Is it normal for my pension income to exceed my salary?

[Oldtowel]

I recently worked out my pension (combo of state, private and work) is worth £57,000 a year. This might not sound like a lot but I currently earn £45,000 a year. It struck me as strange that my pension is more than my current salary. I started my private pension in my early 20s and am now mid 40s so have been contributing a long time.

Everyday currently feels like a slog and the money doesn’t go far. I am working hard on trying to increase my income but not making much progress.

I am still 20 years off retirement so there is still hope for progression but at the moment it seems so strange that I have to wait for retirement to be better off.

Am I doing it all wrong and putting too much money in my pension pots? Or am I deluded and this is actually a measly pension?

Mine will be double my salary but only because part i received in my divorce settlement (though the reason I didn’t have a large pension was due to constant moving for his job!)

Yes, it will be based on continued contributions from now until you retire and forecasts of salary growth and inflation. You would probably expect to be earning a lot more than you do now by the time you retire so £57k won't be so much. So it doesn't actually exist at this point. But well done on looking at it and getting better informed.

By the way the 4 years of pension I got in my early twenties is substantial compared to what I put in, if you invest young it pays off

Is it DB or DC?

If it is a projection is may allow for future contributions, investment return for the next 20 years. Plus it’ll be £57k in 20 years time not £57k in today’s money if that makes sense.

I don’t know what assumptions are fed into your projection but it may be worth finding out. I think in my pension app it explains exactly what the projection represents.

Yes that includes the state pension.

In 20 years’ time your salary might be £150,000.

And a pint of milk might be £10.

I think the key thing is to have a look at what the pots are actually worth e.g. your DB one might be worth £8k per year or whatever, while the current value of your DC one might be £300k which is very different from the value they may be forecasting if you continue to contribute at the same rate until retirement, which would obviously be a lot higher!

Yes at the moment it’s projected to be £57k in 20 years.

£57k pa in today's money incl SP assuming you continue to add the same as current? You do need to understand the assumptions.

You misunderstood. No one said it isn’t a lot, the pp was quoting you “This might not sound like a lot “.

And it does sound a lot. More than I ever earned, when I was paying childcare, mortgage, trying to save into pension.

However, as pp said, check the assumptions. Is it based on you continuing to make the same contributions until you are 67 or 68? When is the starting date?

Have you got an advisor?

That's a very conservative estimate of income for a £1m fund.

Standard Life is projecting £88k a year with a £1.1m pot, I just checked.

I think it’s correct. I kind of have 4 pension pots (one is AVC) so it’s complicated but it’s based on the combined projections they are giving me.

I got it flapjackfairy seems many didn't, yes OP it's a really good pension to have accumulated by your age why would you think it's not much, but as others have said the age for drawing it creeps steadily up and if the worst happens tax is now to be considered

You need to break it down.
The state pension may be very different in 20 years time.I'd not bank (literally) on that.

You've not given enough info here.
Is that a projected figure based on contributing to 65/ 67. whatever age?

I advise you see an financial advisor and go through it with them.

I think you are missing the impact of inflation. Current inflation will roughly halve the value of money in twenty years so the projected income of £57,000 will be worth about £28,000 in todays money.

Your OP read as if you are a current pensioner with £57k pension income plus £45k employment income!

So, actually you are talking about a projected pension income of £45k pa (taking state pension out of it). So you are saying that you have a projected pension pot of £1m ish?

I'm a similar age and if you have DC schemes I'd be looking at the current value of your pot rather than projections that happily assume you'll be contributing to your pension at the same level.

It might be more helpful if you tell us how much you are putting in per month, what your other outgoings are and what the current values of your pots are (assuming DC schemes) on order to assess if you are contributing too much. What does your employer contribute into your current scheme?

Hey look on Martin Lewis - your state pension might not be lower - it depends how many years you need for a full state pension. If you check online it should tell you.

I’ve paid into my pension since my 20s & it’s defo not a 1m pot!!!

This will be means tested by then

How are they doing that?

The usual way of calculating drawdown from a pension pot is to divide by 25. So a £1m pot would give you 40k a year.

What assumptions are these projections based on? Is that £57k in today's money? Does it assume you make 20 years more contributions? Does it assume you will buy an annuity at today's rates? It's really difficult to understand exactly what you mean just from that number.

It clearly states in the OP that she is still 20 years off retirement. It also gives her age as mid 40s so not sure how that would make anyone think she was a current pensioner.

Can you clarify - is your total pension pot currently standing at £57k, or is that the projected income you would receive from your pension pot?

If it is your current pension pot - 57k is not huge and won't pay you much by way of annual income, few £k a year.

If £57k is your projected pension income, then that is huge and your pension pot must be valued well over £1million.

Lots of people confuse the value of their pension pot with the projection of income they are likely to receive. Essentially, you buy a pension income using the funds you saved in a pension pot.

Apologies: I was referring to the thread title.