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I think this is what you need to do to get a proper idea of what is going on:
- find your job contract or emails or employee handbook which will state what the default auto-enrollment pension scheme is. This will be at least 3% from the employer and 5% from you unless you're some sort of weird contractor. That means each year 8% of your current salary before tax is invested in your pension.
- Figure out what you're contributing now. This will probably be the 8% above unless you opted out. If you did opt out, you should almost certainly opt in, because you're throwing away free money (your employer's contribution). ie. you're choosing to have 100% of your salary instead of 103% salary.
- Think about when you want to retire and how much money you will need when you do. For some complete arse-plucked figures if you earn £60k now you will probably be fine on £35k when you're retired with no mortgage and reduced costs from not having to work all the time. Check this thing out for some numbers. Ignore inflation at this stage.
- Work out how much money you need to achieve that income in retirement. You can either have a big pot and sell off a chunk of it each year, or buy an annuity. With the former you get more money but there's a risk it runs out when you're 85 and then you're pretty boned. Annuities are shockingly shit though. As things stand you probably will get the £10k state pension but some people would say not to rely on it being there.
- Work out how much you need to contribute to your pension each year to achieve that pot within the timeframe you want. Try this calculator. Also work out what kind of fund you want as that'll factor in to it with the assumed growth rate. If you're retiring in 5 years don't invest it in highly risky YOLO funds. If you're retiring in 30 years you can pick something that is more risky. Use a growth rate after inflation which will keep all the numbers in 2023 pounds. If the growth rate you're expecting is 6% and long term inflation is 3% then the net growth is 3% so use that in your calculator.
- Work out how you achieve that monthly contribution within the salary sacrifice scheme your employer offers.
- Cry at the results
Or just pick a big number (like 20%), tell HR that, move all your exisiting pension money into a fund you like the look of, and hope for the best
- find your job contract or emails or employee handbook which will state what the default auto-enrollment pension scheme is. This will be at least 3% from the employer and 5% from you unless you're some sort of weird contractor. That means each year 8% of your current salary before tax is invested in your pension.
frankenbike
@hippy
"If you are thinking of doing the Pension Salary sacrifice you cannot chop and change the figure – you need to commit for 12 months to the same value.
If you found after you’d signed up that you really could not afford it we do allow you to cancel but you cannot sign back up to the scheme for 12 months.
You salary cannot go below stat minimum pay but you choose either a set £ value or a % value whichever you prefer."