Pensions For Dummies

[Frozennova]

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?

 

[Frozennova]

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?

 

[Frozennova]

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.

 

[Frozennova]

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

 

[Frozennova]

Definitely take advantage of this generous contribution.

Filled the form in and submitted it yesterday evening with the maximum 5% contribution from myself. I'm young but worth planning for the future now than in 20 years time when Im sat there thinking **** I've got nothing for retirement

 

[Frozennova]

thing is last year i earned 41k (before tax ni etc) but basic salary is only 27k

so ive been here 5 years now, and have just turned 27, so i need to try and elevate the basic salary before retirement.

get an extra day holiday at 10 years, 15 years 20 and 25 years tough

Same for me last year, basic is 20k, earnt around 28k iirc, basic will be going upto 22k shortly after the new year