Pension - am I saving enough?

[Kosenurm]

Hello all,

I am 24 years old, and currently earn £23,000 per annum. I contribute 7% of my monthly pay into a stakeholder pension scheme with Prudential, with a further 11% being awarded by my employer; making a total of 18%.

I am due to retire in 2054... am I saving a good amount in order to live comfortably at retirement? :tinysmile_hmm_t2: Obviously I am hoping my salary goes up throughout my life, at some point.

Thanks,
K.

[wales01man]

Re: Pension - am I saving enough?

Money advice service has a section on calculating

[enquirer]

Re: Pension - am I saving enough?

Try moneysavingexpert.com.

[Charlie505]

Re: Pension - am I saving enough?

Kosenurm - the short answer is 'yes' (probably). If you started saving at your age then probably about 12% of gross salary would be enough for a decent retirement if you keep it up until state retiement age.

It is good that you are already in a scheme - and as you probably know, by 2018 all employers will have had to set up and contibute (3%) into a scheme for their employees - and employees will have contributions of 4% deducted from salary unless they opt out.

We are very bad at saving in this country - we have one of the lowest savings ratios in Europe. A third of the population have no savings and another 20% have less than £1500 to call on. Every generation since the war has spent more and borrowed more than the one before - but saved less. This is unsustainable and there will be tears at bedtime unless the 'borrow and spend' culture changes.

At your age you may expect to live well into your nineties - but that means you will need to have a lot saved unless you want to be poor or work till you drop. So well done you for being a saver already. However, life will throw a few curve balls in your direction so it is important to have non-pensions savings that you can get access to as well.

One thing to bear in mind though - not all pension schemes are as good as they could be. 'Stakeholder' schemes were cutting edge on low charges when they were set up a decade or so ago - but they often look expensive these days becaus epension charges have fallen so much. These days a good value scheme will run at about .5% charge on your fund per annum (and the Pensions Minister has announced that he will put a cap on charges at .75% next year). These might not sound like big numbers but they mount up over a long period of time and reduce the size of your pension pot - so every little improvement counts. So you and your colleagues should be asking your employer what the charge is on your scheme - and if it looks high, you should badger your employer to put pressure on the pension company to reduce it. Either that or your employer should be shopping around for better value.

[MissFM]

Re: Pension - am I saving enough?

Kosenurm - the short answer is 'yes' (probably). If you started saving at your age then probably about 12% of gross salary would be enough for a decent retirement if you keep it up until state retiement age.

It is good that you are already in a scheme - and as you probably know, by 2018 all employers will have had to set up and contibute (3%) into a scheme for their employees - and employees will have contributions of 4% deducted from salary unless they opt out.

We are very bad at saving in this country - we have one of the lowest savings ratios in Europe. A third of the population have no savings and another 20% have less than £1500 to call on. Every generation since the war has spent more and borrowed more than the one before - but saved less. This is unsustainable and there will be tears at bedtime unless the 'borrow and spend' culture changes.

At your age you may expect to live well into your nineties - but that means you will need to have a lot saved unless you want to be poor or work till you drop. So well done you for being a saver already. However, life will throw a few curve balls in your direction so it is important to have non-pensions savings that you can get access to as well.

One thing to bear in mind though - not all pension schemes are as good as they could be. 'Stakeholder' schemes were cutting edge on low charges when they were set up a decade or so ago - but they often look expensive these days becaus epension charges have fallen so much. These days a good value scheme will run at about .5% charge on your fund per annum (and the Pensions Minister has announced that he will put a cap on charges at .75% next year). These might not sound like big numbers but they mount up over a long period of time and reduce the size of your pension pot - so every little improvement counts. So you and your colleagues should be asking your employer what the charge is on your scheme - and if it looks high, you should badger your employer to put pressure on the pension company to reduce it. Either that or your employer should be shopping around for better value.

The thing is, that you get next to no interest on savings now - you can't live on it.

I find it incredibly ironic that, having been a wise virgin and followed Martin Lewis' advice NOT to have PPI, I'm now considerably worse off than those that did, who have effectively saved at 8%

[Charlie505]

Re: Pension - am I saving enough?

FM - Many people make this point about low interest rates - they hurt savers, but anyone with a mortgage does very well out of them.

When people save in a pension (NB. the average managed fund returned something like 5% per annum after inflation over a ten year period) they get free money into the pot from their employer's contribution, and more free money fom the government. For the basic rate tax payer the deal from the state is 'buy four get one free'. And a 5% growth rate equates to your pot doubling in 15 years, quadrupling in 30 years.

That said the build up of savings isn't just down to the compound interest - it is about the discipline of putting money aside rather than spending it and that is something we have forgotten how to do in this country.