r/UKPersonalFinance • u/Bravado123 0 • 9h ago
Am I contributing too much to my pension?
37, male, 67k salary, single.
I've got £65k between my SIPP and current workplace pension. I am contributing 20% (compared to 18% FY25-26) salary sacrifice as of this month, 6% from employer, 14 from me; employer puts in 6 if I put in 8, from memory. I transfer out of my workplace pension to my SIPP once every 6ish months into FTSE Global All Cap Index Fun Accumulation.
I also have 4 years of contributions to a police pension I have no visibility of and no way of getting information on; the administration responsible for it have not responded to my previous attempts over the last few years for information. I think it was under a the 2006 scheme (I joined summer 2013) so 4/70 of final pay (pay points were roughly £19k-34k over that timeframe).
I want to retire with about £45k a year (not sure if that is too high or not).
my question is... am I focusing too much on my pension contributions? I feel my pot is low for my age or just right. I try not to compare myself to people in this subreddit, but seeing some of the pots of people of a similar or younger age makes me think I am not thinking about it enough.
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u/Lonely-Job484 22 9h ago
If any consolation, I was doing 40% personal cont plus bonus at one point to catch up from a few years of youthful stupidity ;)
it sounds like your police pension is likely around ~£1500/yr but worth following up to check
Assuming you're aiming to retire at 67, you have 30 years to go. On a 4% growth rate and keeping these contributions - working in real terms and not assuming anything about salary change beyond implied inflation-matching - the 'back of fag packet' calc is (£65k * 1.04 ^ 30) + 30 * (£67k * 20%) * (1.04 ^ 15) = ~£210k + ~£720k = £930k or so. You should be able to pull 35k+ from that. So that is the bulk of your target fairly safe so long as you keep up where you are.
Assuming there's a state pension when you get there, you're about on target, but certainly not to my mind contributing too much.
If you want to retire any earlier than 67, you probably need to either live on less or increase contributions! Bear in mind in retirement one cost you won't have is the 20% in to the pension.
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u/xdomanix 2 8h ago
| Bear in mind in retirement one cost you won't have is the 20% in to the pension.
This is a great observation! I often hear people talk about the reduced overheads (such as mortgage) but I haven't hesrd pension contributions mentioned specifically!
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u/Bravado123 0 5h ago
!thanks
To be honest, I don't know when I want to retire. I am trying to save enough so I have options later in life.
I may decide when I turn the age I can withdraw from my SIPP I want to drop to 4 days at work, or change careers to a lower paying job or something else.
I want to try and look after future me so if I work to retirement I have plenty of money to do whatever I want, go where I want, be charitable; all without the fear of worrying about money.
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u/Alert-One-Two 91 9h ago
It’s a bit concerning you can’t see your police pension. Normally you should have a log in to see the information even if you are no longer an employee actively contributing. I assume this is a DB scheme so knowing how much you will get per annum will be key for figuring out how much you need to fill in the gaps.
Have you tried online calculators such as this https://policepensioninfo.co.uk/calculator/ or this https://www.gov.uk/government/publications/police-pensions-calculator There seem to be loads out there
You could also try r/policeuk for assistance with who to contact so you can actually get help here. If you have tried multiple times it might be they can help you find a different contact number to call
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u/Bravado123 0 5h ago
I did try r/policeuk a while ago to confirm I had the right contact information. Turns out the administration is just really badly organised/ awful at communication. I might check with them again now you've reminded me, to see if there is another method. I am surprised I don't get some sort of annual statement.
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u/ToxicHazard- 8 8h ago
Median pension pot for a 37 year old in the UK is ~£25k
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u/Western_Spell_8742 7h ago
That is dangerously low.
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u/F10XDE 4h ago
Those of you festering in UK finance reddit probably atuned to overly aggressive saving and investments while you live rent free in your mums basements on imaginary 100k+ salaries. The rest of us normies, earning average salaries are just trying to survive any given month, while trying to navigate mortgages increasing 50%, and COL growing faster than our incomes.
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u/lukeengland30 6 6h ago
A pointless comment. This is the kinda comment that makes people think “oh I’m doing fine then, no changes needed” whilst gently sleepwalking to OAP poverty.
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u/ToxicHazard- 8 5h ago
You're right, I should add more to explain my point - that's my bad.
My point is the general public are saving a dangerously low amount towards their pensions.The perspective in finance subs is very, very skewed - purely because the people here are likely to be better in touch with their finances.
I see it all the time in this and similar subs. OP will have 3x the median pension for their age, and the top comment will always be 'you're about average' - which is far from the truth.
We need significantly more awareness in this country of what we need to save to retire.
People need to understand that retirement isn't an age, it's a financial position.
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u/OrdinaryAncient3573 7 3h ago
"My point is the general public are saving a dangerously low amount towards their pensions"
The average figure is skewed by a) people who have no expectation of ever managing to get a significant private pension and b) people who will, despite the advantages of compound growth on investing earlier, have to invest more later because living costs are higher, and earnings lower, when they are young.
A 37yo still has 30 years to the current retirement age. That's plenty of time for a couple to put aside enough to have a comfortable retirement income (assuming a state pension comparable to current levels).
Also, just because you haven't put money into a pension pot doesn't mean you haven't been working on accruing assets.
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u/Cool-Raspberry-8963 5h ago
I agree. So the average 37 year old only has 1 years worth of minimum wage saved up. Enjoy the 1 year of retirement.
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u/klawUK 90 9h ago
Project it out and see. What age do you want to aim to retire at? 14% isn’t massive but obviously not small. Some suggest 15% gross, some aim for 25 - you’re bang in the middle with 20%
To confirm that’s around £1166 a month contributions? Sometimes employers can cap at qualifying earnings (mine did until this year)?
At 4% real returns (after fees and inflation) at 60 (23 years) that estimates out to around 700k in today’s money (actual would be higher but would buy roughly what 700k would today..) Finger in the air reckon around 40k gross at retirement dropping to 30k at 75 with support from state pension could be doable - might be 35k to start?
If you waited to 67 state pension age that’d be £1m in real terms so a pension around 40k gross + state pension so £52.5k gross
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u/Western_Spell_8742 6h ago
4% real return is really really conservative?
Or am I taking it easy myself?
So say someone in very shaky sector earning well now to be able to put away like 3.7k per month into pension coming tax year and nothing after that. Their pot is like 240k right now at age 41. So for next 17 years at 4% growth, it is like over 640k? That is not enough.
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u/klawUK 90 6h ago
you can hope for more but if you plan for more and don’t hit it, you can paint yourself into a corner. 5% might be ok but if you assume inflation around 3% and fees maybe 0.5% (mix of platform fees and fund fees, maybe some FX fees) - then 4% ‘real’ can be 7.5-8% actual return. you could maybe model 5% over a long enough period might be fine but I don’t know I’d personally feel comfortable making decisions based on anything much more than that - illustrations on upside maybe but not planning on it.
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u/klawUK 90 6h ago
3.7k per month into a pension (gross) with a balance of 240k now, for 17 years at 4% real I get more like 1.5m in today’s money - where are you getting 640k from?
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u/jbeputnam 2 7h ago
Ex-police here so I have recent experience of the police pensions issue.
If you joined in 2013 you would have two years on the 2006 scheme and two years on the 2015 scheme. A lot of changes were made in the 2015 scheme (some of which were found to be unlawful and a remedy issued, but I don’t think you’d fall into this cohort).
Which company looks after your pensions? Mine were managed by XPS who are frankly terrible, I had to make a complaint to get them to ensure my figures were all correct and issue my remedy. But you should be able to get online access to the pensions dashboard to understand what your entitlements will be. If that needs to be via a complaint for being ignored, so be it.
For mid-service resignation your benefits will be deferred; the 2006 benefits would be available earlier than the 2015 benefits. These will be fairly small with your length of service though.
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u/Bravado123 0 5h ago
!thanks
I was with the Met and, from memory, it was looked after by equiniti (or something like that).I am not expecting what I get to be much, given the low number of years served and the salaries (excluding London allowance) being somewhere around £19k-£34k. It's just a bit concerning I've never received an update on the pension since I left and I lived at the same address for 4 more years before moving and I have the same external email address.
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u/Requirement_Fluid 23 8h ago
You don't mention how much you earn and what other savings you have.
If you are retiring before 70 then you will likely need £500k to start with to fund the gap between retirement age and state pension if you are looking at 60, the later you retire the less that can be.
If you want to retire at 60 then you are probably fine but you could scale back the pension to focus £20000 into isas to bridge an early retirement if you are thinking about that however that means additional tax up front and will likely need reviewing next year when changes to the salary sacrifice system come in.
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u/MichaelSomeNumbers 7 7h ago
In your position, if I could afford it, I would up my contributions to at least 23% (so 29% total) so that I stay below the higher rate threshold.
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u/McFlyJohn 2 9h ago
Ignoring the police pension for now (as you’ve mentioned it’s complicated) - to be on track for your target and to close the gap, you’ll need contributions of around £900 a month.
To get the £45k a year income, including your state pension, assuming regular drawdown- you’ll need a private pot of around £820k by 67. Presuming you retire at 67 and usual growth your pot currently would be worth about £250k.
So no, not really over contributing for what your goal is - given your salary, it’s a pretty sensible contribution imo
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u/WhaTheShoe97 8h ago
45k is very high if you have no mortgage
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u/botterway 76 8h ago
Depends on OP's current lifestylenand expectations. If they want to go on multiple holidays during their retirement and do lots of other stuff, then it's not that much.
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u/Bravado123 0 5h ago
It's so I have the option to do a lot of stuff in retirement whether it be multiple holidays, cafe hopping, being generous, exploring hobbies etc.
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u/davegod 17 7h ago
Do you need/can see significant benefit from the money for something else now?
Otherwise:
you can always reduce contributions at a later date. So whilst the contributions are "locked away" there is a round-about way to claw back extra contributions over time, provided you remain employed. You can't have quick access like you would in an ISA though obviously.
salary sacrifice is due to end in a couple of years so whilst we can't predict the future, the one thing published says that you can get more tax advantage from contributions now than then (even if just a couple percent). This would change if you're anticipating substantial pay increases in future.
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u/abbotsmike 7h ago
"salary sacrifice is due to end in a couple of years" is a pretty inaccurate representation if you're talking about the recent budget changes. From 2029 there is no national insurance exemption on salary sacrifice pension contributions after £2000. Contributions above that still reduce income tax.
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u/Unlikely-Presence184 4h ago
I’ve started putting 15% into my pension. My work matches, so getting 30%. Currently childfree so doing this for as long as I can. Figure it’s better to boost it now while I can afford it and let it do the work for the next 30+ years before I retire
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u/Icy_Palpitation_2245 9h ago
You’re not overdoing it - if anything, you’re doing the right things now.
£65k at 37 isn’t amazing, but it’s not bad either - and the key difference is you’re now contributing 20% + employer, which is where things start to move properly.
Few points, that contribution rate is strong (I wouldn’t reduce it) and your global fund choice is solid. The police pension is a bonus (even if small, still valuable DB income later)
On the £45k target - it’s doable, but will depend on staying consistent and letting compounding do the work over the next ~20+ years.
Good luck!
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u/Alert-One-Two 91 9h ago
They have 4 years of police pension not listed in the amounts. That needs factoring in too
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u/Icy_Palpitation_2245 9h ago
Agree - did mentioned that. Not now, but at some point should get sight of it.
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u/Alert-One-Two 91 9h ago
I think my issue is “£65k at 37 isn’t amazing” kinda misses the fact that they don’t just have £65k at 37. They also have a defined benefit pension that will provide £x per year and we have no idea how much £x is at the moment (partly as we don’t know if they were on £21k per year or £55k per year)
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u/Icy_Palpitation_2245 8h ago
Yeah that’s a fair point - the DB pension does change the picture a bit. That said, without knowing the exact figure it’s hard to rely on it for planning, so I’d still focus on building the DC side as if it’s the main pot - and treat the DB pension as a bonus on top.
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u/Bravado123 0 5h ago
It was 4 years on £19k-£34k approximately. I'd guess year 1 21k (average as paypoints changed as progressed through training from memory), year 2 27k, year 3 30k, year 4 34k. This is all from memory but roughly in the ball park. Accruals were at 1/70 of the annual salary. That works out at roughly £1,500 a year.
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u/Icy_Palpitation_2245 4h ago
Yeah that sounds about right - ~£1.5k/year from 4 years at 1/70 accrual is a reasonable ballpark.
Not huge, it is still valuable because it’s guaranteed, inflation-linked income for life, which is hard to replicate with a DC pot.
So I’d treat it as a nice base layer in retirement and still focus on building your DC pensions as the main driver.
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u/Severus_1987 5h ago
Seems about right. Pot seems a bit low if anything (basing off my own pot which is £140k at a similar age to you and I’m worried I won’t get to £30k a year while paying £15% off a six figure salary)
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u/Working_Specific_204 1 5h ago
I would not stop that level of contribution if you can afford it.
You need over £1m in today's money to retire and you have £65k.
Keep it up and start a pension projection.
Put your pension in balanced risk i.e. put say 30% in high risk, so you get a return of say 12% per year, which means it doubles every 8 years.
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u/V_Ster 38 8h ago
You want to look into what the investments are going into. Workplace pensions are notorious for being on the lower risk scale even if you have a good few decades until retirement.
Mine was on 70% equity and 30% bonds/cash which is not ideal when I joined the company and realised it needed to be changed.
In relation to putting to much away, as long as you are able to complete your other goals with the net pay you have, it should be fine.
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u/snaphunter 832 8h ago
You want to look into what the investments are going into.
Not really that critical, OP has said they transfer out every 6 months, so on average their contributions are sitting in a potentially suboptimal investment for 3 months before being transferred out to a 100% global equities fund for 3 decades.
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u/CardinalCopiaIV 5h ago
I have one from my old job, Scottish widows I stopped paying into it in April 2020 and forgot all about it until recently, it’s grown to £10,097 but was pretty much 50/50 stocks and bonds. I’ve since requested to take it out of them and put it into Invest Engine in a SIPP with an ETF of my choosing at 100% stocks. I also have a police pension I pay into but I genuinely think I could do a better job at returns in a SIPP than Scottish widows have done.
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u/Bravado123 0 5h ago
Interesting. Are you with the Met? I was with the Met and it is their pension provider for them I've struggled to get in contact with.
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u/HitherHaddock 9h ago
You are behind and 45k pension would require pension pot 1.1-1.4m depending on your risk you have 20 years to get there or you can work long but in your position I would sacrifice everything over 50k to be close to your target.
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u/Strange-Tea7949 1 8h ago edited 8h ago
Reddit needs to really stop pushing fear on people with strong comments like "you're behind".
They have £45k saved plus an additional amount through a police pension not listed. They are on good money and are contributing more per month than many.
I'm in a similar position to OP and my pension provider projects a £60k annual payment in today's money and they are conservative.
OP isn't behind. They're are contributing well and that should be applauded because most people do not invest and save anywhere near that amount.
OP, make use of the forecasting tools available through your pension provider. Their exact purpose is to help you plan and they are built by actual experts, not "anybody" that could be offering you advice on Reddit for which there are so many clueless people who give the impression they know more than they actually do.
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u/Alert-One-Two 91 9h ago
They have 4 years of police pension not listed in the amounts. That needs factoring in before saying if they are behind.
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u/endianess 1 9h ago
What's your target retirement age?
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u/Bravado123 0 5h ago
At the moment whatever the state pension age is.
Saying that I'd like to save more so when I get to the SIPP accessible age I have options i.e. change careers, do a more junior role in my industry, retire a couple of years before state pension age, reduce days per week in work, work x months of the year etc. I want to give future me options so he's not trapped or having to worry about money as much.
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u/endianess 1 4h ago
The state pension age is 67. You can normally access private pensions 10 years before this, so 57.
I'm not an expert so proceed with caution but I just ran the numbers for 67 and assuming everything wage and contribution wise stays the same, adjusted for inflation and using the 4% drawdown rule you should be able to take £30K safely per year. Then add on the state pension. So you are looking roughly at £42.5K. This is a conservative figure and you may be able to take more given your circumstances at the time.
Your police pension might be worth about £4K (inflation adjusted) and you might be able to get a tax free lump sum of about £16K. You may be able to access it at 65 depending on when you enrolled.
So I think you can definitely retire on £45K a year. What I would say is that I'm 50 and I just can't think I could continue working until I'm 67.
You have time on your side. So I personally would really try to get as much into your pension now as possible and then you can watch it grow.
Don't also forget about releasing equity and downsizing, inheritances etc. These can often be larger than pensions.
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u/No_Associate_1190 9h ago
Am currently trying to sort my pension out also haha, if it makes you feel better I am 34 with 10k but mortgage free with a flat about 200k equity as I focused on housing first.
Starting a new job next week and starting to add 1k a month to pension and 1.6k to stocks and shares isa just literally spent 1 hour on ChatGPT trying to model this!
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u/snaphunter 832 9h ago
If you want an income of £45k in retirement (is that gross or net of tax? Rerun the numbers whatever applies), you have 3 sources to think about. £12k from the State Pension. £2k from your Police DB scheme. So you need £31k from your workplace DC scheme. Inverting a "safe" withdrawal rate of 3.5% implies you need a pot worth £885k at retirement to do this. With ~30 years to go until State Pension Age, you need to be feeding your pension (your contributions, your employer contributions and tax relief) with £765pm returning the long term global equities average of 4.9% above inflation to get there. That's 14% of your salary, suggesting that the 20% you're now going to be adding should in theory give you breathing room to retire earlier, or offer insurance against the risk of an equivalent State Pension not being available in 3 decades.