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?

DB Pensions do have a transfer value - which is effectively “the pot”.

A Cash Equivalent Transfer Value (CETV) is the lump sum amount offered by a defined benefit (final salary) pension scheme to transfer your benefits into a defined contribution scheme. It represents the current value of your future guaranteed retirement income.

Be really careful with projections op. They can make some assumptions that may not hold true for most people - above inflation pay growth, continuing to work full time until 68, good stock market performance.

Its extremely unusual to get a pension that pays out more than you were earning at the end of your career unless a) you used to earn more b) your employer has some scheme where your pay isnt terribly high but the pension contributions are very generous.

A good estimate for today's value is to take your current pot value & divide it by 20.

Are you sure they have not accidentally counted your state pension more than once eg in more than one of the four protections?

@Oldtowelwhat are the current values of the pots?

I hope you are right! We haven't had a mortgage for 10 years (early 50s now) and still have plenty of years left to work.

Someone else quoted this - my pension prediction seems a lot more optimistic. I assume there are different ways of calculating it but here is the screenshot of mine -

It’s three pensions though isn’t it and most people aren’t “ paying into “three . So, when I moved job I stopped paying into that one but consolidated it into my new employers pension where I contribute and they do. I also have a really old one that is just sitting there, it’s increasing but I’m not paying into it. You are probably a bit of an outlier to keep paying into the ex employers pension., also having a current one and then adding in the state one.

what I would consider is how much you need in retirement as at some stage assuming you live to a really old age, you just probably won’t need as much as our appetite to do stuff does diminish.

For someone with a DC pension, they would need way above £1million for an income like that.

We’ll have about £45k in today’s money and that’s with 2 State pensions making up £25k of that and DH’s military pension another £8k.
The average size of a DC pot is around £100k, which gives £3-4k income.
I have no idea what the average DB pot is but I’d happily bet on it being under £10k a year.

There is no pot with DB pensions. My pension is £44k a year my "pot" which is a made up one was around £750-800k . They only give you an estimated pot so they can use it for tax and LTA purposes
I was paying £3k a month in superannuation payments in the last few years of my career. GP so we payed employees and employers contributions so 12% for my employee and 21% I think for employers. That's 32% of my income. Don't get me wrong I am grateful for my great pension but that's how the pot works.

God I thought the pedantry was reserved for the pensions board over on MSE 🙄

Yes, for DB ‘pot’ it’s rather obvious I was meaning Income.

If you read the quote history @Oldtowel you’ll see that I wasn’t quoting you… but another poster who hasn’t read the thread.

Have you seen my screenshot from Standard Life above - they reckon a bit over a million yields £88k a year. Not sure if I am missing something or they are just wildly optimistic.

Possibly, depends on your age now and probably assuming you will work to 68

The pot amount is based on me working to 68 but the bit I was highlighting is the pot size to income. A few people on the thread have said you need over a million for a 47k income - that doesn't align with Standard Life's projection.

Can you break it down a bit more to show current value of your defined benefit pot (more useful than projected). I can tell exactly how much I have accumulated each year of service in DB schemes.

If your figures are in tomorrow’s money (assuming 20 years worth of inflation) you’re actually most likely looking at it worth just over half of that in today’s money. eg 57k today would have been the equivalent off £32k 20 years ago.

Any projections are also potentially assuming steady contributions until 68. I don’t think you can 100% trust the figure based on what you’ve said there. You also have to factor tax into pension withdrawals as well.

That does seem surprising. What does it say in the information and assumptions link at the bottom? Depending on how old you are, there may be a huge difference depending on the assumptions they are using and whether they are referring to real or nominal value

These are the assumptions - mostly things that affect the size of the pot rather than the yield on retirement.

The figures you see are estimates and are not guaranteed. We've made a few assumptions to keep things simple:

• We've assumed you get the full state pension.
• We've used today's prices to give you a better idea of what you could afford to spend, and assumed inflation of 2%.
• Income figures are before tax, and are based on the total value of your projected pension pot. Your income will be lower if you take any tax-free cash as a lump sum.
• We've assumed investment growth of 5% – the medium growth rate set by the Financial Conduct Authority. A pension is an investment, and its value can go up and down, which means you could get less than you pay in.
• The tool assumes you're six months older than the retirement age shown. This may overstate or understate the pension projection by assuming more or less monthly payments are made and more or less growth is achieved.
• We've assumed your earnings will grow by 3.5% a year, and that your monthly pension payments will go up at the same rate. Your monthly pension payment is an average based on payments made over the last 12 months, and is assumed to continue until the retirement age shown.
• Some employers will pay more into your pension if you increase your own payments. We haven't allowed for this here.
• There are limits to how much you can put into your pension and still get tax relief. We've ignored these here.
• We've assumed an annual management charge of 1%, which may be higher or lower than your actual charge.
• Annuity rates vary, so you may get more or less than this estimate. We've assumed you buy a monthly in advance annuity with a 5 year guarantee, no dependants pension and no escalation.
• The information here is based on our understanding in April 2026.

I’ve just completed an online pension calculator. The state pension is an important part of my pension planning. If I include the state pension then the projection is that my pension will be higher than my current salary. 😱🤯

@Mithral it might be that other projections exclude the state pension, as that doesn’t come from/isnt related to the size of your pot as such.

So a pot of your size would produce an income of c.£76k according to them - still a hefty amount.

Fwiw mine is £500k at 39 and my projections say I can expect an income of £57k (importantly from age 60) from a total of £1.6m. I don’t factor in the state pension as I doubt I’ll get it by the time I reach that age, if I ever do.

Thank you. It's assuming you'll buy an annuity (and rates are very good for annuities just now), whereas I think when people are quoting 4% ish it's for drawdown and preserving the 'pot'. Still quite a hefty income though.

The SC amount also includes state pension, I think. The rest is in line with this

https://www.hl.co.uk/retirement/annuities/best-buy-rates- makes a huge difference whether it's index linked of course.

Yes I know, but while it's still a DB pension it tends to be referred to as that, compared to the traditional DC pot. You can't really know what the transfer value will be without asking for that specifically, it isn't part of the routine documentation.

From memory, it's comparatively rare for an IFA to transfer DB pensions except in certain circumstances?

Wasn't being pedantic, I'd just not read it clearly...I get what you're saying now.

Just out of interest how much did your projection say the state pension would be in 20 years?

£88k on £1million equates to an 8.8% withdrawal rate, that’s way above a ‘safe’ rate of 3.5-4%. A few bad years at the beginning would decimate a pot, given that 25% drops aren’t uncommon.