes the new job, 5% employer contribution is probably industry average. He'd probably want to contribute a fair bit on top of this.