Is there such a thing as too much money in a pension?

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I've been reviewing mine and my Husband's collective plans for retirement. We are late 30s and are projected to have enough to sustain our current living standard (have accounted for inflation) thanks to compounding, at the current state pension age of 68 for us. The mortgage would be paid off and I haven't factored in receiving a state pension.

Savings are diverse and a mix of DB and various pension funds and a SiPP.

We are comfortable financially but do a lot of work budgeting and do make hard choices and sacrifices. Lucky enough to go on 1 holiday a year and run two cars. We will also likely downsize in older years to release more capital. Child does lots of expensive extra curricular and we plan to continue to invest in them in this way as well as saving for them.

I'm struggling to justify maintaining the high level of pension savings we make given the limitations on pensions withdrawal ages. We could also increase our current lifestyle. We don't plan on moving anytime soon and don't need to so this would likely be an extra holiday or experiences for us as a family. We have adequate but not extravagant savings plans for our child.

Anything we contribute from now to pensions will be towards retiring early.

I'm keen to hear from those who have retired. How do you know when you have the right balance between living in the now and enjoying life and making sure you have enough for the future?

I don't won't to live a more luxurious retired life at the expense of present life if I can avoid. I'm unclear how well balanced we currently are and projections are not guaranteed. We are still at the point where if our income stopped, after a year this would be an issue.

Does anyone think they saved too much or did anyone misjudge it and end up short? Should I focus more now on S&SI even though we'd lose a huge amount of tax relief as one of us is a higher rate tax payer? Did you realise that you needed access to cash with fewer restrictions?

In any situation where there is likely to be a large IHT bill you should be looking at whole of life insurance to cover the IHT bill (alongside lifetime gifting and gifting from income)

I’ll be better off in my retirement than working life which feels odd. But I don’t contribute extra, I have a DB pension and will have over 40yrs service if I make it to 67. Lump sum of 250k which is more money than I can ever imagine plus 40k plus a year both private and state pension. So although I earn more than that now, I won’t have a mortgage at 67, or if I do, it shouldn’t be too much and lump sum will clear it, so feels mad to have 40k and no mortgage. So I am not worrying about any extra contributions, as I need the money more now.

Thank you. This is where I think we are currently at, we've done the early prudence and now need to spread and diversify. With our contributions and employer contributions alone our pensions are hefty - appreciate a lot to one person is a pittance to another! But if we keep going and don't change a thing, in 30yrs we're on track for £3m. Which obviously depends on a lot of fair wind which isn't going to happen. Even allowing for inflation, it doesn't appear we need that much! If we never contributed again (not the plan) it's about half that. So really are just planning a)if we keep over paying (prob won't) b) what we do with the surplus now when pay rises come c) how much support DC will get d) how much good life can we live and retire before we're past enjoying it. Lots to think about from your post. Thanks.

I think this is probably best! I thought I was fairly savvy but I've got some obvious blind spots!

If you will have £3m in pensions then you ought to take financial advice. It's going to be necessary to plan for IHT.

I think I will get some advice. We won't have that much. It is how much well will have if we continue as we are and as you say, has some big implications. I imagine we'll get noway near this as we will just retire early and stop saving/save elsewhere. Thanks!

This. PIL lived like paupers and when FIL died it came to light they had over £1m.
We are retiring at 55 this year and starting to spend and gift to DC now. Come 80 plus I’m happy to take my chances. Die with zero!

Trying to avoid being this person. I expect if we live a little bit more from now on and plan to retire a lot before 68, we won't actually be that flush. We are just looking at where we are projected to be at state retirement age and working backwards, to avoid living too below our means and working longer than needed. Wonder what motivated your PIL? 🤔

Most people are going to want retire way before 68 if possible. Thats a long time to be working.

Yes, you can have too much. Personally I don’t see much benefit in paying in to a level where it will be taxed at higher rate on withdrawal, as there is no tax benefit at that point, it‘s just a deferral. I’m late 30s and mine has enough in it now (£550k) for it to reach £1.5-£2.3M by the time I’m 60, so I’m reducing contributions to the max for employer matching, and diverting the rest to my S&S ISA. I plan to retire at 55 and use the ISA as a “bridge”, or it gives me the freedom to step back earlier, and eg work part time from 50 instead.

Agreed.

We had this amd decided we are going full tilt until at least 2028 and pension rules change for a few reasons.

1. Health can change rapidly.
2. Compounding means its better to go hard early.
3. In our industries we could easily be made redundant at 50 and not find work again.

AI is changing things in ways we cant predict.

I’m 55 now and even I don’t factor the state pension into any of my calcs

Clear your mortgage as soon as you can, You never know what is around the corner.

Mortgage cleared aged 37

Noone is guaranteed a long life.

I would look at rebalancing and enjoying life a bit more now

I am a similar age to you & also comfortable. You’re doing really well regardless of how you organise your future. I am surprised though that you only have one holiday a year. You have school aged child(ren) and a chronic illness….. I would want/ do take at least two holidays a year plus weekend European breaks because these years you will never get back. You would benefit now, all of you. You can live comfortably at 58-78 but your child will not be with you discovering new places, being thrown into pools and just being their sweet selves. I’d throw another £10-20k at holidays over a pension, particularly if you have secure housing.

My grandad got diagnosed with cancer a few weeks before his planned retirement. His health went downhill quite rapidly from there. He and my nan had enjoyed holidays abroad prior to his retirement and were looking forward to more freedom to do that when he retired, it never happened, he wasn't well enough.
I'm lucky to have a defined benefits pension. I contribute to that and save a little extra in a private pension in case I decide I want to retire early. (No where near enough for even a year yet, but I'm also late 30s and could ramp up what I save in my 50s if I decide I want to retire early). I'm only saving what I can comfortably afford and most of the money I save is going in DCs accounts. What happened to my grandparents has made me very keen to live the life I have now whilst I am fit and well.

We have been renovating our house that hadn't been touched for 30yrs and we are 75% through. It was all that was available at the time of buying that ticked our must have, we didn't really want a renovation tbh. It's eaten a lot of our money and taken longer as we refuse to completely sacrifice everything. Hence the one holiday a year. We do a lot of experience days out. You are correct, we should holiday more! Just a bit limited on annual leave as we have no family to help with childcare and already use a lot of holiday clubs and I buy 2 weeks extra leave. But it still limits how much time we can take together. We are reviewing my husband buying extra leave to enable this.s

It's a really tricky balance. We are in a very good position with pensions and savings but knowing when to stop is hard. You dont want to stop too soon and run out of money but very conscious we could have health problems. DM has developed dementia in her early 70s and all of my parents' plans for retirement have gone out of the window. Now looking like the money will mainly be spent on care

Yes, my financial advisor has been very clear that a S&S ISA should be part of the plan alongside pensions because of the tax free withdrawal.
Perhaps you should consult an advisor to ensure you are structuring things in the most efficient way.

If you can do this, I highly recommend planning for early retirement. I was 58 and DH 61 when we retired last year, and it’s bloody banging! Still have family stresses and obligations (young adult kids and ageing parents), but have downsized and completely changed our lifestyle, and we now have the means to do really new and interesting things with the years left to us.

It’s important also to make your calculations based on front-loading your retirement. At 60 and 70 you’ll probably still have the energy (and hopefully the health) to travel or have whatever other adventures you dream of. At 80 perhaps not so much, so you don’t need to spread your annual income equally until you’re 100 or whatever.

And, as PPs have said, get proper financial and investment advice if you don’t already have it. Not St James’s Place or any of that franchise shite, but a proper, established company with good results. A decent FA is absolutely worth their weight in gold, and will earn their commission from the dividends they pay you - there’s no substitute, and I say that as someone whose DH is extremely financially astute and savvy, but who acknowledges he’d never have been able to make our money work this hard for us had he invested it on his own.

Well done for all your hard work getting yourself into this position at your age - you’ve done brilliantly.

Great to retire early but not so much at the expense of sacrificing now. Get a better balance make sure you enjoy the now. My friend died at 65 never got to retire and enjoy it. You've another 20yrs till you can access it. If you died at 67 youd have had 10yrs of your pension versus 20 years of enjoying life now.

There's a balance. I work in a niche area of financial planning, mostly with older clients. Many of them like to tell me their stories & give me advice - always to live while I have the health, never to sacrifice my active years to hoard money. You may never get to use it.

DH & I being around the 50 mark have started to realise this is true. Last year we went to Japan & on the full fushimi inari loop (stairs!) DH was starting to notice his knee niggling and announced all men in his family get dicky knees. I realised the difference from 15 years ago, and that although we can still do the active, adventurous trips now, we won't always be able to, and DC won't be home with us forever, so we want to enjoy time with them, too.

So while it is vitally important to save for retirement, and we have enough to retire at 60, I'd rather work a bit longer, if need be, to enjoy travel & life a bit more now. We live frugally otherwise (except DC hobbies) and do contribute some to pensions, but don't want to be full of regret for the things we didn't do.

As one client told me 'do it now, you're old for a long time'.

Have you thought about starting a pension for your child?

Also - as you’re both under 40 - a LISA can be used for retirement funds and you can access from 60. You put £4k a year in each and government add £1K. (That’s the max).

That you can withdraw tax free post 60. (Before 60 you lose the government contribution) Might be a good place to save money to bridge the gap for an earlier retirement. You can pay into it til you’re 50.