Pension stuff

[Deleted member 651465]

15% personal contribution
10% employer contribution

I also put £150 aside in SIP payments and £102 in shares which are percentages of my pay.

 

[Mr^B]

me 7% and company 14% here.

Although I can put in a higher percentage, the company only 2x match up to 7%

 

[jimjamuk]

I was chucking in 5% with the company doing 10% which was pretty good - left that now and kind of let it lapse now im self employed. Should get round to putting some in my SIPP

 

[SPG]

So our free financial guy from work, says do this.

• Meet the min reqs for company to match on pension contributions.
• 
  
• Overpay mortgage (if you have one) as much as possible.
• 
  
• Increase pension contribution once mortgage is paid off.

The amount you save in interest by over-payments is money saved for your tax free pension, Of course this is 15-30 year plan depending on your age.

 

[Josh]

I do 5.45% my employer does 20.9%, just need to stick it out for another 35 years and I might be able to afford a loaf of bread a week.

 

[peter]

Well I have 37 1/2 years in mine but still less than 1/3 of salary and that is in the better than average USS pension scheme. They want to change it from a defined benefits to a defined contribution pension.
I pay 13% employer 18%.

 

[Josh]

So the Alpha scheme?

Spot on, had 5 years on Nuvos and Alpha since it came to being.

 

[Calpol]

So our free financial guy from work, says do this.

• Meet the min reqs for company to match on pension contributions.
• 
  
• Overpay mortgage (if you have one) as much as possible.
• 
  
• Increase pension contribution once mortgage is paid off.

The amount you save in interest by over-payments is money saved for your tax free pension, Of course this is 15-30 year plan depending on your age.

This is not necessarily sound advice in today's low interest rate climate.
Consider this scenario. Every £ you pay into a pension product is matched by 20p minimum from the government, 40p if you are a higher rate tax payer. Invested into a SIPP product allows you to withdraw up to 25% of your "pot" post 55yo. In theory this could pay off your mortgage. Its to all intents and purposes free money. and interest rates would have to rise significantly in order to counter the tax free element of pension contributions.

The best advice might lie somewhere between the two strategies as the only drawback with a pension is that the money is tied up until you are 55.

 

[NotAGolf]

So our free financial guy from work, says do this.

• .......
• Overpay mortgage (if you have one) as much as possible.
• ..............

I'm far from an expert on this area, but this is not necessarily good advice. It might be good advice for people with very little equity in their home who want to jump up the LTV bands to secure a better deal, but for someone with a decent chunk of equity and a low interest rate, they could almost certainly make better returns elsewhere.

 

[regulus]

I contribute about 8% of my salary and my employer pays 4%. I also privately invest in the exact same fund I use for my retirement savings (so I have access to the money should I need it) to the tune of 50%+ of salary. Some months significantly more, some months significantly less. 50% is about average.

Depending on the performance, I'll take the private investments as monthly payout at 50 whilst the pension pays out at 65.

 

[The_Abyss]

Every £ you pay into a pension product is matched by 20p minimum from the government, 40p if you are a higher rate tax payer.

Your calculations, or terminology, are incorrect. If you pay £1 in to a pension as a basic rate taxpayer, either:

- tax relief is claimed at source, and your £1 contribution costs you net £0.80
or
- you pay a gross contribution of £1 and the tax relief (matching, in your words) is worth £0.25

It is a common mistake. People often think the Lifetime ISA is more generous as it has a 25% 'bonus' and basic rate tax relief is only 20% for a pension. It isn't. They're the same when it comes to income tax (at the current basic rate of income tax).

 

[FishFluff]

I'm far from an expert on this area, but this is not necessarily good advice. It might be good advice for people with very little equity in their home who want to jump up the LTV bands to secure a better deal, but for someone with a decent chunk of equity and a low interest rate, they could almost certainly make better returns elsewhere.

It's still good advice if you're particularly risk averse or will be moving home within about 5 years. Anything longer term than that though and there's a whole host of low-ish risk products that will outperform over-paying a mortgage with interest rates as they are now.

 

[glenimp617]

So our free financial guy from work, says do this.

• Meet the min reqs for company to match on pension contributions.
• 
  
• Overpay mortgage (if you have one) as much as possible.
• 
  
• Increase pension contribution once mortgage is paid off.

The amount you save in interest by over-payments is money saved for your tax free pension, Of course this is 15-30 year plan depending on your age.

I'm not 100% sure on this. I looked into overpaying and the interest saved was minimal (considering interest rates are so low). Think I could save £175 over 5yrs overpaying £100 each month.

:edit:
What I didn't account for thinking about it, is just with overpaying and shaving say 3yrs off the term that would bring additional savings.....need to go back to my excel sheet I think

 

[SPG]

That was his point, once the mortgage is finished lets say 2 years early at £500 that an extra 12k in your pension pot alone. Of course you have to be strong enough to divert this into your pension. The other side of this is a great deal of us will not live that long into your pension anyway so it really is a game of jeopardy

 

[shiver]

Pay 5%, company adds additional 7.5%

 

[Kemik]

Overpay mortgage (if you have one) as much as possible.

This isn't great advice if your mortgage rate is less than FTSE return.

 

[randomshenans]

Mine is 5/5% split me and employer, but my wife's is 4.6 her and 9.2 employer.

 

[SPG]

This isn't great advice if your mortgage rate is less than FTSE return.

Lots of factors as you say, again he stressed this is not short term plan i.e <15 years and the FTSE will crash at least twice more if not 3 before i retire.

 

[Randomface74]

Overpaying your mortgage instead of investing for your future or retirement is bad advice.

 

[Freddie1980]

Overpaying your mortgage instead of investing for your future or retirement is bad advice.

Correct, if you have taken out a mortgage in the last 8 years the chances are you paying around 2% or maybe less, annual returns on pensions however on the other hand are yielding anywhere between 10 to 20% depending on what stocks have been invested in.