Pensions For Dummies

Man of Honour
Joined
13 Nov 2009
Posts
11,656
Location
Northampton
I'm clueless when it comes to pensions, but almost 25 its probably about time I actually gave my future and retirement some thought.

I currently contribute 1% with a 2% employer contribution, the option is available to increase this to 5+10%

Now using this calculator I found in another pensions thread its fairly obvious that my pension pot will be substantially bigger.

I understand that the monthly cost difference to me will be £50 a month, increasing my pension contribution by £200 a month.

But what does this mean to me in 43 years time, apart from the obvious rough£200,000 difference in the size of my pension pot?
 
According to this: https://www10.landg.com/eap/RetirementIncomeCalculator

If you retired today with a pension pot of £150k, you can buy an annuity that will give you an income of ~£6.5k a year

If your pot was worth £350k, you can buy an annuity that will give you an income of ~£14.5k a year.

Other options are available. Seek professional advise before making any decisions.
 
You could take out £200k early and buy a nice supercar, just make sure when you crash that it finishes you off or your later years might be a bit sparse. :p

On a more serious note, well worth thinking about now. My pension is terrible and unless I earn substantially more in the future I'm pretty screwed.
 
It means your pension pot will be roughly £200,000 bigger

Not sure what else you need to know?

Should have been more specific, what it means on things like yearly income

According to this: https://www10.landg.com/eap/RetirementIncomeCalculator

If you retired today with a pension pot of £150k, you can buy an annuity that will give you an income of ~£6.5k a year

If your pot was worth £350k, you can buy an annuity that will give you an income of ~£14.5k a year.

Other options are available. Seek professional advise before making any decisions.

That's very helpful.

So the way it looks to me assuming I have a two pots one £100k, one £300k the options I have are

£4560 p/a
£14,365 p/a

or

£3390 p/a + £25,000 drawdown
£10,800 p/a + £75,000 drawdown

Does that sounds right?
 
Last edited:
The magic of compound interest will be your friend, even in our current low interest rate environment. Anything you can put away now in your 20's has 40 years to grow. The employer contribution is especially valuable.

I would suggest you make sure to be using your ISA allowance as much as you can. The downside of a pension is that the money is locked up until you are old and decrepit. Savings in an ISA can be taken out and used any time - which gives your far more flexibility.
 
Well clearly the biggest factor here is your employer contribution which is generous.

I would definitely be taking advantage of that. You don't know how generous a future employer will be.
 
My employer doubling my contribution upto 5+10% is what grabbed my attention and got me thinking about it, as that is a big difference compared to the 1+2% I'm on at the moment.

Long term savings is something to address in the new year once we have purchased our first house.
 
My advice to anyone is start as early as possible, take full advantage of any employer contributions and then look to retire as soon as you can. If you start now and put some thought into it, you may well be able to retire whilst you are relatively young instead of working until you are 70. :eek:
 
If you can afford the contribution and know you won't need access for the very very long term definitely do it. Nothing else you do will come close to the 5% for 10% employer contribution.

Regarding annuities no adviser would recommend them at present apart from for the very cautious. Their value is pretty minimal.

Regarding the Lifetime ISA as they are not released until April 2017 it's something to bear in mind but not really relevant to long term planning when you have employer contributions and the minimum contribution for yourself in April 2019 due to Auto Enrolment will be 5% anyway.

The only thing that may take priority is a first home purchase. But tbh even then £50 per month shouldn't crack the bank.
 
The crux of this thread for us 20-somethings and 30-somethings, is that we'll all be dead by the time we're pensionable. State pension is already 68 as it is. By the time we're 68 it'll have gone up to 78 and we'll be dead by then as this is what the gov't wants. The WWII generation were the healthiest and we're regressing now. Private pensions will soon follow suit coz that's what the CEO's / fat cats are also wants. BHS is already a shining example of that.
 
The magic of compound interest will be your friend, even in our current low interest rate environment. Anything you can put away now in your 20's has 40 years to grow. The employer contribution is especially valuable.

I would suggest you make sure to be using your ISA allowance as much as you can. The downside of a pension is that the money is locked up until you are old and decrepit. Savings in an ISA can be taken out and used any time - which gives your far more flexibility.
Agree,

OP you end up old (middle aged) before you know it.
 
The crux of this thread for us 20-somethings and 30-somethings, is that we'll all be dead by the time we're pensionable. State pension is already 68 as it is. By the time we're 68 it'll have gone up to 78 and we'll be dead by then as this is what the gov't wants. The WWII generation were the healthiest and we're regressing now. Private pensions will soon follow suit coz that's what the CEO's / fat cats are also wants. BHS is already a shining example of that.

:rolleyes: Thanks, I needed a good chuckle!!!
 
The more you put in the sooner, the better the long-term result. Compound tax-free interest is very much your friend.

You are 25. Your likely pensionable age will be 70. You will likely live to near 90. You should budget for living longer than that. You are going to need an income to keep yourself in house and home - and beer - when you can no longer work.
 
I think these private pensions are all another big scam to line the pockets of the financial industry. There's no real transparency on what they charge to operate the fund and what they invest in.

In the event markets decline you can bet your bottom dollar that their cut won't be effected, they'll put the burden of the loss onto the fund holders.
 
I think these private pensions are all another big scam to line the pockets of the financial industry. There's no real transparency on what they charge to operate the fund and what they invest in.

In the event markets decline you can bet your bottom dollar that their cut won't be effected, they'll put the burden of the loss onto the fund holders.

You have no idea what you're talking about.

The amount of misguided negativity about saving for your retirement, and consequentially people refusing to save for their own futures, hugely outweighs the poor value pension schemes available. Both routes will lead impoverished retirements.

In the meantime, people willing to research a bit more or take some advice can easily work out how to best save for their retirement.
 
It is extremely generous. Most employers cap at about 6%. Mine caps at 3% IIRC.

I assumed ours capped at around 4% before the letter came through this morning, and had never given it much though, 5+10% seems to be very high judging by other peoples reactions here.

Annoyingly the contributions are only calculated on our basic pay and I earn about 30% on top of that by the time bonuses are added into the mix. I also have no intentions of changing career paths or employer anytime soon
 
Back
Top Bottom