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

 

[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

 

[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.

 

[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.

 

[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.

 

[413x]

It does seem everyone has a better pension than me!
16pc employer contribution is crazy

That's 4x mine.

But I guess pension + salary is always worked out. So if you get a higher employer contribution you'll probably get a lower salary (in equivalent job)

 

[413x]

Snip

To answer the OPs question, put enough into your pension so when you do retire, you don't have to work.
ISAs are great for early retirement..
Savings are there to fund you in certain situs till you get to retirement.

For me I'll need to work longer because I wont have enough. I am aware of that at least.
Unless, I mean when, I win the premium bonds or something I'll certainly need to work past 55.

I'm OK for that, as it would be too much a compromise on "good years" to try and retire a few years earlier but miss out now.


I guess that's it for me. I don't really have a fixed date. Not sure how I could do. Too many variables.

I'm not confident a pension or NHS will even be around, in which case probably can't retire anyway. Just too many unknowns at this point.