Pensions

[ManchesterBea]

Hello everyone,

I'm trying to get a sense of where I should be with my pension. For various reasons; employers not needing to provide pensions due to contracts, and being self-employed, I have very little in a pension pot. I am early 40s.

Due to my income, I do have disposable income I can save, and I would really love to get my pension pot to the average for my age.

However, I can't really find much information online!

If you have a pension pot, do you know how much you have in it? If you're around my age.

I'm on track for full state pension. I'm already mortgage free. So I'm lucky in that respect!

I'm currently saving 500 a month into pension. (But this has only been for the last couple of years!)

Can I ask what this means? Thanks ☺️

Thanks everyone ☺️

I think EdgarsTale means that she has a defined benefit pension so it's not based on the 'pot' she has built up as a defined contribution pension would be. Instead a defined benefit pension works by accruing entitlement to a certain pension each year. E.g. you might get 1/60th of your current salary for each year you earn and so a person earning £60k would then get £1k a year in retirement for each year that they worked. These pensions are most often found in the public sector so don't sound likely to be relevant to your current situation. As an aside, £48k a year is an amazing pension for someone of current working age and would have been pretty close to the lifetime allowance (before Jeremy Hunt scrapped it). Great for EdgarsTale but don't worry if it looks unachieveable because the reality is that relatively few people will get that kind of pension now.

If you have a defined benefit pension (very rare now) you have a defined annual pension, not a pot.

Thanks!
That kind of pension would just resulting lots of saving for me, and then I would drop off the twig, so not much good to me, not really looking for that amount. 😊

Op if you are self employed are you a Ltd company, paying wages through PAYE? If so you can make Employer contributions to your pension. This saves both tax and NI on your pension contributions. You can claim back tax if you pay contributions yourself but not NI.

A person can’t be a Ltd company. They can own one, but the company is a legal entity in its own right.

Sorry, yes. I work in the public sector so have a defined benefit pension. It just means I accumulate a set amount each year on retirement rather than a big pot of money. I won’t actually get to 48k a year as I want to retire early, so will go at 57 & take a smaller amount.

If you have a defined benefit scheme pension you can find out your CETV which will be equivalent to the "pot" the OP is talking about.

I'm late 30's and have X2 DB pensions, with my state pension it should be around 50k p/a this will fund me and DH who has a private DC pension with around 90k in it (he's 40), so will be significantly less than mine.

That is what I meant and I think most people understood that

I've just checked up on my teacher pension statement today.

I've another 10 years til I'm 60 and can take it without (the bulk of) it being reduced as I'm a transition member and have some final salary scheme with a lump sum and the rest a career average without.

If I go at 60 I'll have about £20k a year pension with a £40-50k automatic lump sum that I get without reducing my pension.

I also paid into an AVC from when I started teaching. It's not much but will give me another few hundred a month to top it up, and to make up for the years I was on mat leave and then part time and paid less into my pension.

The scheme changed in about 2014 but then was deemed not to be right, so was updated last year. This gave me a bigger amount of pension I can take at 60 and a smaller amount at 67 which will be reduced pro rata when I go early. But it works in my favour. It also boosted my lump sum by about £12K.

I will aim to quit at 60 and do something mentally and physically easier than teaching, but still keep myself busy for another 5 or so years before retiring completely.

Some people work on the basis they will draw 3.5 to 4% of their DC pot each year so on that basis you would want a pot of around £350,000.
You might not want to work to 67 though so many people also have a plan to cover the period between stopping (or cutting down) work and SPA. It’s key to know your expected expenditure.
The pensions board on MSE is good for discussing this stuff.
Pension contributions would usually be a good move because of the tax relief.
I think you need to up your contributions!

Yes, but what’s the point? I know what I’ll get each year, so I don’t see why I need to know the ‘pot’ size.

@EdgarsTale because that is what the OP was asking so she could compare her DC pension?

This pension calculator is useful

https://www.hl.co.uk/pensions/pension-calculator

The CETV of someone's DB pension isn't terribly useful to someone trying to work out how much they need in their DC pension.

I'm 46 OP so a few years on from you, my current pot is £100,000, sadly my employer contributions are low and I work part-time. Assuming pot growth to 260K, projected yearly income at 65 is £16,000 if I buy an annuity.
I want to increase this so will move to salary sacrifice when I can afford to.

Even if that £500 a month never changes, over 25 years it’s well over £300k with average growth and compounding.
That’s £9k at 3% drawdown ( which means you will never run out of money) a year plus a State pension of just over £10k in today’s values. £19k is more than fine if you are in a couple and ‘ok’ if single, as long as you are not renting a home, if that’s the case you need a whole lot more.
Renters will use the whole of their private pension and then some so would be better off with no pension at all, as their rent etc. would be covered by benefits.
It’s a horrible position for low-middle earners who rent, a moderate pension means you get fuck all and end up worse off.
Before my Sister got PiP, she was £70 a WEEK worse off for having a small annuity of £40 a week from her divorce and was £5 over the limit for HB and everything that goes with it. She had to pay full rent and I had to step in and pay her arrears to stop her being evicted, the fact that she is disabled meant fuck all to the HA.

Thank you very much for that, that really helps. Thankfully I'm mortgage free, and do have a small income from rental property, also mortgage free. So hopefully, unless something goes horribly wrong, I shouldn't be in a position where I am having to rent.

46 years old. DC pension pot is £140k but I've ramped that up a lot in last couple of years - put in £2,600 a month plus annual bonus. Project to be in region of £700k when I'm 65 after taking out tax free lump sum to repay mortgage at 57. Also have a DB pension - salary of £8k a year - worth around £200k if it was a 'pot'. DH has less and puts in less (makes more sense for me based on my scheme). But expect he'd still have around £200k.
Also saving into ISAs and hoping for an income of £55k a year in retirement including ISAs

I agree with Mia.
You should maximise your pension contributions up to your relevant earnings each year so as to benefit from the government tax relief. when you draw down your 25% tax free sum you can top up your cash again into an isa.

I'm.same age and mine is worth about £170k. What I would say, depending on your employer, they might be willing to increase your pension contributions as it cuts down their corporation tax. Might be a good negotiation tactic at appraisal time. Remember you don't pay tax on anything going on the pot and you get 25% as a tax free lump sum when you retire so use it as much as you can.

It's so complicated, it feels like everybody's financial situation is slightly different. I wish things were more streamlined, I'm definitely in position to be able to pay more, and thankfully have significant savings and mortgage free property. Still feel very lucky. I'll look the contributions! At least there's plenty of time.

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