😀Thanks so much for watching and please do let me know should you have any questions or comments especially in regards to qualifying earnings, pension contributions etc!!
Very useful thank you. I've been making notes off your videos. I've lived and worked in the UK since 2003, first as a student then on a work permit, eventually becoming a British citizen in Jan 2012. I've been working since the first week I arrived here, contributing taxes and NI but I won't qualify for a full state pension because I haven't lived here long enough. I've been working full time in the HE sector since 2005 but owing to poor employer practices, haven't been enrolled in an occupational pension until Jan 2011. Since then I've been steadily contributing to my occ pension and I have also started paying in additional voluntary contributions by way of salary sacrifice. I am 52, single, no children, no dependents. Job security is poor in the sector so I am trying to save as much as I can, paying in min of £2000 each month into my pension pot but have also started to save recently in a S&S ISA. What is the min. pot that I can aspire to build within the next couple of years that would make things slightly more comfortable? At present my retirement builder in USS is only worth an annual payout of around 7500 and a 22k lumpsum but I've saved around 100k into my USS Investment Builder which is at least 20k higher at current valuation.
I pay about £60 into my pension each month but the company I'm with only pays in £40 per month. I thought that the employer had to match the contributions. My annual gross income is about £22,000. Is my employers contribution correct or should they be paying more?
Thank you Usha for the kind words and for sharing your story. It sounds like you have a really understanding of the system and what you need to do. You will qualify for some State Pension is you build up the minimum which is 10 qualifying years, to get the max state pension you''ll need 35. In terms of a minimum pot that is hard to say as it will largely be dependent on how much you need in terms of your living cost and the type of lifestyle that you aspire to.
Thanks @Samantha Hardy. That to me looks like the minimum basis on qualifying earnings. So your 8% contribution is based on £15,760 of your salary, the first £6,240 isn't included. So therefore your employer is paying in 3% of £15,760 and you are paying in 5% for a total of 8%. As mentioned in the video that would actually mean a personal pension contribution of approx. 6% of your gross basic salary. Hope that makes sense!
@@EdmundBaileyUK Thank you Edmund. Yes I am saving like crazy. I live a very frugal lifestyle. I've nearly paid off a 25 year 6-figure sum mortgage in under 9 years. I will be mortgage free by next summer. Owing to changes to the USS scheme I've decided to diversify my savings, having recently opened a 10k S&S ISA and intend to drip feed whatever I can from my post-tax income into it each month. I've built up good equity in my house but would like to live there for as long as I can. Including monthly mortgage payments I live on under £900 a month, a frugal but healthy simple life. It's tricky to get the balance right in terms of a decent pot vs having some kind of life. Thank you for your videos. These are hugely useful.
I'm 24 and I'm going way overboard by putting the equivalent of 32% of my salary in my pension 😂 Don't worry, I'm only doing this whilst my living costs are low. The idea being that contributing more at the start will mean I will need to contribute less later!
My highest contribution was 25%, but I was still able to give up working a bit sooner than most of my colleagues. Retiring early isn't for everyone, but it's nice to have to option to do so.
I started working for my present employer 33 years ago. For all of that time, they have contributed an amount representing 20% of my gross pay to a really good pension scheme. I retire later this year and am thankful that I have a sizeable pension pot. Save as much as you can afford. 8-)
Left Australia two years ago, employers have to pay a minimum of 9.5% on top of your wage with no personal contributions and it’s going up in stages. We’re screwed left right and centre here in old Blighty.
I am 37 and work for tesco. I put in 7.5% of pay which is matched 7.5% as well. Able to save 220 total each month and saved 10k so far. Even on a low salary and taking into account 2% pay increases. I should have a pension pot of 300k if I retire at 68. If u start young, have a good job and contribution enough, any1 cud have 1 million in their pension pot.
Late starter here. Only worked for tiny companies before age 36 so no provisions made by employer. Moved jobs and bigger employer enrolled at 6% with 6% employer match with bonus ongoing 3% contributions after 5 & 10 years service. After avoiding two rounds of redundancies in the space of 24 months I realised I need to reach "my figure" ASAP so I upped my contribution last year to make a total of 43% monthly which I plan to increase by 1% annually. Reached 50 with a pot of +£130k but growth being battered by markets of late so I hope I'll have enough !
@@christopherjhall Well 31% from me and 12% from my employer because of the years of service bonus additions. I know I'm lucky that my circumstances allow me to be able to do so and I'm certainly not boasting. I just fear any luck I do have is going to run out after dodging two rounds of redundancies so I want to get myself into a position that should a 3rd round arrive sometime in the future I would be in a position to perhaps take the enhanced package on offer and retire earlier than planned. The last few years under the cloud of COVID & lockdowns has shown me that a) I can live quite frugally and still be happy and b) You never know what new bug is around the corner that could potentially curtail your planned retirement years. I don't drink or smoke and have no kids, my one vice is the occasional huge Lego set so as long as I can financially cover that I'll be happy to potter around the house in my later years. I plan to buy a huge TV set for myself as a retirement treat and as long as I have food on the table, a roof over my head and the Internet I'll be content to catch up on all the shows I've never watched ! I just need the markets to play ball and give me a bit of a boost to the savings ! 🙂
@@dabe1971Hi, same as you, putting in as much as I can in the hope of using it as a bridge to the state pension if I have to retire early. I do like work but can see a day when I can’t due to health reasons so need to put it away while I can. Living each day well and eat right and love those around me. Take care and keep it up. M.
Its scary to think the minimum is really not enough! I've always tried to put a good bit extra into my pot to avoid worry later on, thanks for the video!
Thanks Sparrow Fall!! Yeah, totally agree especially where in some cases someone thinks they are paying 8% but are actually on qualifying earnings and so technically only contributing less than that as a percentage.
@@EdmundBaileyUK I'm only 28 so when I started my new job last year I took a long hard look at everything. My percentage is based on my gross salary, my company contribute 5.5% as well as all national insurance savings, I top that with a 7.2% salary sacrafice. I wish it could be more but statutory minimum is a thing.
Very useful thank you. I've been making notes off your videos. I've lived and worked in the UK since 2003, first as a student then on a work permit, eventually becoming a British citizen in Jan 2012. I've been working since the first week I arrived here, contributing taxes and NI but I won't qualify for a full state pension because I haven't lived here long enough. I've been working full time in the HE sector since 2005 but owing to poor employer practices, haven't been enrolled in an occupational pension until Jan 2011. Since then I've been steadily contributing to my occ pension and I have also started paying in additional voluntary contributions by way of salary sacrifice. I am 52, single, no children, no dependents. Job security is poor in the sector so I am trying to save as much as I can, paying in min of £2000 each month into my pension pot but have also started to save recently in a S&S ISA. What is the min. pot that I can aspire to build within the next couple of years that would make things slightly more comfortable? At present my retirement builder in USS is only worth an annual payout of around 7500 and a 22k lumpsum but I've saved around 100k into my USS Investment Builder which is at least 20k higher at current valuation.
Thanks Kick. It assumes 2.5% increases every year. I could build it with the average pay at key ages to reflect more significant pay increases overtime but clearly have to be mindful of how much complexity is built in for the sake of the video. But looking at the average in the UK it looks to be about £33k for someone that is in the 40-49 age bracket. So not a massive difference.
Is there a way to estimate when you have enough in your pension. Scenario for example: If a 40 year old had £300k in a pension and plans to take it at age 60 is it possible to get some rough idea what it might grow to if no more money was added from age 40 to 60. In this scenario approx. £600k is required at age 60.
Use rule of 72. This means if the annual rate of return is 10% then money will double in roughly 7.2 years. So it could be £600 by age 47-48 years, £1.2m by age 55-56.
Thanks MR Smith. As it presently stands, yes he would. And I’d really hope that we don’t end up in a world of a means tested state pension as that would be a pretty poor outcome especially where we have an auto enrolment pensions in place.
Thanks for the information Edmund, as always very informative. Can I ask what programme are you using to generate a forecast and is it available free to use or do you recommend a programme. Cheers
I have contributed to a pension for 11 years of the 24 years I've been working. I'm 47 and - largely due to compound growth - I will easily retire by 60. I'm currently contributing 10% and my average contribution to date has been around the same. The answer as I see it? Contribute as early as possible (if you're going to have a holiday from contributions, do it later in your career) and ensure your money takes more risk. High risk, compound growth is the answer to most pension problems. All in my humble opinion.
Guess that I am an outlier - I only paid into a pension scheme for the last 14 years of employment, retired at 52 and started drawing my pension at 60. Yet my (and my partner's) total pension income is approx. 3 times our living expenses. Savings continue to grow... It is all more about what you spend than what you earn.
Hi Edmund I'm in my late 30s and i do contribute around 10% of my earnings and my employer pays around 8% the of my gross earnings to DC fund. The funds are invested in mostly higher risk shares fund My question is: what are the chances that I can retire at 58 with an income that's high enough to cover living expenses? You talk about making high enough contribution but if am honest i am rather pessimistic that my DC pot would be high enough at my retirement. Why do i think that: A) the inflation is nearing 10% (RPI) B) the UK government (or BoE to be more precise) is printing money like there is no tomorrow C) the UK national debt is rising at the rate that that makes me think that taxes, bills, expenses like petrol/diesel will continue to increase at a stupid rate in the future D) why on earth the average UK pension fund has no means to invest in gold/silver which is the perfect vehicle to invest in at the time of negative interest rates and the inflation spiraling out of control? I have a very strange feeling this isn't a coincidence and the system is rigged... So my follow up question would be: what difference does it make how much i save and how much i invest if the real rate of inflation is higher that the average rate of return on investment on my pension fund? In other words, in the real terms if my investment return is lower than the rate of inflation that I am losing money, burning them rather than gaining anything - right ? Whose winning here, as i think the only one who really profits is the fund manager who gets the annual management charge/fee and not me ... ?!
Thanks so much for the really good question, although there is alot to unpack there!! As to your chances of retiring on a decent income, in truth I have no idea , but clearly your chances increase the more you accumulate relative to the income you need in retirement. That's just simple logic. The world and economy will unfortunately always go through and experience all kinds of issues, does that mean you should not accumulate or save or plan? We have no idea what kind of world we will be in in 10, 20, 30 years time. However, we can make some reasoned and reasonable assumptions or what the world will be like and that equities have in overall been away of protecting/growing your wealth, its not the only way but a simple and largely accessible one. In terms of who benefits from inflation then i would say 'mostly' everyone loses, some speculators, those that are highly leveraged and where interest rates can be kept below the rate of inflation do well. Its also mostly beneficial to highly indebted governments to allow the repayment of debt in depreciated currency. You are correct in that the real rate of return on most asset classes is negative, just how negative depend on the assets class and time period, e.g. cash the real rate of return/loss is probably around -8%, on other asset classes it will be less. Therefore holding cash will, for now, guarantee a real purchasing power loss.
Great video and these are some of the things I wish I knew earlier in life. What are your thoughts on the general rule of thumb on contribution should be half your age?
Thanks Alexander!!! Ooooh that’s a good one and has been around as a rule of thumb for a long time. I haven’t seen any evidence of the maths behind that idea but in principal yes a 12.5% contribution sounds about right for a 25 year old and 20% for a 40 year is a decent contribution level but clearly personal factors are always at play as per affordability etc but certainly anything above 12% is far superior to the minimum which is arguably insufficient.
Great video. Does these calculations include employer contributions as well? So 8% is total from BOTH employee and employee? Right now im paying 15% and employer 10%, am i right in saying that is 25% of my gross annual wage is going into my pension? Thanks.
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😮
Can i put my partners lump sum from their final salary scheme(after they retire),into my pension pot, (personal pension 20% tax payer). To get the 20% tax boost on it?
Yes you can as long as you have the relevant earnings to justify it. Relevant earnings being pay from employment. The pension annual allowance is £40k per tax year but carry forward might also be available where you have salary in excess of £40k.
If this is you then you really need to switch your pension 5.5% is low the S & P have returned on average of 10% over the last 100 years....Stay away from money manager's and invest in a etf/index fund...vanguard is a good choice. Good luck.
Thanks Daniel. This is based on figures provided by Vanguard in terms of expected returns based on a 60/40 portfolio. Adjusted for inflation the S&P is likely to have returned around 7% pa and I would assume charges aren’t built into that either. Again Vanguards assumption is that returns will likely be lower going forward.
@@EdmundBaileyUK S & P return on investment of 10,564,407.01%, or 9.92% per year. This investment result beats inflation during this period for an inflation-adjusted return of about 308,563.04% cumulatively, or 6.79% per year. I don't really think bonds are a good idea especially 40% unless you're 96 🤣🇬🇧 thanks for your reply.
Yeah although that volatility over that period is huge if 100% in equities, that can be hard to stomach when you are drawing an income and need it to live on.
