Workplace Pensions

  • Filter
  • Time
  • Show
Clear All
new posts

    Workplace Pensions

    Going off on a slight tangent here.

    My workplace auto-enrolment pension now has me contributing £150 per month. My employer matches this.

    My statement reads, in today’s money...

    At 65 years old (I’m 36 now) I may receive.

    11k tax free.
    £120pm (taxed?)

    i feel this is a very disappointing return even with the ‘free money’ from my employer.

    I guess this is a general pension question.

    Who has has opted out - who is focusing the monthly cash on business / property instead?


    You are likely to get better response from this more specialised forum

    Artful: 71: State pension - thank you you lovely taxpayers - & some private pensions: (Life ain't fair, sorry..)
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...


      Originally posted by mojo_scotland View Post
      Who has has opted out - who is focusing the monthly cash on business / property instead?


      Opted in and overpaying to pull my income (inc rentals) into the lower tax bracket.


        What does the statement assume about future contributions? I'm wondering if they are assuming a fixed £3,600 pa.

        You can always transfer to a higher risk investment, although it won't be worth doing that until a few years have built up.

        There are a number of variables that go into these predictions:

        - rate of inflation;

        - rate of return on investments;

        - scheme percentage commission;

        - how contributions will vary with time.

        The companies don't really get a choice of the rate of inflation and investment return rate that they use, in the calculation.



          The monthly return does appear 'low'. However, I put as much into my pension as possible each year to bring my income into a lower tax bracket.

          Think about how much it is actually costing you.

          For £300 contribution each month it is only costing you £120 (assume 20% tax bracket?)
          No other savings / investment will give you this return on your investment.

          When you come to retire, you will have contributed £41,760 and have a pot of cash worth £104,400 (based on 29 years investment with no growth/losses)

          Now you could throw compound interest, rate of inflation etc.... into the mix, but using the above keeps it simple. ( I realise this is a very simplistic example )

          When you come to retire, you can take 25% tax free and do what you want with the rest... so to me that seems like quite a return???

          As ever, a mix of investments, property, pension earnings is Utopia.


            I'm a little bothered by the low figures.

            If the "tax free" amount is meant to reflect the position of today (ie. you can take out 25% tax free), it would mean your pension fund would be £44k when you are 65.
            Which means that the fund must have lost more than half its value - you'd have put in much more than that over nearly 30 years.

            Which sounds like a terrible deal.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


              its not as bad as mine your better off than me -
              my workplace pension 53pence a month and im 6 years off retirement i think ill get about 50 pound a year so im going to have to work beyond retirement doing on line work and stuff like leaflet distribution but id be happy with the 11,000 a year its enough to live off

              i think you have to opt in
              but 150 pound a month seems a lot to pay in doesnt the pension credits pay as well or national insurance pension - surely statepension


                I believe your pension statement is based on a calculation of what your pension fund is worth today and inferring no further contributions made. So if you stopped paying in to your pension fund, this is what your fund could potentially be worth at 65.

                Each year you contribute more, this calculation would likely change.


                  The ones I've always seem assume no further contribution, but the OP seemed to suggest that the scheme has only just started, and, given the figures used for these estimates have gone down a lot from when I was first in a money purchase scheme, I think a £44k pension pot in present day terms couldn't be explained in only one or two years of £3.6k a year, which is why I think it most likely it has been based on £3.6k for 29 years, but with the £3.6k staying constant in absolute terms.


                    The estimate looks low because it is a low estimate. To ensure that different pensions can be compared fairly there are strict rules on how an estimate is prepared. One is the assumption that you will buy an annuity with it. Currently annuities are poor value so this makes pensions look poor value. Most people should not buy one at current rates. You don't have to.

                    Given that your employer doubles your contribution, and you also get tax relief you should contribute as much as your employer will match. You won't do better elsewhere.


                      Annuity rates don't affect the cash free sum, which implies a total fund value of £44k.


                      Latest Activity


                      • Pay off residential with buy to let

                        First poster here looking for advice, this is our situation. We have one buy to let property mortgaged at £40000 and worth around £130000 and our home with a £65000 mortgage worth around £190000. We are looking to move house but keep both properties. Would it be wise to paid...
                        15-10-2019, 19:42 PM
                      • Reply to Pay off residential with buy to let
                        Hi Boletus, before I responded to your reply I thought I would seek legal opinion since your view on Non Recourse Lending was slightly at variance to my understanding and I am detailing the majority of the response, I would add that he is also a director of a Buy to Let lender.
                        Given that the...
                        16-10-2019, 21:54 PM
                      • Reply to Pay off residential with buy to let
                        I'm sure loanarranger is well aware but just to point out to others reading, UK BTL mortgages are not non-recourse lending.
                        i.e if you default on a BTL loan, it doesn't end with the lender repossessing the BTL property, they can still come after your main residence or other assets.

                        16-10-2019, 13:09 PM
                      • Reply to Pay off residential with buy to let
                        Boletus , you make an interesting observation , however I have always taken a “ conservative” approach to such matters believing that having one’s main residence unencumbered is a safety net should financial difficulties ensue and adversely affect the financials of investment properties . Others...
                        16-10-2019, 11:52 AM
                      • Reply to Pay off residential with buy to let
                        That is the cleanest solution but not the best financially once the new S24 tax rules are fully implemented.

                        There is quite a lot to this but the crux is that residential mortgages are cheaper than BTL.

                        interest on £100,000 BTL mortgage at 2.5% - 20% tax 'relief'
                        16-10-2019, 10:03 AM
                      • Reply to Pay off residential with buy to let
                        If the figures stack up I would always recommend paying off the residential mortgage given that there are no tax benefits to be used against the mortgage interest element of the loan; whereas there still remains a slight advantage in the tax regime for residential property investments.
                        Given that...
                        15-10-2019, 20:51 PM
                      • £25K personal income criteria for re-mortgaging BTL
                        Recently read in propertygeek about remortgage: <quote> most mortgage lenders want to see personal income of at least £25,000 that isn't derived from rents. Even if you buy all the properties while you're still working, as soon as you quit that income is gone – so you might struggle when the...
                        14-10-2019, 21:51 PM
                      • Reply to £25K personal income criteria for re-mortgaging BTL
                        May I add a degree of caution, there are very few underwriters who understand the legitimacy of offsetting carried forward losses incurred in previous years and which allow the profits to be adjusted which in a number of instances will either show a continued loss or a much reduced net profit. In such...
                        15-10-2019, 18:45 PM
                      • Reply to £25K personal income criteria for re-mortgaging BTL
                        Thank you Hospitality, was just about to post the same question tonight, in two month time I can take early retirement, receive a pension of 14k per year (+ lump sum) and a income of 42k gross on my rentals, per year I have 14 months before my next rate change and was starting to get concerned a...
                        15-10-2019, 17:41 PM
                      • Reply to £25K personal income criteria for re-mortgaging BTL
                        Not all lenders have the requirement of a minimum independent income of £25000 so please don’t lose heart if presently one’s income, excluding rental income, falls below the minimum.
                        In the event that one “retires” from main stream employment or self employment and have a property portfolio...
                        15-10-2019, 07:48 AM