39 yrs old in july had a pension since 18 but i can't seem to get any sense on what the best amount of cash to put away for a pension is.?
I moved to this job nearly 7 yrs ago and bought into the company pension scheme on the Railway i put £30k into it which bought me approx 6.5yrs.
No offence here " The old timers" who are at 58-60 don't like to talk much about there pensions but do say what i pay is a lot however i don't think it is.
Currently pay £510.00 every 4 weeks into the pension that is £210.00 into railway pension and £300.00 avc called Brass 2.
So guys what do you recomend leave it as it is till 60 and see how it is or pay more as a lump sum every year as and when i can afford it to avc, at maximum at the moment with company but can pay lump sums.
Retirement age on the goverment web site says 67! however ideally 60-62 would be better if not before that!
Any advice welcome thanks Tony.
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Is the railway schem still paying based on final slary?
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For my final salary scheme, I was paying in £812 month. you need to be paying at least somewhere near this in total to get a reasonable pension,
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You need to specify what level of income you want in retirement.
There are some good calculators on the net. Just put your subject line in google and the first five or six links are all you need, eg. thisismoney pensionsorter.
Last edited by: John H on Mon 14 Jun 10 at 16:36
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Tee, that's 'cos it's not an easy question, and we'll probably be locked up for giving financial advice (sorry, reference to another thread there).
Why is it not an easy question? Well (and please don't answer these questions, I'm not being personal) you need to consider (off the top of my head, I'm sure someone else will be much more organised);
how much do you earn?
how much do you think you will need in retirement?
will your mortgage and any other significant debts be paid off?
what's inflation going to do in the next 20 years (Please DO answer this one if you know the answer!)
what's inflation going to do between then and the day you die?
when are you planning on dying?
will you need to provide for dependents during retirement and/or after your death?
what growth can you expect from your pension investments over the next 20 years?
what pension / financial legislation will the various governments enact over the next 20 years in line with their "you have to save for your retirement but we're damned if we're going to help at all, we need every penny we can squeeze out of you NOW" policy?
Get the idea?
It sounds like you have a final salary pension scheme? You get a % of your salary as pension upon retirement? They are as rare as hen's teeth now. It is unlikely you will persuade the company to pay out early. The pension fund would want a big top up from them to compensate for the years when not only are you not paying in, you're actually drawing out. Be prepared for it to close :-(
As for your AVC, look at annuity tables to get some idea of what annual income each £10,000 will buy (just Google "annuity rates"). Depressing isn't it? :-( These will change over time, they are not fixed so don't put your head down for 20 years.
Sorry T but it's over to you. You're doing the right thing, taking an interest, looking at the numbers. Just keep doing that I'd say. You might also consider putting money into ISAs each year. Tax free when you draw money out instead of when you put it in and you can do what you want with it, it's not committed to an annuity.
Beware of forecast future values. There are certain %s that have to be used in calculation no matter how ludicrous they may be. Just ask anyone with an endowment mortgage.
If you can, find out what fund your AVC is going into, find it's price on the internet and watch it from time to time. Don't rely on annual statements that are 6 months out of date when they arrive. You will build up a feel for that investment and you may want to go for something different. I assume that your AVC offers a choice of funds.
On the bright side my pension is a lot less than my gross salary was but I'm not paying NI, I'm not paying pension contributions and I'm not paying higher rate tax so the net is not too bad. Plus I may let the wife stop working one day (Don't tell her!).
JH
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For my final salary scheme, I was paying in £812 month. you need to be paying at least somewhere near this in total to get a reasonable pension
Yes better start saving more.
Yes it's a final salary pension scheme i know its a bit like how longs a piece of string, rather than bury my bonce id rather bang it away thats the cash nowt else. lol.
Mortgage will be paid off in 4 yrs., so then can pay the old mortgage fee into a isa or avc which ever, i will look online at those above places.
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Pay your full sum into a stocks and shares ISA before you look at pensions.
Tax free in perpetuity AND you don't have to buy an annuity with it AND you can pass it on. You should probably be putting 25% of your salary away (a guess).
Last edited by: Mapmaker on Mon 14 Jun 10 at 17:44
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Tip
Save as much as you can in a Pension Plan BUT make sure you have other sources of Capital on retirement - ISAs, property, cash, shares, a wife or husband with a pension.......
Never have all your eggs in the one basket.
I have a mixture of Pensions - pumped in £60K into a Personal Pension in my last 10 years + 40% Govt tax = £100K no growth and the Annuity rates fell dramatically.
What should have been £120K @ 9% became £100K @ 6.5% IIRC i.e. that part of my total 4cast from that pension was reduced from £10.8K and yielded £6.5K.
Thank goodness I had other final salary pensions to fall back on + other assets
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FB and Tooslow and others talk much sense.
Employer's schemes are usually the best bet but be wary of AVCs. My employer pushed them as a no-brainer if you could afford them..... and then put all my money in Equitable Life!
But things are getting less and less certain and tax breaks of all sorts might not last too long.
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My dad retire with a pension pot of £700k that he put in over 25 years. He is not happy with the results and said that if he knew then what he knows now, he would have invested in property like crazy, buying in low periods such as now, then lived off rents or sold the lot and budgeted with the cash left over.
He said to me recently, in no uncertain terms, dont bother with a pension unless you can really pour the cash in and then prepare for a disappointing result.
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>> dont bother with a pension
I've never had one, I'm 37 and have always lived pretty much from one month to the next - and I can't see that changing any time soon.
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>> would have invested in property like crazy
And then might have been liable for capital gains tax?
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>>And then might have been liable for capital gains tax?
Still probably one of the best options.
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CGT, on landlord properties is (currently) not ruinoous.
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Either a great deal or none at all. Save a small amount and you will lose out on means tested benefits. If I was on a very low wage I would forget about saving for a pension.
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I am in my employers final salary scheme - think I put in around 350 a month and they put in around 450. I get 2% of my final salary for each full year I am in plus any overtime I do adds slightly to this.
If I want to go early (before 60) think I lose 3% for each year. Although this all sounds good I am not expecting that it will last long enough for me to benefit (25 years to go) so have a second property that I view as a second pension. My partner has no provision whatsoever, but the in-laws are loaded so she has no real concerns as such. They are anti pension, retired at 50 & 48 and live from savings / investments.
TBH I am only in the company pension scheme for the life insurance and the fact that they add so much its almost like free money
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but the in-laws are loaded so she has no real concerns as such. They are anti pension, retired at 50 & 48 and live from savings / investments.
Great but you can't rely on them leaving you a wad of cash to spend can you they may live a long while & spend the lot and the house!
I agree with some comments save nowt and let the state bail you out but i can't and won't id rather save some it's a tough desision what to do for the best.
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>> Great but you can't rely on them leaving you a wad of cash to spend
>> can you they may live a long while & spend the lot and the house!
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>> I agree with some comments save nowt and let the state bail you out but
>> i can't and won't id rather save some it's a tough desision what to do
>> for the best.
>>
My comment was tounge in cheek :-) Having retired so early and having a very gentle pace of life living both in the UK and overseas they may well outlive us, but they are very shrewd with money (for shrewd see tight)
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Find out what the maximum pension is that HMRC will allow (as a percentage of final salary) and aim to get that ~ it's some time since I retired so I'm not sure what the current rules allow. For the time being pay the maximum contribution into your company scheme that HMRC will allow. At the end of every tax year calculate what pension you have accrued and plot a graph against time of this figure as a percentage of your salary. Extrapolate the graph and find out when you will reach the HMRC allowed maximum pension. As time goes by adjust your payments downwards to ensure that you won't be grossly overfunded, but bear in mind that it's better to be overfunded than underfunded.
www.hmrc.gov.uk/rates/pensions.htm
www.hmrc.gov.uk/pensionschemes/faqs/contoccs.htm
You may need to do a bit more research into it, but the above should give you a good start.
Last edited by: L'escargot on Tue 15 Jun 10 at 07:05
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To have a financially stable retirement you need to maximise your monthly retirement income. Resist the temptation to take a lump sum at the expense of a reduced pension. It's likely that your AVC scheme will give a better rate of return than any other investment. Admittedly the money equivalent to the lump sum won't be there to contribute to the size of your estate when you die, but you probably won't be bothered about that when you're dead!
Last edited by: L'escargot on Tue 15 Jun 10 at 08:18
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And finally, remember that it's a lot easier to adjust to a salary increase when you're working than it is to adjust to the inevitable decrease in income when you retire!
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>> Resist the temptation to take a lump sum at the expense of a reduced pension.
No matter which way I looked at this, it was far better for me to take the maximum lump sum and invest it myself. However, I would have preferred to have left more in the pot had the return been more favourable.
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>> >> Resist the temptation to take a lump sum at the expense of a reduced
>> pension.
Nope - dont add up at all. I took out £100k in cash for a 5k a year reduction in pension.
Thats 20 years to recoup the cash sum. I shall be dead by then.
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>> >> >> Resist the temptation to take a lump sum at the expense of a
>> reduced
>> >> pension.
>>
>> Nope - dont add up at all. I
Your mileage will vary but it's worth doing the calcualtion.
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www.monetos.co.uk/pensions/non-state-pensions/tax-free-lump-sum/
There's lots of information regarding pensions if you Google.
Last edited by: L'escargot on Tue 15 Jun 10 at 09:29
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Definitely take the tax-free cash lump sum. It's the only way investing in pensions makes any sense at all. Then invest it yourself.
My pension contains anything that being contracted out of SERPS has generated, plus anything my employer has put in. My own contributions to the pension are about £200.
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"Definitely take the tax-free cash lump sum. "
Probably true if you have a money purchase scheme
If you are lucky enough to have a company final salary pension this may not be good advice unless you need the lump sum to pay off a mortgage or similar. Easy enough to check, just see what sort of annuity you can buy for the lump sum amount offered - you can get quotes online. Don't forget to factor in any index linking.
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>>>>> Resist the temptation to take a lump sum at the expense of a reduced pension.
>>Nope - dont add up at all. I took out £100k in cash for a 5k a year reduction in pension. Thats 20 years to recoup the cash sum. I shall be dead by then.
Similarly I will take my deferred company pension from next year at 55yrs. The money they'll pay out over 10yrs until the normal 65yrs will only go against me if I live beyond 85. I'd far rather take the money now and know I could do stuff with it including enhancing my preparation for retirement.
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I have one of those rare beasts AKA Final Salary scheme - we're on 60ths too, so it is similar to one of those 'Gold plated' Public Sector ones you hear so much about these days (it's not, it's private, and closed to new members!). I pay in 6%, my employer pays in 15% or somesuch AND is adding money to the fund to keep it at the minimum funding level. It's no wonder that FS schemes are closing all over the shop. It is perhaps the one thing putting me off going contract, as I would need to put a shed load of cash into a private scheme to get the same return - and then I would have to buy a paltry annuity at the end. If I was not in a FS scheme, I would put the min into the scheme to get the contribution from the employer (don't forget if you don't join you are taking an effective pay cut!) and invest the rest elsewhere. BP shares look at a good discount at the moment...(with apologies to anyone who's pension is invested here!)
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RichardW - I think FS schemes are a real problem for some employees and regard their abolition as a good thing for employees' day-to-day happiness (if not for their eventual retired worth). I worked at head office of a big clearing bank for a while. Half the department was trapped on poxy below-market-level salaries but with a whacking great (relatively) final salary pension. They couldn't afford to leave, but they hated the place (everybody did).
Future generations won't have that problem...
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>> Definitely take the tax-free cash lump sum. It's the only way investing in pensions makes
>> any sense at all. Then invest it yourself.
The money I put into in my AVC scheme pays 10.3%, and will never vary from that level. I'm well pleased with my decision not to take it as a lump sum.
Last edited by: L'escargot on Tue 15 Jun 10 at 18:20
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Well done. When did you retire? And is that index linked?
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>> When did you retire?
2002
And is that index linked?
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No, it's fixed. The figure of 10.3% is my calculation of the percentage that my commuted pension is of the amount I left in the AVC scheme, and which I could have taken as a lump sum ~ but didn't.
When I was employed I worked relentlessly to maximise my pension. I aimed for (and achieved) to the penny the maximum that the HMRC would allow as a percentage of my final pensionable salary. For a period I made the maximum allowable contribution of 15% of my salary. It was just a pity that my main company pension scheme was allowed to define my final pensionable salary. It was a "sliced" scheme in which my pensionable salary was defined as the average of my last two years salary minus an amount equal to the single person's state OAP. I took voluntary redundancy at age 63, and had to fight to get my 3 months salary in lieu of noticed included in my pension calculations. In the end I was abut £100 overfunded, so I was happy to know that I had planned my pension to a nicety.
I recommend that everyone actively plans their pension, bearing in mind any HMRC restrictions, rather than leaving it to fate.
Last edited by: L'escargot on Tue 15 Jun 10 at 20:05
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>> The figure of 10.3% is my calculation of the percentage that my commuted pension is of
>> the amount I left in the AVC scheme, and which I could have taken as a lump sum ~ but didn't.
The problem now though is that annuities are paying the lowest returns for a long time - less than 7% flat at age 65.
www.telegraph.co.uk/finance/personalfinance/pensions/7827514/Annuity-rates-QandA.html
>> I recommend that everyone actively plans their pension, bearing in mind any HMRC restrictions..
HMRC rules changed a lot in 2006 ("A" day).
tinyurl.com/3xa4elx
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>> HMRC rules changed a lot in 2006 ("A" day).
>>
>> tinyurl.com/3xa4elx
Thanks for the update. It appears to me that the changes were very beneficial.
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The most important thing of all is to live long enough to at least get your money back....:-)
Also that another "Gordon Brown" doesn't attempt to steal £5bn annually for more than 10 years from pension funds.
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>> The most important thing of all is to live long enough to at least get
>> your money back....:-)
I think the most important thing is have a sufficiently large pension for you (a) to be able to live comfortably and (b) to not suffer too large a drop from when you were working. As I said earlier it's much easier to adapt to an increased income than it is to adapt to a reduced income.
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www.telegraph.co.uk/news/matt/
This cartoon changes daily, you need to look at todays (16 June) version.
Last edited by: Arctophile on Wed 16 Jun 10 at 20:20
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But you still need to live long enough to reap the anticipated return...:-)
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>it's much easier to adapt to an increased income than it is to adapt to a reduced income<
I'm not sure that's true. When we decided first to retire early and then to emigrate we sat down and worked out what we really need, and it isn't much really.
We've coped with the viscissitudes of foreign exchange and economic crisis so far. (Fingers still firmly crossed though).
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>> >it's much easier to adapt to an increased income than it is to adapt to
>> a reduced income<
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>> I'm not sure that's true.
People who have just left their pension to chance and haven't tried to maximise it can suffer a large decrease in income when they retire, to which it isn't easy to adapt. In particular it can be hard for those who aren't fortunate enough to inherit from their parent's estate.
www.extension.umn.edu/distribution/businessmanagement/DF6499.html
Last edited by: L'escargot on Thu 17 Jun 10 at 14:55
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There are indeed people whose only income is the state OAP. For them, life must be very hard.
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At the age of 60 today how much do you need to live on? now this is going to be far and wide with what lifestyle you want, no mortgage no loans pension pot what do you really need 1k a month ok? plus a pot of 70k.
Or do you need more a month and a bigger pot or less?
It's a nosy question i know so feel free to answer if you like!! lol.....
My bills at current excluding the mortgage is £200.00 plus food and petrol so more like £500.00 a month.
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The important thing is that when you retire, you are loosing less from your pension, than you did from your salary.
For example, My salary was taxed at higher rate. I doubt many on here will be earning enough pension to break the higher tax band. I am not paying NI, not paying into pension pot. All I am loosing from my monthly pension slip is 20% tax. A far cry from the near 50% that was disapearing before.
Given that if you have timed it all right, your are paying off your pension and any debts you have when you retire, your outgoings shrink dramatically.
All in all, I am about 200 quid a month worse off, cash in bank per month, and I am not working. Most people have to commute to work, so that covers that.
Nicole is still working, that helps.
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How much money to save for pension? - Bromptonaut
