How much is my pension likely to grow in 5 years

[Slothfully]

I have £122,000 in my pension pot. If I salary sacrifice £12k per annum for the next five years, how much am I likely to have in the pot?

Obviously it's never 100% as market goes up and down but go on a compound interest calculator one where you can add monthly contributions. Put a quite conservative 5% or something in they interest part

My pension guy says plan on 4% growth. Quick calculation says in 5 years it should be in a bit north of £200k.

What have you invested your pension in?

I didn't expect replies in the middle of the night - thank you!

The company pension scheme.

I'm clueless but, as I get my state pension in just over 5 years time, am trying to get clued up.

Quoted myself by mistake there 🙄

Think I need to stop mithering and get some sleep.

There are lots of good pension calculators online that will help you with this OP - put it in a few as they make different assumptions so it’s good to see a range.

Also one piece of advice, have a look at the default investment plan that your work is using. You may want to consider changing it now or in a few years if you plan to take your pension in the not too distant future, to reduce the risk profile. (Standardly, the longer you have before retirement the higher the risk should be with your portfolio.)

Like PP said, if you are near the end of your working life then your pension should be investing in safer funds. This should mean lower growth and something more stable so you can plan better. Can you organise a meeting with your pension provider to discuss it?

Thanks again all.

Can you organise a meeting with your pension provider to discuss it?

Will do!

Interestingly I was listening to a pensions segment on the radio last week and they said this advice is actually less relevant now. Because most people use drawdown rather than annuities you don't necessarily need to be as conservative as early as before.

I'm hoping to carry on part time rather than retire at 67 (enjoy my job) and I have more money in S&S ISAs than in the pension pot so will probably tap into those first.

Does your company pension scheme provider have a website with a forecasting tool you can use? If not, could you contact them and ask for a forecast for your proposed retirement date based on current contributions?
Also, you might like to book an appointment with Pension Wise (it's free): https://www.citizensadvice.org.uk/wales/about-us/information/pension-wise/ My husband and I found their advice invaluable.

It depends on what it is invested in, what fees you are being charged and how the market does.

An appointment with pensionwise is definitely a good idea.

I would also suggest Rebel Finance School or the Meaningful Money podcast and YouTube videos to learn more about pensions and investing so you can learn ways to maximise your returns and plan properly as well as consider your personal risk tolerance.

Neither of the above will cost you any money.

The advice I received was that if you want to grow your funds fast you might get faster growth by investing in funds via a stocks and shares isa. Eg in 5 years my ss isa has grown by 15% while my pension only by 10%. Review all your options.

The tax and NI savings from salary sacrificing into the pension would blow the ISA away in those circumstances.

Sorry but that doesn’t make sense, was that advice from a financial advisor trying to flog you an ISA?

The growth depends on the funds you invest in, not the wrapper those funds are in (pension vs ISA).

As pp says, pension value usually increases quicker because of the tax breaks. Presumably your pension has grown slower than your ISA because of a different investment strategy, or higher fees.

Best of both worlds might be a sipp.

You need to look at a few options based on your risk tolerance.

The standard advice to be more conservative towards the end is sound enough, but do consider how much you need, and see what level of risk allows for achieving that.

I've been catching up my pension pot in the past two years, and it's grown 60% in total, but then I'm in my thirties and can stand the risk.

I'm invested in a Sharia fund for now, they're generally considered to be a reasonable balance of risk and profit.

Sorry OP, I don't want to confuse things for you!

There are huge benefits to saving in a pension rather than ISA :
1.Your employer will usually contribute, sometimes even matching additional contributions you make. This is worth maxing out: it's free money
2.Your tax is deferred. This is worthwhile even if you'll be in the same tax band in retirement, since you get the growth on the gross amount
3.You get to take some of your pension tax-free.

The only things that might put you off are:
1.You can't access it until a certain age - but sounds like you're in the clear anyway
2.You might find that the investment plan isn't what you want (which is what ozanj suggests)
3.You might be paying fees which aren't competitive (which does make a big difference)

If you're worried about negatives (2) then you have the option to open a sipp - which is similar to an ISA in that you choose your own funds, but still gives you all the tax advantages of a pension.

But the pension contribution from your employer is usually worth much more than that.

And if you're asking advice on returns, it sounds like you still need to do a bit more research before making your own investment fund choices.

My advice would be to find out whether your employer matches further contributions. If so, it might be worth increasing your pension even further (possibly using some of your ISA now instead). But get advice!

I've got a further £12k pa that I'm putting into S&S ISA but am now wondering about putting it into pension instead. Employer only matches minimum. Am going to request meeting with provider and book appointment with Pensionwise.

Thanks all for not pointing out what a numpty I am for getting to this age and being so clueless. On the plus side the house was paid off 3 years ago.

People who have less than 10 years to retirement and who need to grow their pot fast are never advised to add more to pensions. Pension provider strategy is often for ‘slow and sustainable’ growth even for high risk funds. So a 60 yo isn’t going to get the same out of the same pension investment as a 40 yo. ISAs, however, have more room for you to choose your strategy - you can choose funds that are higher risk, buy equities. I have investments (unfortunately not ISA wrapped but you can do the same in an ISA) where 50k has turned into 140k in less than 5 years.

SIPs are okay if your employer contributes too. But I would still max out my ISA allowance first.

Not necessarily. It would depend on how much you’re contributing in total. I put 20k a year into my ss isa and pay approx 35% of my salary into my pension including employer contributions. Similar types of high risk equity funds. The ISA has grown faster over a shorter period. Unfortunately for me my non-ISA non-Pension investments have grown fastest lol

That sounds like spectacularly poor advice. An ISA or pension is just a tax wrapper - you can broadly hold the same types of asset in each, and so the returns will be the same on like for like funds…except, with a pension you get tax relief in the way in making the actual return much higher.