Man of Honour
How aggressive are you guys going with your pension profiles? I've ramped it up over the last few years in terms of risk profile, seems to be paying off but I appreciate it's not for everyone.
Pension fund performance - do you monitor yours, how is it doing, do you actively change it?
- Thread starter danlightbulb
- Start date
Soldato
Is there an easy pension finder, one that does all the work just from a name?
Soldato
I'm more aggressive with paying in than the pension profiles themselves...
doesn't matter if you make 300% increase if you're only paying in a small amount.
Work is paying 10%, I'm paying an additional 12% and work is giving me an additional NI employeer tax relief 13.8% of that 12%. All my yearly bonus is getting placed into my pension as well, where I get the 13.8% NI employeer tax relief on top too.
Handly that this drops me down a tax bracket
In terms of the pension profiles itself...
50% into active manage profile rated at 4
45% into a passive profile rated at 5
and 5% into a passive profile rated at 6
I do have two DB pensions to fall back on to with about 10 years in them and my own stocks and shares portfolio to help if it hits the fan.
The beauty of compounding, you dont need a 300% increases overnight if you start early enough. You dont even need huge sums, you just need time.
Last edited:
Soldato
I know how compounding works, but if you have a small amount to compound it's going to take you a lot longer to compound the amount you need to retire.
As I said, you dont need large sums, just time.
Soldato
£1000 compounded for 20 years at 5% is £2,712.64
you will only need 12 years compounded at the same rate to reach £2,729.77 if you had £1500
While time in the market is important, most of us have a deadline of when we want to retire at which stage the pot will begin to go down and when we die when the money will be no use to us.
The original question:
In which I answered that I'm more aggressive with the amount I put in that the profiles themselves.
So unless you have a device that can speed up time and make compounding occur more aggressively, you point on compounding irrelevant.
Just to follow up on this post — I'm now paying into my pension via salary sacrifice, with my employer splitting the Employer NI savings 50/50 with me.
So both my net pay and my pension contributions are now roughly £50 more each per month. Nothing like a "free" £1,200 per year for doing nothing.
It also puts me back into the 20% tax bracket (along with a C2W scheme purchase), so happy days there as well.
Yeah but you are adding and increasing contributions every year for the period. Its not a flat £1000 and thats it. Risk is different really, risk really means volatility and when you are a way off from retirement it doesnt even matter, in fact volatility in accumulation phase should be welcomed as you can buy more for less.
Last edited:
You're both right. Obviously time will make a smaller sum bigger but time is constrained for all of us and the more you have to start with the more you'll end up with.
Time won't compensate for being able to put in twice the amount of cash.
Time won't compensate for being able to put in twice the amount of cash.
Last edited:
Man of Honour
I'm more aggressive with paying in than the pension profiles themselves...
doesn't matter if you make 300% increase if you're only paying in a small amount.
Work is paying 10%, I'm paying an additional 12% and work is giving me an additional NI employeer tax relief 13.8% of that 12%. All my yearly bonus is getting placed into my pension as well, where I get the 13.8% NI employeer tax relief on top too.
Handly that this drops me down a tax bracket
In terms of the pension profiles itself...
50% into active manage profile rated at 4
45% into a passive profile rated at 5
and 5% into a passive profile rated at 6
I do have two DB pensions to fall back on to with about 10 years in them and my own stocks and shares portfolio to help if it hits the fan.
It depends how far off you are from retiring and how much you can afford and how long ago you started - fortunately I've been putting in for over 20 years.
I mean including my and the companies' contribution I'm putting in over 28% per month (means I can't spend it if it's taken at the source, I know what I'm like!
- and I get a nice bit of tax relief). But I'm also 10 years away or so from being able to draw down from it should I want to, so I'm choosing a more aggressive strategy, and with the joys of compound interest, I can start to go more safe as I approach the date I'm eligible for it. I didn't want to be in the same position as my parents who had to work till their late 60s to be able to actually stop work altogether.I want to be able to retire as early but also as comfortably as possible. If it means I have to work a little longer to afford me that then so be it. I left it late however to learning about how to manage my pensions effectively (despite having contributed for a long time) . It's been less than 10 years since I really started to plough into it, so I'm pushing really hard for it.
Last edited:
Man of Honour
I wished they taught you this stuff at school - managing your finances and so on, I mean I proactively did it, but not everyone has the chance to.
Soldato
I didn't start paying into a pension till I was 30, but my figures are way better than the national average for my age now. God knows if it will be enough to retire on and god help those with average or below average pension pots.
It's a double benefit paying more than needed into a pension, more money when you retire and your not used to having that money while working so your lifestyle hasn't crept up so you're be comfortable on less money.
A lot of pensions talk is based on annuity as well as they was common with final pay pensions but it seems that draw down is the way for me as it allows my pot to compound even after retiremenet.
Pension planning is no difference from to living an health lifestyle.
The food you eat is the money you can put into the pension.
The workout/training plan is the risk/stress level of your portfolio.
The amount of time you can go to the gym or spend at the gym is the amount time you can let it compound.
The only thing that's really in your control is the money you put it...
you can have a great training plan, but what happens if the machine you want to use is broken, used by someone else, you injure yourself or quite simply the exercise plan is not as effective as first thought.
what happens when you can't get to the gym, if it gets closed down or your just having a lazy day after a restless night, you won't be able to spend time there or train correctly.
A friend of mine had a final pay pension, which got frozeon and he got moved to DC pension with everyone else...
after a further 15 years of paying into the DC, he got made redundant. So he decided that he won't work to become a house hubby to look after two young kids while his wife worked. They lived of his DC pension, which he had to pay a penalty on and let his final pay pension compound until he reaches retirement age,
He's been diagnosed with cancer (twice) so had to break into his final pay pension which didn't have the time he wanted for it to compound and pay a pennalty on as he would rather use the money now and enjoy the time he's got left.
In the ideal world we will all have loads of money to put into the a pension, into a plan that generates enough cash for a long period where we will not need to touch the orginal pot and can live off just the interest...
Right - with those who want to stay invested and do drawdown - what isn't mentioned a lot is that it's a good thing to have a cash buffer so you can draw down on that if the market hits a tough spot. This stops you from damaging your returns on recovery. Look at the dip and recovery around COVID for an illustration.
This is my plan - 1-2 years of emergency cash to draw down on if we get another pandemic style situation. I appreciate it's a tough thing to build and get your head around, especially with the impact of inflation on savings.
This is my plan - 1-2 years of emergency cash to draw down on if we get another pandemic style situation. I appreciate it's a tough thing to build and get your head around, especially with the impact of inflation on savings.
Last edited:
Soldato
Well historically that was where bonds did the heavy lifting.
But yes volatility was why funds would historically move away from all in volatile stocks as you approached retirement.
You can also still take some of your pot and buy an annuity, if stocks are really high its an option (at any point) and it changes the dynamics since you have more fixed income.
I dont always agree with him but James Shack recently did a test on how much do you need in your pot for certain income levels, it shows how much effect the stock market can have on that if you stay invested
How much do I need to retire with £20k/£30k/£40k/£50k per year? (100-year backtest results)
Looking for help with Financial Planning?I am a Chartered Wealth Manager and Partner in a financial planning practice based in the UK. If you would like to f...
www.youtube.com
Really its why having more than just a pension pot is important, because it also allows you to be tax efficient.
Soldato
I'm super aggressive, with a large % in the S & P. I could take it now if I wanted too but I shall ride it out as long as possible.
Soldato
100% VHVG (developed world)
I don't consider that aggressive, I consider it the safest thing to do.
Emerging markets increases fees and risk for seemingly no benefit.
Bonds are still garbage. Returns are below the base rate, price falls, doesn't hedge against stock downturns.
Soldato
I have 1-2 year emergency cash fund now, so I can live of that in case something happens to my income so I don't have to sell out from markets.
I have DB pots which I'm planning to get an annuity with coupled with the state pension I should be able to live a very basic lifesytle if things hit the fan but yes I'm planning to have at least 2 years of cash funds either from drawing down on my pension or stocks and shares as a buffer.