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?

Actually my NHS pension isn't 1/2 my salary, even before tax. Don't know where I got that from 😂. I did get a lump sum though.
Don't forget your private pension will be taxed, as well as your interest from any savings OP.

The question is what the buying power of £57k will be in 20 years time. Also there will be lots of assumptions in the calculation that might or might not be right.

Is this 57k in 20 years or 57k plus inflation in 20 years time?
A huge difference

Sounds that might be your projected pot/income and you’re comparing it to your current salary. So yes you would expect future income to be higher but spending power will be less so you can’t make a direct comparison

Yes projected figure based on retirement age of 68. It’s factoring in state pension.

Yes that’s true, I guess it’s good to keep paying in at the same rate.

Very true.

But you haven't said if includes future contributions, growth, today's figures, or purchasing an annuity.
How much is the current total of all pots?

Factoring in state pension at what amount? You need to adjust that for inflation (hard to predict triple lock rates).

Sorry @flapjackfairy I didn’t understand what you meant. I thought you were saying it isn’t a lot.

Yes that makes sense. I guess I am dreaming about earning £57k which is a lot to me currently. But as lots of people have pointed out it may not be much in the future.

I think this post has confirmed to me that keeping up with the pension is a good plan.

If you can easily afford to keep contributing at current levels, then you might as well carry on. But you should also built a pot outside of your pension to enable you to, for example, go part time from aged 50 or 55 ish and to use those other savings until you need to access you pension. Ie think about your non pension locsted savings to allow easing off of work in the 10 year run up to retirement.

But is the figure they’re giving you a projection? In which case it’s not a certainty by any means!

No you couldn’t, it rises to 57 in 2028.

Assuming projected, as others have said £57k in 20 years won't have the same value as £57k today. Also you said its at 68, so thats assuming you keep paying in at the same rate til 68. If you want to retire earlier, it could be quite a bit less per year, as it will need to pay you for longer, won't have as much time to grow, and you will have paid in less.

Sounds like you have been making a great effort, but don't get too carried away with projections. Particularly if you might want to take funds earlier, go part time, or retire earlier. You have no idea what inflation could have done by then too.

As you have a decent amount, but don't fully understand what it will give you, might be worth looking at getting financial advice. You should be able to at least get an initial meeting at no charge to give you an idea of whether or not, or how they can help.

If I ended up on retirement at state pension age with a contribution of every year of my working life, my net take home, given how NI contributions change, would be more.

I won't though as my calculation is less because of periods in jobs on a low salary and some without a works pension.

So OP may not be alone.

That sounds like you are doing great OP, my actual pot is under 70k so far and I am 40 so based on needing 500k in the pot I have a lot of work to do!

No idea where the 500k idea came from, I think it's something my MIL told me!

Good point. And this could well rise again between now and when the Op gets to mid/late 50's.

Are you sure you are not adding together the annual pension in your DB schemes with the fund values of your AVCs and private pension?

I know of no DB scheme that pays more in retirement than final salary or even career average. Until recently inflation was very low so wouldn’t have increased your DB pension to such an extent. Even the one who have been part of a DB scheme most of their lives and have a very good salary will be seeing a massive ‘paycut’.

Updated

I think OP and you are misreading the tone of this comment

I think 57k in 20 years is around the same as about 32k now. It depends what assumptions the projection has made as it could be in today's prices

Some people will still be able to take a private pension at 55. I've had one since I was 18 and my 55 age is protected

Chat GPT is very helpful for you in running alternative scenarios. You can ask it to calculate what it would be if you stopped work at say 55 and 60. It will make a big difference if your current calculations are based on you continuing to work your 67 with AVC’s being made every month throughout that time.

Yes it’s a projection. I understand that it’s not guaranteed.