Managed to hit my 30k pension goal by 30

[johanna123]

@h8sin2luvgod That’ll do fine for rough calcs

 

[jefftheamericanchristian]

@h8sin2luvgod

How would one value a DB pension pot? I've seen figures like multiplying the yearly income figure by 20.

I tend to assume I'll live to about 84 and multiply by the number of years between the normal pension age for the DB pension, and age 84.

I've got one DB pension worth about 8K PA from 63.5, which I figure is worth about 164K, and one worth about 5K PA which I can't take till 68, so that's worth about 80K.

So I reckon my pension savings are worth about 244K in real terms.

I did consider transfering the 8K pension into my new scheme not that long ago, but the transfer value they offered me was atrocious. I mean, less than the sum of the contributions atrocious.

The CETV is not really intended to be a measure of the value of the pension so much as it is an estimate of the cost of providing it. But either way, don't use the CETV as an indicator!

 

[jane14]

@seekingchristiancommunity Salary changes over time. If you’d have asked me at 30 i would have been on track now later into the 30’s I’m off due to salary increases

 

[heyilovegod2254]

@jane14 Like any rule of thumb/guideline, that kind of thing is based on a "typical" career trajectory, and an assumption that you have a baseline lifestyle/quality of life that will stay vaguely consistent through your life. The idea being that those pension savings levels will roughly (with compound interest) allow you to maintain a proportionate lifestyle into retirement

So yeah a salary increase can throw that assumption off, but only if you have significant lifestyle creep because of it. And since you're earning more, you can balance that lifestyle creep with additional pension savings

So you only come a cropper if you use all your new income for a better lifestyle without using any of it to top your existing pension up to being consistent with that lifestyle

 

[x1extreme1x]

@seekingchristiancommunity Thanks!

I'm 0.76x Salary at 32 so as on track as one can be.

 

[heyilovegod2254]

@seekingchristiancommunity It's worth noting that this doesn't really apply to Defined Benefit schemes. I know that's not the case for OP, but I like to mention it in case someone with a DB scheme is reading this and confused at how far disconnected their pension is from it

Eg at

 

[faithguy10]

@heyilovegod2254 Ah, I was wondering wtf was going on with mine being 4x my current salary... That totally makes sense, they'll catch up due to compounding on the final furlong

 

[priyarawat]

@seekingchristiancommunity 0.37 at 33. It's not looking good lads and lasses

 

[modestmatty777]

@seekingchristiancommunity Awesome that means I'm well over! 5x 0 and have 3 different pots all over 3k (at last time I checked and can't remember when... year or 2 ago)

 

[happyhippie2018]

@seekingchristiancommunity Bro there is no way I will have 10x of my salary saved

 

[lamdiengiat1]

@seekingchristiancommunity Scales poorly for younger high earners but not bad

 

[jleigh]

@seekingchristiancommunity I have 7 years of LGPS payments and 0.1 X my salary in a pension pot at 30. I feel like this looks worse than it is but doesn't fill me with confidence

 

[jwb7111]

@jleigh That's a DB scheme, you don't have a "pot". You get a set retirement income, so this table doesn't apply to you.

 

[lil_j]

@seekingchristiancommunity That's a useful table, and in actually don't better than I thought, pretty much got 2x at the moment, hoping to put more in over the next decade now the kids are a bit older.

 

[brendon83]

@seekingchristiancommunity Is current gross salary the best benchmark here, or would it be better to think of the portion of your salary that you live off after paying for things that you hopefully won’t need to in retirement, such as your pension contributions themselves and stuff like mortgage that might be paid off, etc.

 

[bigpgone]

@seekingchristiancommunity Those figures seem high, particularly for very high earners?

 

[guenhwyvarthecat]

@bigpgone Most people don’t save nearly enough for retirement especially early on. How often do we get posts here in the vein of “I’m 53 and have four buttons and a moth in my pension pot, help!”.

It’s usually a case of lack of education rather than bad decisions. Most people have very little idea of how pensions (or personal finance in general) work because they’re rarely explained if you don’t go looking.

 

[ittwirbaacs]

@bigpgone Obviously it depends on how you want your retirement lifestyle to compare to your working lifestyle, but if anything I'd say it is less conservative for higher earners.

Lets say you earn £20k per year and reach 65 with 10x your income in your pension, £200k. A 5% drawdown is £10k per year. With the ~£10k state pension, you're basically in the exact same position as prior to retirement.

If you earned £100k per year and reach 65 with 10x your income in your pension, you have £1million. The 5% drawdown gives you £50k per year. Add on state pension, and you have £60k. Significantly less than before.

 

[hache]

@ittwirbaacs But of that 100k, you were probably stuffing close to 40k in your pension...

 

[ittwirbaacs]

@hache No, you don't need to contribute 40% of your salary to a pension to end up with 10x your salary. It's generally closer to 15%, and some of that (probably a larger portion fir higher earners) will come from the employer.