Pension/ISA/savings split?

[413x]

Are there any general guides to ratios of the above? And what is sensible to aim for?

And what do you guys have in terms of splits?

For me I'm 39 (boo) and this is my split:
1x savings (easily accessible, emergency funds)
2x isa (I could use this easily but ideally not)
4x pension (retirement)

(ie if I had 10k in savings id have 40k in my pension)

I'm thinking in general I'm under on the pension side vs average person.

I expect this is not the ideal way to think about it as if you have 10k, 100k, 1mln..
The ratios are probably very different as well as your age,salary etc etc

 

[Mr Badger]

Are there any general guides to ratios of the above? And what is sensible to aim for?

And what do you guys have in terms of splits?

For me I'm 39 (boo) and this is my split:
1x savings (easily accessible, emergency funds)
2x isa (I could use this easily but ideally not)
4x pension (retirement)

(ie if I had 10k in savings id have 40k in my pension)

I'm thinking in general I'm under on the pension side vs average person.

I expect this is not the ideal way to think about it as if you have 10k, 100k, 1mln..
The ratios are probably very different as well as your age,salary etc etc

Most people are significantly below where they should be when it comes to private pension contributions. Always try to get the most out of your employer if their scheme will match your contributions! Maxing out your annual ISA entitlement is also sound advice if you have that much money available.

For the other stuff to some extent it depends on your outgoings and foreseeable expenditure. Ideally you want at least 3 months of outgoings saved somewhere accessible in case of emergencies. Beyond that it's what you are comfortable with and how long you think it will be invested. If you aren't planning to touch it for quite a few years then a stocks and shares ISA is a solid choice. If you might want to use it next year to pay off a chunk of your mortgage, buy a car or whatever then a cash ISA will remove the risk of stock market volatility.

 

[413x]

Most people are significantly below where they should be when it comes to private pension contributions. Always try to get the most out of your employer if their scheme will match your contributions! Maxing out your annual ISA entitlement is also sound advice if you have that much money available.

For the other stuff to some extent it depends on your outgoings and foreseeable expenditure. Ideally you want at least 3 months of outgoings saved somewhere accessible in case of emergencies. Beyond that it's what you are comfortable with and how long you think it will be invested. If you aren't planning to touch it for quite a few years then a stocks and shares ISA is a solid choice. If you might want to use it next year to pay off a chunk of your mortgage, buy a car or whatever then a cash ISA will remove the risk of stock market volatility.

That is kind of what I have now.
My work place pension is basic. Ie 5pc matched (I put in 9pc and get 5pc match).
I put in 9pc as I'm behind.

My isa is a S&S isa. I should have clarified that.

My savings are split between a few instant access sources.

My savings should cover any emergencies.
Its a split between savings account (6.25pc interest) a cash isa (5.1pc) and some. Premium bonds (for that big win!)
And this would cover 2 years of living hand to mouth (ie mortgage + bills + food etc) or 1 year of living normally. If I needed to replace boiler, or something like that I'd re-top up that savings.

Its more the ratio. Ie should pension be more like 6x, or 8x? Etc

 

[Gammawolf]

I think the answer to this is too variable to apply any form of guideline given peoples circumstances.
I myself keep about 6 months outgoings in easy access, the reality is though its easy enough to liquidate other assets if push came to shove. Across me and my wife we probably do double into SS ISA's than pensions. The main reason for this is that we have quite low out goings and neither do we need a combined pension pot of £5m+ so we'd rather take the tax hit and have it in an accessible form so we're flexible in our 40's and 50's to either retire early, move country, upsize etc.

 

[Selekt0r]

I think the answer to this is too variable to apply any form of guideline given peoples circumstances.
I myself keep about 6 months outgoings in easy access, the reality is though its easy enough to liquidate other assets if push came to shove. Across me and my wife we probably do double into SS ISA's than pensions. The main reason for this is that we have quite low out goings and neither do we need a combined pension pot of £5m+ so we'd rather take the tax hit and have it in an accessible form so we're flexible in our 40's and 50's to either retire early, move country, upsize etc.

Sensible. I didn't start to do any serious saving/investment outside of pension contributions until relatively recently - for the exact opposite reason to you (i.e. we had relatively high outgoings / 3 kids / London costs etc.). Now the kids have left home and we've cleared the mostgage I'm playing catch-up on the ISAs + general savings side of things. I'll be able to access my pensions from early next year - mix of relatively small defined benefit (although still capable of covering > 100% of our regular outgoings) and a very healthy defined contribution pot. Better ISA savings started earlier would have given me more flexibility to bridge the gap from 55->60 as I'm still nervous about tapping into the DB pensions until age 60 as they get scaled back quite a bit when taken earlier and/or depleting the DC pot too early and exposing myself to too much sequencing risk.

 

[Brok]

Are there any general guides to ratios of the above? And what is sensible to aim for?

And what do you guys have in terms of splits?

For me I'm 39 (boo) and this is my split:
1x savings (easily accessible, emergency funds)
2x isa (I could use this easily but ideally not)
4x pension (retirement)

(ie if I had 10k in savings id have 40k in my pension)

I'm thinking in general I'm under on the pension side vs average person.

I expect this is not the ideal way to think about it as if you have 10k, 100k, 1mln..
The ratios are probably very different as well as your age,salary etc etc

Sounds like you have your emergency funds sorted so next think about your retirement targets - when do you want to retire and how much do you want to be able to spend each month/year in retirement? Once you have your target number, you can see what adjustments you need to make to your pension contributions to hit the magic number. If you want to retire before pension access age, how are you going to bridge the gap? This is typically some mixture of ISAs + GIA + Cash (unless you have some passive income sources or can realise an asset such as a house) The ratios will then adjust themselves to meet your financial goals and level of risk tolerance.

Something like this https://james-shack.co.uk/retirement-planner will help you model different scenarios and can account for things like one-off expenditures/gains etc. You do need to sign up to a newsletter to get access.

To answer your question about splits I am 47 and roughly

2 x Pension
1 x ISA
1 x Cash

My cash holdings are quite high but they are being converted into ISAs each year as the allowances roll over. I max out pension contributions so can't increase that further and have shied away from significant GIA holdings although this may change in the next couple of years as I expect an event that will generate a one-off influx of cash.

 

[MichaelAwkward]

As above, really is personal circumstances dependent and depends on when you plan to retire.

Definitely maximise tax free savings first, but the mix of ISA (and that could be a combination of cash or Stocks and Shares ISAs) vs pension would depend on when you plan to retire.

The earlier you plan to retire the more you’d put in ISAs to form a bridge until you can access your pension.

The ukpersonalfinance sub on Reddit has a useful workflow for this sort of planning: https://ukpersonal.finance/flowchart/

Depending on your circumstances and how complex they are, professional advice may be worthwhile.

 

[413x]

I don't plan to retire very early. Simply don't earn enough
(I'm 39 and my pension is only worth about 90k)

I'd rather work longer but part time than retire early and have no money to do anything.

I don't max out my isa every year. Again. Salary isn't high enough to do that.

So bar any rule changes I don't see my contributions going up much in the near term.

I do think my easy access is now high enough.

I should probably (at 39) think about when/how I want to retire. I expect it will come down to the health lottery.

If I'm fine getting about in my 50s, 60s etc. But I'll probably want to work into those to some degree as my pension/isas won't be high enough.

Do plan to equity release at some point too which would be a nice boost. But that's probably late stage.

 

[Tom_ed1987]

This will vary massively depending on circumstance e.g whether you're saving a house deposit, & even circumstantial by age, as 2 professionals aged 35 & 40 who have made similar pension contributions will have significantly different valued pension pots.
I'd suggest a metric like like ratio of ISA+pension vs current salary is maybe more useful.

My split right now in nominal value goes something like:
1x Savings
15x ISA
30x pension

 

[Brok]

I don't plan to retire very early. Simply don't earn enough
(I'm 39 and my pension is only worth about 90k)

Mine was worth less than that at 39 and I had very few other assets ( less than 10k excluding house), I'm probably going to hit my FI number before 50. You never know what's around the corner, one lucky phone call was all it took for me.

 

[EvilRob]

There's definitely no one size fits all.

• Savings - stop at the point you have a buffer that works for your situation. For me it's pretty high (about 1 years earnings after tax) because finding a similar job would be a long process. Also just helps with anxiety. No point putting more in after that, though.
• Pension - at least get your company match.
• Roughly split anything more than that between ISA and additional pension contributions, biasing more towards pension if it helps you avoid tax thresholds especially over £100k.
• If you are in the very fortunate position you max out pension and ISA, then GIA.

 

[mattx4]

I look at it more of an annual target. I am to put 20% of my gross salary (inc employer contribution) into my pension and aim to save 10% of my net salary and put that into ISA / savings

 

[Disco_P]

I pay the default 3%/5% split with my employer for pension contributions. Invesing more in pensions is a post home-ownership question for me.

Whilst I save for said home, 33% of my income goes on fixed monthly expenses, 27% on spending money and 40% into savings. I will max out my ISA this year (cause I didn't use it at all last year - oop)

 

[throwaway4372]

Currently unemployed so I feel like I'm lying, but my general approach so far has been:
- Aim for 20% pension (total) to start taking pension at 57 rather than 68 (might not be alive at 68)
- Use the £20k S&S ISA allowance (allows years of retirement before 57) (might not be alive at 57)
- Whatever's left: overpay mortgage (huge relief to have it paid off) / enjoy your life (might not be alive tomorrow)

I recently watched a bunch of retirement planning videos and they all do some variation of this spreadsheet/chart that shows how you'll fund each year of retirement. Easy enough to make yourself, here's mine, and I found the process very informative for understanding what retirement might be like and what factors affect that.

Spoiler

Notes:
- I have no idea how 'pro' this is, but I feel a lot better having gone through the process.
- I plan to retire at 50 in this example (if ISA does well then earlier becomes possible).
- It's possible for me to get enough NI years for full state pension at age 48, I'll just buy any years I miss, so this is based on getting the full state pension.
- Income required is £20k a year in todays money rising by CPI (a number I pulled out of my butt which I think I could live on comfortably).
- Stop driving at age 70 and gradually do less stuff as I get older (might give up driving earlier in reality, for me a car is a utility for accessing work).
- State pension triple lock continues, forecast at 2.5% as the minimum under the triple lock.
- I have another sheet for forecasting pension growth to see if it meets the required amount or not (if I end up with more than I need I get extra income).
- Same for ISA (if I end up with more than I need I retire earlier, or go on a cruise).

 

[slinxy]

If you are near the tax brackets, put whatever it takes to lower be placed in the lower bracket.
for every pound you put into your pension, you would only be putting in 50p in to your ISA if you are at the 40% tax rate.
anything under the tax bracket put that into ISAs and savings.

The percentage of your assets shouldn't be a factor, because you have other assets like your house and car too.

Savings accounts should only really be for savings; for a raining day like if something breaks or you lose your job, for a car, or a wedding for example, and even then you could pay for it on a interest free credit card wait for a good time to cash in on shares.

Everything else should be placed into a stocks and shares ISA.

It very much depends on your life situ... for example my nephew who's married with kids, he has zero savings as he puts everything into shares.. knowning that his wife can carry the financial responsibility if needed for a period of time. He's prepared to do any job and never seems to have an issue finding work.

Me on the other hand, who's single and have a car that will fall apart any second from now, I have enough in savings for a replacement car and about a years living expenses, yes I can find work but it will no where be near my current role's pay as I work in quite an small niche specialist field and finding another company that requires it will take some time.

my savings and personal invested amount is about the same at the moment about 10% each of my net pay, and I'm putting in about the same amount of cash into each month. My pension is 7 times the amount, I'm puting in 13% per month, my four figure yearly bonus into my pension, plus the 12.5% of that amount from the employers NI, Work is puting in 10%. Roughly 25% in total of my monthly income, of which I'm only paying 13% of..

I'll upload my sankey diagram of my cash flow at some point...

 

[Zefan]

Currently unemployed so I feel like I'm lying, but my general approach so far has been:
- Aim for 20% pension (total) to start taking pension at 57 rather than 68 (might not be alive at 68)
- Use the £20k S&S ISA allowance (allows years of retirement before 57) (might not be alive at 57)
- Whatever's left: overpay mortgage (huge relief to have it paid off) / enjoy your life (might not be alive tomorrow)

I recently watched a bunch of retirement planning videos and they all do some variation of this spreadsheet/chart that shows how you'll fund each year of retirement. Easy enough to make yourself, here's mine, and I found the process very informative for understanding what retirement might be like and what factors affect that.

Spoiler

Notes:
- I have no idea how 'pro' this is, but I feel a lot better having gone through the process.
- I plan to retire at 50 in this example (if ISA does well then earlier becomes possible).
- It's possible for me to get enough NI years for full state pension at age 48, I'll just buy any years I miss, so this is based on getting the full state pension.
- Income required is £20k a year in todays money rising by CPI (a number I pulled out of my butt which I think I could live on comfortably).
- Stop driving at age 70 and gradually do less stuff as I get older (might give up driving earlier in reality, for me a car is a utility for accessing work).
- State pension triple lock continues, forecast at 2.5% as the minimum under the triple lock.
- I have another sheet for forecasting pension growth to see if it meets the required amount or not (if I end up with more than I need I get extra income).
- Same for ISA (if I end up with more than I need I retire earlier, or go on a cruise).

My brother in sheets, you got a blank version of that spready?

:edit: JFC you know you're getting old when retirement planning is exciting

 

[413x]

Currently unemployed so I feel like I'm lying, but my general approach so far has been:
- Aim for 20% pension (total) to start taking pension at 57 rather than 68 (might not be alive at 68)
- Use the £20k S&S ISA allowance (allows years of retirement before 57) (might not be alive at 57)
- Whatever's left: overpay mortgage (huge relief to have it paid off) / enjoy your life (might not be alive tomorrow)

I recently watched a bunch of retirement planning videos and they all do some variation of this spreadsheet/chart that shows how you'll fund each year of retirement. Easy enough to make yourself, here's mine, and I found the process very informative for understanding what retirement might be like and what factors affect that.

Spoiler

Notes:
- I have no idea how 'pro' this is, but I feel a lot better having gone through the process.
- I plan to retire at 50 in this example (if ISA does well then earlier becomes possible).
- It's possible for me to get enough NI years for full state pension at age 48, I'll just buy any years I miss, so this is based on getting the full state pension.
- Income required is £20k a year in todays money rising by CPI (a number I pulled out of my butt which I think I could live on comfortably).
- Stop driving at age 70 and gradually do less stuff as I get older (might give up driving earlier in reality, for me a car is a utility for accessing work).
- State pension triple lock continues, forecast at 2.5% as the minimum under the triple lock.
- I have another sheet for forecasting pension growth to see if it meets the required amount or not (if I end up with more than I need I get extra income).
- Same for ISA (if I end up with more than I need I retire earlier, or go on a cruise).

Quite scary the weight of the state pension if it keeps going up in age you can claim at.

I'd be surprised if I manage to have a 500k sipp by that point!
.but if I carry on working longer that may buffer it.

Of course if I pop. It early problem solved!

At least mortgage will be gone.
Some inheritance would be nice and probably make everything OK! But if not I'll just have to hope I can work long enough to plug the gap.

 

[throwaway4372]

Quite scary the weight of the state pension if it keeps going up in age you can claim at.

Yeah bonkers, country obvs can't afford it.

I'd be surprised if I manage to have a 500k sipp by that point!

Make a sipp forecast spreadsheet. guide:

Spoiler

cols:

• Year
• Your age
• Your pension pot balance from previous year
• Your estimated payrise (2.5%)
• Your salary (grows each year by payrise %)
• Your contribution %
• Employers contribution %
• Total contribution %
• Contribution £
• Estimated investment growth (5%)
• Amount drawn from pension (£0 for now, you'll use it later)
• New balance (previous balance + growth + contribution - drawn)

drag it down all the way to age 95
remove contributions from whenever you plan to stop working, observing that the pot continues to grow
see where you're at by 57, 68, etc.
then fiddle with contributions to get it where you need it to be

Some inheritance would be nice and probably make everything OK! But if not I'll just have to hope I can work long enough to plug the gap.

Good point, I deliberately don't include inheritance in my plan because it's unpredictable (mum might spend it all). Similar thing for downsizing my house because I may never do it. Few hundred grand there I'm not accounting for.

 

[[FnG]magnolia]

Just LOL if you're not just getting through every day by the skin of your teeth because you spent yesterday's bail money on today's powder opportunity and really, that's no way to live a life is it?

e: noobs.

 

[413x]

Yeah bonkers, country obvs can't afford it.


Make a sipp forecast spreadsheet. guide:

Spoiler

cols:

• Year
• Your age
• Your pension pot balance from previous year
• Your estimated payrise (2.5%)
• Your salary (grows each year by payrise %)
• Your contribution %
• Employers contribution %
• Total contribution %
• Contribution £
• Estimated investment growth (5%)
• Amount drawn from pension (£0 for now, you'll use it later)
• New balance (previous balance + growth + contribution - drawn)

drag it down all the way to age 95
remove contributions from whenever you plan to stop working, observing that the pot continues to grow
see where you're at by 57, 68, etc.
then fiddle with contributions to get it where you need it to be

Good point, I deliberately don't include inheritance in my plan because it's unpredictable (mum might spend it all). Similar thing for downsizing my house because I may never do it. Few hundred grand there I'm not accounting for.

I'll def grab that SS and probably cry!

Yeah I don't include inheritance as a given for sure. More as a nice bonus if it comes.

When you're not having kids and thus dying with 0 is the aim (but impossible) it opens up equity release. Probably not downsizing as I'll never have/want a big house and I'll probably end up living in a cheap area.
But that could unlock a big chunk of cash too.

Its pretty much a given for me to do that really.