How Much Should I Contribute Into My Pension?

None of us want to work forever so let’s answer the question of how much should I contribute into my pension?

In simple terms, a pension scheme is just a type of investment plan to help you save money for later life, but what makes them so valuable is that they have favourable tax treatment compared to other forms of savings. The biggest available tax win for you comes in the form of tax relief on your contributions which essentially means some of your money that would have gone to the government as tax, goes into your pension instead. If you are employed, you might be a member of your company pension scheme where you will also be benefiting from their contributions too or if like me you are a lone ranger and you’re running your own thing, it’s down to you kid but either way they are a great tool for your retirement planning toolbox.

But how much should you be contributing? Let's take a look.

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#pensions #howmuchshouldicontribute #retirementplanning

[FernandoBowen-]

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

[DamienTalksMoney]

Zero dislikes at the point of this comment!!! Love it. Well done mate clear info, well explained and a lovely job on the edit and audio.

I see those drop shadows on the text!

[neilinvests]

I started working at 22 properly, the business had an opt out policy which meant through laziness alone, I started at 22, thank goodness.

Nice video mate.

[darrenjosephgregory]

Great video, I am very grateful that when I joined a Local Authority in 2007 I signed up to the LGPS but even though I did it is only now, some 13 years later that I really have started to think about saving and investing. I'm in a much better financial position than I was ten years ago but I so wish I had known more when I was younger. The irony is I worked in retail banking in the early 2000s. I am now looking at a junior SIPP for my 10 year old son (yes I wished I had the knowledge to have started ten years ago). We don't have much, will be putting away £50 per month into the this and hopefully other family members will top it up but even with a small amount that relatively early start should help him later in life, especially if he continues to contribute from 18. Thanks again.

[creatingbalancefinance]

Great video!! I really need to put more focus on my SIPP. I’m so pleased I started managing my pension myself but need to start adding much more - it just hasn’t been a priority!

[DisruptiveWealthCreation]

Great share. Not the most popular subject for most people but probably the most important. Great vid!

[mrc]

Cheers, Tom. Nice to see another excellent vid. I've royally stuffed my pension and I'm 54. Got a few of the little blighters dotted around and need to gather up those statements and consolidate, I think. Gah, proper old mess. I have an S&S ISA being my only saving grace, which is where most of my disposable income goes. Not sure if I'm a lost cause with pensions. Anyway, enough moaning from me. Top notch stuff here, mate.

[pm]

Great video! I would be grateful if you could advise what's best for me..37 year old.. started pension contributions age 27, currently 45k pension pot. I earn 38k and i sacrifice 18% monthly from my salary into my employers pension scheme ( the biggest i am allowed) they pay 5% only. Am i doing the right thing? Or shall i decrease my contributions to 5% or 10% and invest the remaining in a SiPP or stocks ans share isa or lisa? So confused here😮

[batking]

I’ve always saved into a pension at least enough to match employer’s contributions since I started working at 22. For many years It didn’t look like it was going to be anywhere near enough to allow me to retire. But it’s built up over time, and in recent years since becoming a higher rate tax payer I’ve increased my contributions - the extra kicker you get from higher rate tax relief is massive! I’ve also consolidated my old pensions into a low cost SIPP so I can better see what I have, and was surprised by how much they had grown - hoping in a couple of years it will be enough to coast to what I need by retirement age. I also invest in an ISA - essential for a security base, and if you want to retire early, as the money is not locked in. It’s definitely worth contributing to a pension - if it comes out of your salary, its money you never see so don’t miss and it builds up behind the scenes, and a lot more of it goes into your pension than you’d get after tax. Great video with sound advice as always!

[postie]

Would it be better to put the maximum you can afford into a NEST BEFORE putting anything into a Vanguard ISA? Discounting any employers contribution, as that 4% goes in whether you pay more or less, considering Govt tax relief on any cash put into a pension it gives you a 20% return before you do anything and also isn't at risk of a market crash. Or would the ideal choice be a S&S SIPP on top of a NEST pension, moving money from NEST to SIPP as and when you can. (I think NEST only allows you to move it all, not sure if that can be done every month, or year, or when changing jobs)
Another question is, if I raise my NEST contributions, does my employer have to raise theirs, or is 4% the max they can pay, or can they 'voluntarily' contribute more? Do they get any tax relief on pension contribs?

[SteveDuts]

Great video as always and good information, luckily i started paying into my pension scheme on the railway 17 years ago 👍🏼

[PrettyPennyClub]

Nice video, Tom. Just scanning down the comments it seems pensions are as divisive as ever. More information = better choices. Cheers for this.👍

[bartkuk]

Hi, probably a dumb question so sorry for that but what do you exactly mean by “my pension”?? I work for nhs and contribute towards nhs pension scheme but I don’t think it’s down to me to decide how much I would like to contribute right?? It’s all set by the scheme and that’s it or am I missing something here? Please explain 🙏🏻 all the best Bart 😉

[richardmartin]

okay this may be a dumb question but what the hey! at 55 you can take 25% of your pension? so to make maths simple if i had£100k pot i could take 25K tax free, could i then reinvest that into my pension and get tax releif - or use that £25K to supliment my salary for a year and increase my pension via salary sacrice by 25K - thus reducing my tax biill for the year and whatever i saved on tax invest in a ISA?

[Ian-lmmn]

Hi Tom love your Videos you Explain it well so people like myself can understand most things. I have a Question for you.. I put 18% of my wage in a company pension half from me half from the company this is the maximum they will put in should I put even more in that pension or should I put the extra amount in my private pension which has £120, 000 in it, I am 56..Regards Ian...

[WaleedTawfiq]

HI mate I worked for 3-4 years with NHS as a Physiotherapist, how can I find out how much I have pension accumulated and when can I get retired? I'm 57 years old. Thanks

[terrynutkins]

urgh depressing watch for someone at 40 without a pension pot. My question - at the age of 40 with limited income is it a better bet to invest in the stock market or a pension pot?

[DafyddMorse]

Not the sexiest but I have to play the hand I've been dealt! 😆
I made the "11 Streams of income" video you wanted to see!
Rule of thumb! I knew that but had forgotten so thanks for that reminder!

[davidmorgan]

I've popped off but late I'm afraid, better luck next life for me!

[StupidIsTheNorm]

Zero. Put it in an ISA. You get 100% tax free. The tax relief on a pension will disappear if the pension fund is a high fees and underperforming. Given that at least 75% of funds don’t even match the index, the pension is the least attractive option.

The pension was designed by rich people for rich people. That’s why it works at it’s most efficient when you’re a higher rate tax payer and want to have your money paid abroad when you retire.

PLUS, if you have any sort of ambition, and want to retire before age 55, the pension is absolutely useless.

People who sell pensions will tell you otherwise.