Worried about lack of pension

[Ritaskeeterdidit]

I’ve found myself in my late 40s with only around 50k in my pension pot. I’ve been neglecting it for years due to having seemingly more important things to pay for/working part time to raise children and now I’m really worried. I’m self employed so no workplace pension to join. I will get a full state pension (whatever that looks like by the time I reach retirement age) but I’m not sure what to do for the best to bolster my private pension. How much, realistically, do I need to have in the pot to be able to live comfortably? Do I need to open a basic pension with AJ Bell or similar (one where I can be hands off) and put away as much as possible? I won’t have a mortgage by the time I retire so that’s something but I’m worried about affording the basics.

More than I’ve got and I’m 64!

I’m in a different country, but investing is investing on some levels. Find a suitable investment/pension product. Find out what e average return has been over the last 10 years. All funds have good and bad years, so comparing funds based on the 10 year return is a decent comparison point. I’d want something with at least an 8% return over the past 10 years.

Roll your 50k into there. Then set up a direct debit for a weekly or monthly amount to go into the fund.

If it continues to return 8% over a ten year period, then what you have should double every 7-8 years. That said, those weekly or monthly contributions will boost it too. That means you’ve got a bit of scope to see what you already have really grow.

You may have waited a while, but at least you’re onto it now and not waiting until you’re 60. It should end up being quite a useful amount on top of a state pension.

Knowing that your home will also be paid off should be a good boost too. I see you’ve also mentioned the possibility of a boarder. Even if you did this for a few years and put the extra into your investment, it would really help. But, it’s that compound interest that helps the most, so if you’re going to give it a try for a few years, do it sooner rather than later.

work out your current living expenses annually ( excluding mortgage) and include clothes Christmas and holidays maintenance of house and car pet bills etc , when you have a figure what you need annually then work out what % of this figure would be covered by state pension

I do think this is incredibly difficult to work out when you're still in the expensive parenting years. I'm in my 50s with three teenagers still living at home. I know we won't have a mortgage to pay in retirement and we won't need to save at the same rate but it's really hard to work out what two people need to live on. Food, gas, electricity, water, days out, holidays, clothes, car costs (we have a 7 seater), alcohol, children's allowances, even home improvements will all go down so much. But how to work
out how much is hard. And we have to put them through university between now and then which will curtail our saving quite a bit. But at some point we'll inherit but don't know how much. And since we've got good salaries we can afford a good quality of life so if someone else says 'oh, you can easily live on £20kpa will that also apply to those of us who currently have several multiples of that? I know I'm in a better position than most but will it feel like enough in retirement? And will it still feel like enough 20 years into retirement (MIL is 88 and still travelling the world).

work out your current living expenses annually ( excluding mortgage)

ok so why should you exclude this? Genuine question

I’m fortunate enough to hopefully not have a mortgage when I retire. My friend has been only interest only for most of her term

she's now paying into a repayment mortgage and minimum pension but she’s late 40's. I assume there’s no help with mortgage payments when you retire?

@OnTheBoardwalk the advice was to OP she said her mortgage would be paid off by then so obviously it will no longer be an expense,

I agree not everyone will necessarily have paid it off by the time they retire or they are possibly looking at using their tax free lump sum to clear balance

To check on how much state pension you will get contact the Future Pension Service on 0800 731 0175 and ask for a Pension Forcast. You will get a print out of your national insurance payments from the date you started working. This will show how much state pension you will get and more importantly if there are gaps in your contribution record for periods of sickness and unemployment and whether you can now make payments to increase the amount at pension age. Any period you were signing on or claiming sickness benefits should have seen you get credits for your pension.

There's a useful site gov.uk which has a load of useful information including social security benefits and state pension entitlement. It has benefit calculaters as well.

I did take out a private pension with a company called Equitable Life. That turned out badly so I started looking in charity shops buying vynil records back in the late 1980s before the charities realised the potential value of the original records they were selling. I now have a valuable collection to auction off.

@Gordon1958you can do all that online in 10 minutes. You don’t need to write to anyone. You just need to set up your account log in.

Well that's nice of you. It makes you feel better to spitefully think that other people who have been more sensible than you with saving won't get the state pension they've paid in for over their working lives?

Why on earth should I fund your pension if you want to steal mine?

A decent hope would be "I hope the pension triple lock continues"
not "I hope they take other people's pensions away, who are already funding mine"
😡

OP, thanks for posting this, it has prompted me to look at my pension. I'm in my very early 30s and have about £20k in my pension pot. I've been playing with the money helper pension calculator and it has been eye opening, I hadn't realised how little the standard pension contributions from my salary would give me back in retirement.

Yes they are saying that £100k pension pot will pay you £400 per month - and in fact it's a bit optimistic.

There's something called the 4% rule. If you have a pension which you take as drawdown (ie you keep it invested in the pension, but you take some out each year to live on) then as a rule of thumb you can take out 4% of it each year and reasonably expect it to last you 30 years.

4% of £100k is £333 per month.

The alternative to drawdown is to buy an annuity, which gives a guaranteed income for life. Annuity rates vary, but aten't all that far off the 4% rule.

OP, when you get there you'll want to think carefully about how much of your pension fund to use to buy an annuity, and how much to keep as drawdown, which will allow for uneven income needs over your retirement.

But for now, focus on getting as much into your pension as possible.

Remember that inflation is the killer: if you have it in a savings account with 3% interest but inflation is 5%, then you're actually losing money each month. With your time frame of 20 years, most people would advise investing in the stock market. People have given good advice on where to start learning about how to invest. At it's simplest, you could put pension savings each month into a low fee index tracker in a SIPP.

Be aware of fees - they make a big difference long term.

And look very carefully into terms and conditions before transferring your existing pension. Fees are percentage based (although with a minimum) so it might be doing fine where it is.

And don't panic. The next 20 years of saving as much as you can into a pension is long enough to make a big difference to your retirement.

But you do need to prioritise it. As a pp said - well done for facing up to this now. You future self will definitely thank you: every month for 20-30 years.

Agree, keep your hands off my SP. I have paid a bloody fortune in tax and NI and have taken the SP into account in my planning. I'll be bloody furious if it is taken away to give more to those who didn't contribute or save. Absolutely not ok and will never be acceptable.

Have you ever sat down and added up how much you’ve actually paid in national insurance and then deducted everything that you cost the NHS education etc It’s highly unlikely that you’ve actually paid a bloody fortune or or a net contributor because this so a few of them

OP you have a home and say you will be mortgage free by the time you retire. That is huge and will save you a fortune. Depending on the size of your home is downsizing a possibility in your 60s?

It is far from ideal not having a large private pension but the real ticking time bomb is those expecting to retire without owning a home. You would need a huge private pension especially if future governments drastically reduce/ eliminate housing benefit.

The amount of NI paid is actually on gov.uk.
Of course there are plenty of high earners around who have (or still do) contributed a lot and saved a decent amount; it's not unreasonable for those people to include a full SP in their planning and it would be outrageous for that to be removed because they earned well, contributed and saved for retirement. We can't have SP/ PC reserved for people who were either low earners or non contributors, that would be breaking the social contract and be demotivating to save.

They won't means the state pension - that would kill it. What they could do is remove the triple lock and then use means-tested benefits to make up for the pension inflating away to being meaningless within a few decades.

The people that would most hurt would be people with a small pension, like the OP..

What social Contract what did you sign?

Absolutely ludicrous suggestion.
It won’t demotivate people to save, Look at the US they pay more tax than us receive less services and believe me they bloody save. Because the alternative is destitution

I totally disagree that de-motivation to save is a ludicrous concept. Just look now at the number of people suggesting no point in saving a small pension or to spend everything they can because then you won't get PC or help with care fees etc.

And of course you don't actually sign the social contract, it is implicit in civilised, organised society.

Somewhat ridiculous to rely on anything that’s implied rather than written down it just doesn’t exist. You’re delusional.
People who are already demotivated to save if you like will continue to be no matter what the circumstances because actually it’s highly unlikely they aren’t demotivated to save they just physically can’t because they’re living hand to mouth.
that particular group of demographics is increasing month or month already.
I’ve never been more certain than anything that they will remove the triple lock.

Given that the constitution is actually written down and that is out the window already, I’d find it remarkable that anybody relies on a social Contract. It’s actually hilarious.

Having no welfare state works - because people save in order to not be destitute, as you say.

Having a Welfare state that applies to everyone works - especially in a well integrated society,c where everyone feels that the rest of society has their back They're willing to contribute when things are going well for them on the implicit understanding that they will recieve help themselves when they need it.

But a system which takes loads of money from just a few people in the society, and by definition doesn't ever pay out to them because they are wealthy enough to contribute? 😂😂😂 No, that doesn’t last.

Apparently the idea of a well functioning society with a welfare state that applies to everyone is now a hilarious, ludicrous concept 🤷

I was clearly bonkers to work my socks off, pay my way, and expect something in return, who knew.