How screwed am I with Pension investment to date?

[doveofpeace]

Stupidly, about three years ago, I opted out of my previous companies pension scheme. It was based on qualifying earnings and thought it was generally just a poor scheme.

Fast forward to April 2022, landed a new role. Was auto enrolled for a few months but decided (for whatever reason) to opt-out again, as I'm trying to save for a mortgage.

Almost two years down the line and I'm starting to panic.

No house to speak of and have all but given up that dream, with paying London rents. I now earn a good salary of 72k a year, but severely worried about my pension pot at 34 years of age.

To break it down, within my pots I have;

Aviva 1: 1,380.90
Aviva 2: 1,602.87
Aviva 3: 1,238.56
Aviva 4: 1,429.77
SW: 1,384.69

Total: 7,036.79

TfL (DB): 2,131.37 per annum when I reach 60.

Auto Enrolment levels are 4% and 4%, where the employer doesn't match any increase above this.

Is this bad? I'm worried that when I reach retirement, I'll have nothing to show for it. No house, no pension. I still want to save for a mortgage, but margins are very tight, especially if I sacrifice more into my pension.

 

[lifecouldbeeasier]

@doveofpeace Best thing to do is start now.

There’s a rule of thumb that says whatever age you start saving for retirement at, you should contribute half your age. For you that would mean a total contribution of 17%.

May sound like a lot, but you’re in the 40% tax bracket, so you won’t feel as large of an impact on take home pay than someone in a lower tax bracket.

 

[macbashfeed]

@lifecouldbeeasier As a note for OP, this 17% includes the company contribution. This would mean increasing personal contributions from 4% to 13%.

 

[jjan3]

@macbashfeed When people say to increase contributions, does this mean setting up additional payments into the pension pot from a bank account or should employers allow you to increase your contribution directly from your paycheck?

 

[justvisitingrealquick]

@jjan3 Yes generally you would arrange with your employer to increase your contribution percentage.

 

[hemantbobby]

@jjan3 Your employer is likely to allow you to make Additional Voluntary Contributions (AVCs) and that way you'll get the tax benefit directly. Your pension scheme may allow you to make one-off payments directly to them but if you do that you'd need to claim the tax back on a tax return.

 

[zogy101]

@hemantbobby get salary sacrifice if you can OP ... then there's no tax return to file.

 

[herbiggestfan]

@zogy101 Plus you save national insurance with salary sacrifice

 

[candelandsweete]

@hemantbobby As a 40% tax payer you still need to file a self assessment to recoup half the tax from AVC’s - the pension provider will automatically top up assuming you pay 20% tax leaving a shortfall to be reclaimed. This may also apply to your initial contribution.
If your employer offers salary sacrifice then use that as the money is simply not taxed under that process.

 

[thehappypainter]

@jjan3 Depends on your employer. Most will allow you to make additional voluntary contributions (AVC) and most of those will be via salary sacrifice - these will come from your paycheck and make NI savings too, which your employer may also put in your pension. But if they don’t or for self-employed etc I believe you can make your own payments from your bank account into a SIPP and claim back the relief.