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How Much Should I Contribute Into My Pension?

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None of us want to work forever so let’s answer the question of how much should I contribute into my pension?
In simple terms, a pension scheme is just a type of investment plan to help you save money for later life, but what makes them so valuable is that they have favourable tax treatment compared to other forms of savings. The biggest available tax win for you comes in the form of tax relief on your contributions which essentially means some of your money that would have gone to the government as tax, goes into your pension instead. If you are employed, you might be a member of your company pension scheme where you will also be benefiting from their contributions too or if like me you are a lone ranger and you’re running your own thing, it’s down to you kid but either way they are a great tool for your retirement planning toolbox.
But how much should you be contributing? Let's take a look.
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Hi there! My name is Tom Morgan, Founder & Financial Planner of Orca Wealth Ltd, welcome to my RU-vid channel ‘That Finance Show’. I’m very glad to have you here because this channel gives me the opportunity to help people and share information with those who wouldn’t normally get it.
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When investing remember, your capital is at risk. Investments can fall and rise and you may get back less than you invested. Tax treatment depends on your individual circumstances and may be subject to change. This channel is for information and entertainment only. The information provided by Tom and That Finance Show is not intended to address your particular requirements and should not be construed as advice. Neither Tom or ‘That Finance Show’ will not be held responsible for any actions you take as a result of watching these videos.
#pensions #howmuchshouldicontribute #retirementplanning

Опубликовано:

23 авг 2024

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Комментарии : 70

@DamienTalksMoney 3 года назад

Zero dislikes at the point of this comment!!! Love it. Well done mate clear info, well explained and a lovely job on the edit and audio. I see those drop shadows on the text!

@ThatFinanceShow 3 года назад

Are you even a youtuber if you don’t drop a shadow? Thanks mate!

@neilinvests 3 года назад

I started working at 22 properly, the business had an opt out policy which meant through laziness alone, I started at 22, thank goodness. Nice video mate.

@ThatFinanceShow 3 года назад

Here he is, thanks Neil. Who says laziness doesn’t pay off...

@mrc1500 3 года назад

Cheers, Tom. Nice to see another excellent vid. I've royally stuffed my pension and I'm 54. Got a few of the little blighters dotted around and need to gather up those statements and consolidate, I think. Gah, proper old mess. I have an S&S ISA being my only saving grace, which is where most of my disposable income goes. Not sure if I'm a lost cause with pensions. Anyway, enough moaning from me. Top notch stuff here, mate.

@ThatFinanceShow 3 года назад

Iain, sure it’s not a lost cause! Have a look into the pros and cons of getting them all together. Find out what costs you are paying and how they are invested. Also, you’ll want to check you won’t be losing any benefits on transfer that aren’t readily available anymore.

@mrc1500 3 года назад

@@ThatFinanceShow Thanks, Tom. I'll take a look. Appreciate the tip.

@darrenjosephgregory 3 года назад

Great video, I am very grateful that when I joined a Local Authority in 2007 I signed up to the LGPS but even though I did it is only now, some 13 years later that I really have started to think about saving and investing. I'm in a much better financial position than I was ten years ago but I so wish I had known more when I was younger. The irony is I worked in retail banking in the early 2000s. I am now looking at a junior SIPP for my 10 year old son (yes I wished I had the knowledge to have started ten years ago). We don't have much, will be putting away £50 per month into the this and hopefully other family members will top it up but even with a small amount that relatively early start should help him later in life, especially if he continues to contribute from 18. Thanks again.

@ThatFinanceShow 3 года назад

Hi Darren 👋🏻 great to hear from you. I hope to be able to engage people at a younger age as if you can crack it then, it’s so much easier. That being said, it’s often not until later life when earnings and circumstances mean you can start to think more about investing. It’s a tough balance. Amazing to hear what you’ve started for your son, one day he’ll be thanking you for that I’m sure. Thanks again and welcome to the channel.

@darrenjosephgregory 3 года назад

@@ThatFinanceShow Thanks. I think a future video aimed at parents and grandparents who are often in a good financial position and can invest in their children and grandchildren's future would be good for many people. I think the investing timescale of children is under estimated. Keep up the good work,

@ThatFinanceShow 3 года назад

@@darrenjosephgregory great idea thanks Darren. Consider it on my list

@creatingbalancefinance 3 года назад

Great video!! I really need to put more focus on my SIPP. I’m so pleased I started managing my pension myself but need to start adding much more - it just hasn’t been a priority!

@ThatFinanceShow 3 года назад

Thank you! It’s difficult isn’t it, all different priorities trying to shout louder than the others. The key for me is trying to think ahead about where you want to be and then seeing how you can make that happen.

@FernandoBowen-78 Месяц назад

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

@imohimoh3441 Месяц назад

I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.

@FernandoBowen-78 Месяц назад

@@imohimoh3441 That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well

@imohimoh3441 Месяц назад

@@FernandoBowen-78 My advisor is Victoria Carmen Santaella;

@imohimoh3441 Месяц назад

You can look her up online

@LiamOlivia-4 Месяц назад

@@imohimoh3441 The crazy part is that those advisors are probably outperforming the market and raising good returns but some are charging fees over fees that drain your portfolio. Is this the case with yours too?

@DisruptiveWealthCreation 3 года назад

Great share. Not the most popular subject for most people but probably the most important. Great vid!

@ThatFinanceShow 3 года назад

Thank you, pensions appear to still have some negativity around them but they are a great planning tool.

@DamienTalksMoney 3 года назад

that thumb fact is madness!!

@ThatFinanceShow 3 года назад

I genuinely did not know that’s what it meant.

@Ian-lm7mn Месяц назад

Hi Tom love your Videos you Explain it well so people like myself can understand most things. I have a Question for you.. I put 18% of my wage in a company pension half from me half from the company this is the maximum they will put in should I put even more in that pension or should I put the extra amount in my private pension which has £120,000 in it,I am 56..Regards Ian...

@PrettyPennyClub 3 года назад

Nice video, Tom. Just scanning down the comments it seems pensions are as divisive as ever. More information = better choices. Cheers for this.👍

@ThatFinanceShow 3 года назад

Thanks David, interesting isn’t it. I might do more on pensions...

@SteveDuts 3 года назад

Great video as always and good information, luckily i started paying into my pension scheme on the railway 17 years ago 👍🏼

@ThatFinanceShow 3 года назад

Thanks Steve, always appreciate you watching and commenting.

@DamienTalksMoney 3 года назад

Steve got that pension on lock!

@SteveDuts 3 года назад

@@DamienTalksMoney Yeah 👍🏼 been paying in for quite a while now and with investing i’m on track (pardon the railway pun) to retire early.

@batking911 3 года назад

I’ve always saved into a pension at least enough to match employer’s contributions since I started working at 22. For many years It didn’t look like it was going to be anywhere near enough to allow me to retire. But it’s built up over time, and in recent years since becoming a higher rate tax payer I’ve increased my contributions - the extra kicker you get from higher rate tax relief is massive! I’ve also consolidated my old pensions into a low cost SIPP so I can better see what I have, and was surprised by how much they had grown - hoping in a couple of years it will be enough to coast to what I need by retirement age. I also invest in an ISA - essential for a security base, and if you want to retire early, as the money is not locked in. It’s definitely worth contributing to a pension - if it comes out of your salary, its money you never see so don’t miss and it builds up behind the scenes, and a lot more of it goes into your pension than you’d get after tax. Great video with sound advice as always!

@ThatFinanceShow 3 года назад

Totally agree Peter. There’s so much ‘free money’ up for grabs with pensions, especially for those with employers chucking in the pot. It’s a no brainer. Thanks as always for watching and getting in touch, appreciated 👊🏻

@pm5095 4 месяца назад

Great video! I would be grateful if you could advise what's best for me..37 year old.. started pension contributions age 27, currently 45k pension pot. I earn 38k and i sacrifice 18% monthly from my salary into my employers pension scheme ( the biggest i am allowed) they pay 5% only. Am i doing the right thing? Or shall i decrease my contributions to 5% or 10% and invest the remaining in a SiPP or stocks ans share isa or lisa? So confused here😮

@jonathangiles4854 2 месяца назад

My advice would be to have a saving pot to cover emergencies in an ISA. Everything else in your pension as your doing. The difference is once it’s in your pension it’s stuck there for a while without access. An isa is typically available to access now. The benefit of pension esp salary sacrifice is the saving in your monthly tax 👍

@postie10111 3 года назад

Would it be better to put the maximum you can afford into a NEST BEFORE putting anything into a Vanguard ISA? Discounting any employers contribution, as that 4% goes in whether you pay more or less, considering Govt tax relief on any cash put into a pension it gives you a 20% return before you do anything and also isn't at risk of a market crash. Or would the ideal choice be a S&S SIPP on top of a NEST pension, moving money from NEST to SIPP as and when you can. (I think NEST only allows you to move it all, not sure if that can be done every month, or year, or when changing jobs) Another question is, if I raise my NEST contributions, does my employer have to raise theirs, or is 4% the max they can pay, or can they 'voluntarily' contribute more? Do they get any tax relief on pension contribs?

@ThatFinanceShow 3 года назад

Hi Paul. Good questions, I’ll do my best to answer them all. Pensions vs ISAs is a topic well debated, I plan on doing a video on it in the future. They have pros and cons to each - I like both. The tax relief is the biggest win for the pension whilst contributing like you say, free money! It’s not necessarily true to say it’s not at risk of a market crash, it depends how you then invest the money inside the pension. The pension is just a tax wrapper in the same way that an ISA is a tax wrapper. SIPP would probably cost a little more but will give you more investment choices, depends whether you need them. Each employer will have their own rules, they only have to do the minimum but some more generously will do more in order to attract better talent as part of the package. Employers get relief in a different way, pension contributions are an expense for corporation tax purposes (most of the time) and they save National Insurance too which they can choose to pass on or not. Hope that helps.

@DafyddMorse 3 года назад

Not the sexiest but I have to play the hand I've been dealt! 😆 I made the "11 Streams of income" video you wanted to see! Rule of thumb! I knew that but had forgotten so thanks for that reminder!

@ThatFinanceShow 3 года назад

Thanks Dafydd! I’ll come check it out when I get chance.

@bartkuk1 3 года назад

Hi, probably a dumb question so sorry for that but what do you exactly mean by “my pension”?? I work for nhs and contribute towards nhs pension scheme but I don’t think it’s down to me to decide how much I would like to contribute right?? It’s all set by the scheme and that’s it or am I missing something here? Please explain 🙏🏻 all the best Bart 😉

@ThatFinanceShow 3 года назад

Hi Bart, thanks for the comment. The NHS pension is different, it’s a defined benefit scheme rather than the more common defined contribution style scheme in talking about here. Should have made that clearer!

@richardmartin9069 2 года назад

okay this may be a dumb question but what the hey! at 55 you can take 25% of your pension? so to make maths simple if i had£100k pot i could take 25K tax free, could i then reinvest that into my pension and get tax releif - or use that £25K to supliment my salary for a year and increase my pension via salary sacrice by 25K - thus reducing my tax biill for the year and whatever i saved on tax invest in a ISA?

@ThatFinanceShow 2 года назад

Richard, no stupid questions here. Hopefully no stupid answers either 😂. Taking out a lump sum to stick it back in is against the rules, look up ‘recycling’. Otherwise it would be an infinite tax relief loop!

@richardmartin9069 2 года назад

@@ThatFinanceShow great info as usual - i thought there would be a law against it somewhere - keep up the great work

@richardmartin9069 2 года назад

@@ThatFinanceShow maybe this would be a good subject for you to cover as when i searched youtube there are only 2 videos and they both say its possible but complicated

@ThatFinanceShow 2 года назад

@@richardmartin9069 thanks Richard, I’ll stick it in the ideas pile.

@WaleedTawfiq Год назад

HI mate I worked for 3-4 years with NHS as a Physiotherapist, how can I find out how much I have pension accumulated and when can I get retired? I'm 57 years old. Thanks

@ThatFinanceShow Год назад

They will send a statement once a year Wales with all the info on

@WaleedTawfiq Год назад

@@ThatFinanceShow I didn’t received it at any time 😌

@terrynutkins0 Год назад

urgh depressing watch for someone at 40 without a pension pot. My question - at the age of 40 with limited income is it a better bet to invest in the stock market or a pension pot?

@ThatFinanceShow Год назад

A pension pot is just the product, think of it like a basket in which you put your investments. Most pensions are invested in the stock market.

@davidmorgan9434 3 года назад

I've popped off but toooooo late I'm afraid, better luck next life for me!

@ThatFinanceShow 3 года назад

There’s always the lottery!

@ABB-bw6tc Год назад

I can’t afford to put it away

@StupidIsTheNorm 3 года назад

Zero. Put it in an ISA. You get 100% tax free. The tax relief on a pension will disappear if the pension fund is a high fees and underperforming. Given that at least 75% of funds don’t even match the index, the pension is the least attractive option. The pension was designed by rich people for rich people. That’s why it works at it’s most efficient when you’re a higher rate tax payer and want to have your money paid abroad when you retire. PLUS, if you have any sort of ambition, and want to retire before age 55, the pension is absolutely useless. People who sell pensions will tell you otherwise.

@ThatFinanceShow 3 года назад

Completely disagree, feels like an outdated view. Pension flexibility and the fact that most people have lower income when they come to retire making even the taxable element tax efficient (with proper planning). Many pensions don’t have high fees and you can go down the index only route if you want. Having free money in the form of tax relief to invest and grow for 30 years plus is worth having even if you have to pay some tax further down the line. I don’t think it’s either ISA or Pension, I think it’s both.

@StupidIsTheNorm 3 года назад

@@ThatFinanceShow well of course you would disagree. You get paid when someone buys a pension from you. You rely on the herd working for 50 years and retiring on a pension kicking out half salary. Anyone who is able to work hard can retire in 10 years. Pension or no pension

@ThatFinanceShow 3 года назад

There’s so much wrong with that statement I don’t know where to begin. Ah well, each to their own - I’ll stick to what the numbers tell me.

@StupidIsTheNorm 3 года назад

@@ThatFinanceShow happy to debate more. I reached financial independence in 3 years on minimum wage. In the next 7 years I’ll make £1 million. They’re my numbers

@postie10111 3 года назад

@@StupidIsTheNorm with an exceptional statement like that - you may need to provide some exceptional proof. Of course, this is RU-vid comments section, so not the best place to find enlightened conversation. Pony-up some figures on how you '"reached financial independence on minimum wage in 3 years". I'm guessing your concept of Financial Independence is somewhat different to what most people think....